Social Media Influencers, How To Start A Watch Brand, AP’s Royal Oak Risk: Your Business Questions Answered

Welcome back for more of your watch business questions answered. The global watch business is big. The Swiss watch industry alone is worth an estimated 50 billion Swiss francs annually and is the country’s third biggest exporter. There is plenty to discuss, so please feel free to ask more questions in the comments. 

Question 1: Social Media Influencers

How much do watch brands rely on (some) watch media/influencers as outlets for their advertisement and hinder actual reporting on their product – e.g., by granting access only in return for favourable stories? Thanks in advance!

“Don_Knilch”

There’s no doubt that social media personalities on TikTok (hello Mike Nouveau) and YouTube (greetings Adrian Barker, Andrew Morgan, Britt Pearce, and a certain high-volume Dutchman based in Belfast named Nico Leonard), not to mention Instagram (too many to list), are a growing part of the marketing and communications focus for brands.

Let’s not forget that it was, after all, Ben Clymer and Hodinkee that ushered in the era of premium video watch content with the Talking Watches series, most notably the John Mayer episodes one and two. The impact of these videos on the industry and the enthusiast community is hard to overstate. And there’s plenty more to come in the Talking Watches series. 

But it was a notable moment last year when Audemars Piguet decided to make a video with Nico Leonard. Known for his foul-mouthed critiques of brands and online feuds with celebrities, Leonard has amassed about 2 million subscribers on YouTube with his in-your-face, click-bait content. He has certainly crossed the line of good taste and fairness on multiple occasions. But the views continue to add up.

Leonard told me he was paid to make the video with AP and says brands, including Ulysse Nardin, are working with him because he is ”authentic” in his comments and point of view.

“We value the genuine dialogue he fosters,” says Ilaria Resta, AP’s chief executive officer.

At Watches and Wonders last year, Cartier flew Mike Nouveau – in a helicopter! – from Geneva to its manufacture in La-Chaux-De-Fonds. That’s an expensive trip, and the Richemont-owned brand clearly sees upside to the former DJ turned Watch TikTok King’s expertise and content featuring vintage Cartier.

Notably, both Leonard and Nouveau are watch dealers. Players in this part of the industry are increasingly producing more watch-related content to drive clients to their stores or online sites or trading platforms.

As for YouTubers like Barker, Morgan and Pearce, they also aren’t generally paid by the brands to talk about new products. They are, however, sometimes given access to watches to better review them. Andrew Morgan, previously known as the ‘The Talking Hands’ guy on Watchfinder’s YouTube channel, has worked with and consulted for brands like Christopher Ward and H. Moser & Cie. since striking out on his own. Morgan says he only works on content creation with brands that he already likes, respects, and believes he can help.

The fact that brands are working more with these types of creators reflects a broader shift in media consumption as consumers increasingly get news and information from non-traditional sources.

Still, the staid Swiss watch industry is rarely accused of pioneering new forms of communication and storytelling methods. They’re following other sectors in their embrace of these (relatively) new voices. Let’s not forget that Patek Philippe didn’t have an official Instagram account until 2018.

Question 2: How To Start A Watch Brand

A story I’ve long wanted to read is a study on the wave of “new” independent brands. If you’re not a watchmaker what all goes in to creating a brand? Who are the suppliers you go to to shop for components? How are these brands doing?

“Rich fordon”

Not sure who the nice person asking this excellent question is, but here goes:

The barriers to entry for creating a new watch brand have never been lower. Book a trip to Geneva in June and head to the EPHJ fair at Palexpo, and within a couple of hours, you will have met enough suppliers of watch cases, movements, dials, and straps to cobble together a watch with your brilliant new brand logo. Depending on your budget, the components likely won’t all be made in Switzerland. But if you want to produce a ‘Swiss Made’ product – that means that it complies with the ordinance that it be a Swiss movement, be cased in Switzerland, and have incurred at least 60% of the manufacturing costs in the Alpine nation – you can certainly be accommodated. 

From Montrichard to Roventa-Henex SA, there are plenty of  ‘Private Label’ watchmakers in Switzerland or in other countries to make your new ‘independent’ watch brand. Then, the hard part starts. How do potential customers learn about your great new watch? Breaking through amid the online din of hundreds of competing microbrands is no small feat.

And if you are not using a private label maker, how and where do you facilitate and oversee production? If you aren’t based in Switzerland and are trying to make a Swiss-made watch, it can be a serious challenge.

That’s why we’ve seen some of the strongest new independents beef up their on-the-ground Swiss presence. Horologer Ming is among the most successful of the new wave due in part to its original and distinct design ethos, which was created by co-founder Ming Thein and has generated great interest from enthusiasts and collectors.

While Ming Thein is based in Kuala Lumpur, and other executives and brand founders are in other parts of the world, Horologer Ming now has its own Swiss watchmaking facilities and corporate entity (Horologer Ming SA). It has hired executives from its main component supplier to join the brand and oversee Swiss production, which has allowed the company to better manage production and delivery. For the first time, Horologer Ming has added an approachable-priced watch, the 37.02 ‘Minimalist,’ to its permanent collection.

Ming is also a founding member of the Alternative Horological Alliance, along with the US-based Fleming brand and American watchmaker J.N. Shapiro. As outsiders navigating hurdles, they’ve banded together to share resources, knowledge, and potentially some production assets. They make high-quality watches in an industry that hasn’t traditionally been particularly open to newcomers, let alone foreigners.

The move underscores the difficulty of producing top-tier Swiss-made watches by companies not based in Switzerland. Even for relatively small production runs such as Fleming’s Series 1 of 41 watches, the brand’s COO and art director, James Kong—well acquainted with Hodinkee readers for his superb photography, which can be seen on Instagram @waitlisted—has been spending a lot of time in Switzerland. He’s been shepherding production via frequent and in-person contact with the brand’s stable of high-end Swiss suppliers.

“Oversight, open communication, and as much face-to-face interaction as our schedules will allow are essential when working across cultures and languages to produce a product where small details make all the difference,” Kong says.

”We’ve found that making a quality watch requires us to be as close to the process and the craftspeople behind it as possible. Not only are we more creative and productive when working with our partners in person, but we’re also able to efficiently tackle open issues that might otherwise linger for months in the background, heading off any potential miscommunications before they happen.”

Kong says that showing up regularly in the country to strengthen relationships is critical for another reason: 

”We’re often placing orders for bespoke, complex parts in quantities that likely matter little to any larger supplier’s bottom line. As the leader of another high-end independent brand said to me once, the only leverage brands like us have is ensuring that our suppliers care about us as people.”

The bottom line is that designing and getting someone else to produce a watch for your new independent marque is relatively easy. Creating a real brand with consistent production quality and delivery to customers, not to mention the challenge of selling watches in a market overstuffed with new names, is exceedingly hard.

Question 3: AP’s Royal Oak Risk

Do you believe that AP is in a uniquely precarious position, given how much of their equity is tied up with the Royal Oak? Patek and Vacheron both have similar offerings that compete in the same space; however, I don’t feel as if they’re as overleveraged, given Patek has the Nautilus, Cubitus, and Aquanaut (not to mention several other distinct non-sports watch lines) and Vacheron isn’t as reliant on the Overseas/222 from what I can tell. The CODE 11.59 line is definitely picking up steam, but I suspect that if the integrated stainless steel sports watch trend disappears, AP would be at considerable risk from a brand equity and eventually sales standpoint.

“cocktailtime”

Good question, and it is one that has been leveled before at the company from Le Brassus.

Overreliance on any one product and a lack of customer diversity can be risky for any business, whether it makes cars, shoes, handbags, or watches. Of course, the Royal Oak isn’t just any product. It is the original integrated bracelet luxury sports watch. Designed by Gerald Genta and launched in 1972 at an audacious price for a steel timepiece, it has evolved into a flagship and is certainly worthy of being the centerpiece for one of the top Swiss brands.

Still, when you include the beefy Offshore, the Royal Oak accounts for an estimated 87% of Audemars Piguet’s total sales, according to Morgan Stanley and LuxeConsult. That is a heavy concentration, and the analysts estimate that other models, most notably the CODE 11.59, are unlikely to ever account for more than 20% of brand revenue.

That is a risk. On the secondary market, prices for the  Royal Oak 16202 in steel have fallen from more than $250,000 at the peak of the hype bubble in 2022 to about $68,000 today, according to data from WatchCharts. That’s still almost double the retail price of about $36,000.

As you note, the CODE 11.59 has been making progress after a rough launch in 2019. The CODE case was used to bring back the Starwheel complication in 2022 – much to the delight of enthusiasts. And previous AP CEO Francois-Henri Bennahmias got to go out with a bang at his last Grand Prix d’Horlogerie de Geneva awards in 2023 with the CODE 11.59 Universelle RD#4 and its 23 complications taking home the top prize Aiguille d’Or.

In its most recent batch of releases celebrating the brand’s 150th anniversary, AP is offering its new perpetual calendar movement – that can be operated and set using just the crown – in Royal Oak and CODE models. But it’s still the Royal Oak driving the bulk of AP’s business, and business is good at the moment. It was one of just 11 out of 50 Swiss brands to grow sales last year, according to Morgan Stanley, rising about 3% to 2.4 billion Swiss francs.

So yes, the concentration of the Royal Oak in AP, compared to more diverse rivals, is a problem. But considering the staying power and demand status of the Royal Oak, it’s a nice problem to have.

​Hodinkee 

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