How Patek Philippe Survived the Downturn
As head of Patek Philippe since 2009, Thierry Stern has seen one of the most remarkable boom and bust cycles in the watch industry—and weathered the apparent downturn relatively unscathed. Following years of record sales fueled by robust demand from China, Swiss watch exports fell more than 11 percent in 2016, their worst slump in more than 20 years. But independent watchmakers such as 178-year-old Patek Philippe, which produces around 55,000 watches per year, have remained competitive and maintained their workforces intact even as the market shrank.
Worth caught up with Stern to discuss how Patek Phillipe survived a downturn, ongoing challenges for the industry and why his company remains one of the most highly regarded watchmakers in the business.
Q: WHAT IS THE STATE OF THE WATCHMAKING INDUSTRY NOW?
A: We are back to normality. There were many years when the watch industry was increasing—it was fantastic—but it cannot always be like this. And we at Patek have always known this. For my dad, for example, what’s happening today is totally normal—Patek has gone through many different crises over the years, and we know what’s going to happen most of the time. We know how to survive them. What is good about this is that there have been too many new brands that showed up from nowhere selling too many items at high prices, but most of them didn’t really have the structure and the will to do that. So maybe this will clean up the market.
AND HOW DO YOU SURVIVE A DOWNTURN?
It’s very simple. First, you have to be a very strong brand with a very good strategy. But most important is that you not change your strategy all the time. For people who know Patek, they will not suddenly be lost because I’m changing now for sports versions or for just selling steel watches.
WHAT’S WRONG WITH SELLING ONLY STEEL WATCHES?
Many brands switched to selling only steel watches because it’s cheaper. And they have been producing too many of them.
DID BRANDS OVERESTIMATE THE CHINESE MARKET?
Everybody was rushing into China, and then suddenly China stopped its consumption. Most of the time you need minimum two years to produce those watches. So suddenly they realized they have too many watches.
HOW DID PATEK AVOID THAT FATE?
If you know your market very well, if you have a very good relationship with the retailer, even the final client, you can anticipate that. Most brands also have shareholders pushing them [to produce more]. In my family, the shareholders, it’s the family—we are very cautious for the future. I have to work to be sure that in the future my own family will take over and continue the business. We saw what was going to happen so we did not rush to increase our production. We were maybe more vigilant. If I increase production by 2 percent, that’s major at Patek.
HOW IMPORTANT IS THE SECONDARY MARKET?
Very important, but I should not get involved in that. I’m selling new watches—what I have to control is the people selling Patek, like the gray market [sales through unauthorized dealers]. We have been working with all our offices around the world to stop that, but we have to be realistic. It will not be possible to stop it 100 percent. At one point the watch was sold by one of our retailers, and that’s what we are really looking for. If we see a retailer not playing by the rules [and contributing to the gray market], we’re going to shut it down.
WHEN IT COMES TO BUYING A PATEK, WHAT DOES A POTENTIAL NEW CLIENT NEED TO KNOW?
That we have longevity, but we are also very innovative. You will never see Patek Philippe making, for example, a smart watch. That’s not our field, but we are smart enough to create something as good as a smart watch, but with a different mechanics. Creativity’s the key to our success—there is no way you could stay around for 178 years if you are not willing to evolve. We focus on developing something new but that still matches our existing collection and that will surprise you as a customer.
SHOULD BUYERS CONSIDER THE FUTURE VALUE OF THE TIMEPIECE?
You never know the future value of any piece. That depends on the piece, the quantity, the rarity and many other factors. What’s beautiful is you never know when and why you should resell a watch. So you can pass it on to the next generation, and its value maybe will be quite high and this will always be something nice to get. But it is something I cannot promise.