A new Rolex store in Scotland has opened amid major shifts in the luxury sector, writes TERRY MURDEN
With the retail industry suffering its worst ever downturn and stores closing at a record rate, the opening of a new shop of any sort is bound to attract an unusual level of interest.
When it is Scotland’ first dedicated store to one of the world’s most famous brands it adds an extra layer of intrigue.
The new Rolex outlet in Glasgow will be seen by some as confirmation that the high street has a future while others will see it as a crucial test bed for bricks and mortar in the luxury market against the seemingly relentless shift to a virtual retail market.
If Brian Duffy is at all concerned about the wisdom of his latest venture then he’s not showing it. As chief executive of Watches of Switzerland, which is behind the new Rolex store, he admits the global market in luxury goods has softened, but he points to the upside and the long term.
“Internationally, there is a reduction in demand particularly because there are no Chinese and American tourists,” he says, concurring with data showing how the Covid-19 crisis has hit the luxury and fashion industry hard.
According to a study conducted by the Boston Consulting Group, sales in these two sectors could drop by 25% to 30% compared to 2019. Euromonitor International is a little less pessimistic, predicting the luxury goods market to shrink by 18% against expectations that it would grow by 3% this year.
Last month the FTSE 100 company Burberry revealed that revenues in the year to March fell 3% to £2.6 billion and comparable sales dropped 27% in the fourth quarter. However, it pointed to some encouraging signs since the financial year-end as countries eased restrictions, and said in May that sales since the start of April in mainland China and Korea were ahead of the prior year.
Mr Duffy says the data conceals a more complex set of dynamics. “Paris and London may suffer from the loss of Chinese and US customers but domestically demand is still there,” says the Glasgow-born former director of Celtic football club. “People have money. They are not going abroad on expensive holidays, so they are spending it on other things.”
His faith in the luxury sector holding up is shared by David Kellie, chief executive of the Natural Diamond Council. “The luxury world rebounded from previous crises. And I see this as no different,” he told the industry website Luxury Society.
Guy Bedarida, creative director, at the luxury online store Marina B, says fine jewellery is in a position to thrive as a category in the post-pandemic world. “The opportunity lies in telling a story through very personal luxury goods that have meaning for the individual wearer.
“After all of this is over, if not sooner, consumers will be seeking pleasure in small, attainable ways. The mindset that jewellery has inherent value will also be a factor as everyone considers their personal spending power.”
Mr Duffy shares that view of the product as an investment and a personal journey. “A Rolex is not just a watch. It is a piece of craftsmanship,” he says. “It has been described as a ‘rational indulgence’. It is not frivolous. it is an emotional investment. People are buying something that will be a heirloom that they can pass on.”
It worked for the family of the late film star Paul Newman whose 1968 Rolex Daytona, bought for $200m by his wife, sold at auction in 2017 for $17,752,500 after just 12 minutes of bidding.
Maybe that was in the mind of the Glasgow store’s first customer who made a purchase within 10 minutes of it opening. It marked the beginning of what Mr Duffy said was a record week for the former Watches of Switzerland outlet in Buchanan Street.
‘A Rolex is not just a watch. It is a piece of craftsmanship. It has been described as a rational indulgence’
It was a welcome slice of positive news after the company’s stores, including Goldsmiths and Mappin & Webb, were closed for more than half of the quarter. Added to that, Rolex watches are not sold online, so income collapsed.
“What we have seen is very pleasing. We have a lot of customers on waiting lists who we have been able to satisfy,” he says.
The reopening of shops came a year after Mr Duffy led Watches of Switzerland to a stock market listing which was five times oversubscribed. The shares soared from a strike price of 272p to 380p before plunging to 180p as the Covid crisis hit the whole market. They are now back at around the flotation price.
Investors will be encouraged by forecasts that the sector will rebound at the end of this year. Evidence of its resilience and of pent-up demand came early into the global lockdown on 11 April when Hermès reopened its Guangzhou flagship store and reportedly achieved a $2.7 million turnover in a single day.
The watch as more than simply a timepiece is an important selling point. Mr Duffy says it is the one piece of jewellery apart from a ring that men will wear, while demand for Rolex watches among women is growing faster than it is for men. The actresses Charlize Theron, Jennifer Aniston, and Eva Longoria, singer Rihanna and model Rosie Huntington are customers, and there are a growing number of women increasingly drawn to the larger-faced men’s ranges, worn looser like a bangle.
Fashions, like boom and bust, come and go, but the luxury sector believes there will always be a place for quality and a demand for expensive high end brands, especially those that retain and grow their value.
What will change is the route to market. The opening of the store in Glasgow marks a commitment to personal service and bricks and mortar retail, though the march of digital sales is advancing and – some say – inevitable. In this new virtual world, the industry is looking to ways of projecting holograms of a timepiece on to a customer’s wrist, and virtual reality showrooms where buyers can browse merchandise with the help of virtual assistants.
As José Neves, founder, co-chairman and CEO of Farfetch, told Luxury Society: “In the future, digital transactions are expected to represent a significantly larger proportion of the overall luxury industry.
“With current retail store closures, travel restrictions, and shifting consumer shopping habits, I expect to see an acceleration of this secular shift to online.”