The Business of Watches [037] Former CEO Of Bulgari Jean-Christophe Babin

0:00Jean-Christophe Babin:Welcome to the Business of Watches, the Hodinkee podcast where we go behind the scenes to talk to the executives and the players making the watch industry tick. Today we are speaking with Jean-Christophe Babin, longtime head of Bulgari, many other roles in the watch industry and watch jewelry industry over the years. And today, the president of Geneva Watch Days, the gathering, the salon, the fair that happens at the end of the summer each year. Jean-Christophe Babin, welcome to the Business of Watches. Thank you for joining us. Thank you, Andy. Thank you, Olinke. It's a pleasure. Especially, I mean, to talk about this forum, I would say it's more a cultural event than typically watch fair, which has been created during the COVID.

0:53So it was born out of the absence of any other watch fair as institutional, traditional watch fair head boss

1:04Jean-Christophe Babin:decided not to run. In 2020. So yeah, talk about how the event came about and then we'll talk about where we are now. Yeah. Well, you know, that was very simple. I mean, the traditional fairs decided not to run for a very simple reason, because the COVID was preventing public gatherings. And as the existing fairs, then SAH on the one end and Basel Fair on the other end, were relying upon a very centralized infrastructure, for instance, the Pallexpo Exhibition Center in Geneva. there was no way to postpone to further months hoping that COVID will have vanished in the meanwhile because the next months were occupied at Pallexpo by other kind of events or exhibitions so obviously when you are tied by a very busy location, if you miss your slot, there's no other slot before the year after And when I realized that they wouldn't run at all, I mean, in 2020, I remember it was a Saturday morning.

2:20I said it's crazy because the watch industry, despite COVID, needs watch pairs, definitely. COVID is not a global pandemic. It's a rotating pandemic, meaning by that it started in China, went westwards to Europe, then crossed the Atlantic to the US, then to Asia and back to China, where eventually it ended. So it's true that for Europe, the spring 2020 was the worst period. It's when it reached from China, countries like Italy, Switzerland, which were pretty much hit by COVID. But on the other hand, we knew that this pandemic was rotating so that sooner or later, it would leave Europe to go hopefully nowhere.

3:12It went in the US, unfortunately. And then the idea was to run a new fair, but not a fair conventional, a fair which was fitting with the COVID constraints. And which, after COVID, if we would decide to run it, could be repeated. and so I thought that this fair should be decentralized because the main reason for the cancellation of Basel and SESH was that it was centralized in one location. So decentralization was mandatory, not only to avoid pandemic, but also to provide the brands with more freedom to exhibit more or less the way they wanted, wherever they wanted, and according to their resources and ambitions, and not to be forced to rent expensive corridors in one single location.

4:04Our only obsession with that, it should be run in Geneva State. Yes. But it could be in your boutique. If you had a boutique big enough for a showroom, it could be in an hotel suite, which is easy to rent and to refurbish. It could be in your manufacture. Many watch maisons are located in Geneva State. so the brand could choose where they would exhibit. But obviously, the fair itself had to be a material institution, and therefore we created the center of the fair, which is a pavilion still existing today, three times bigger than in 2020, where the brands could exhibit their best pieces. So it was not really a brand showroom, but it was a showroom of all the brands, which was a world first, I mean, for a watch exhibition offer.

4:58Usually the brands are exhibiting only in their booths or in their showrooms. So each brand participating could exhibit two or three or four pieces, which was the most emblematic of the 2020 collection. The second thing is that this structure was also designed to allow the public to come every day to discover the exhibiting brands, which was also a major disruption versus the existing fairs.

5:25Jean-Christophe Babin:Yeah, this was a change to allow the public to visit brands the same as journalists or people from the industry. Yeah, and we felt that to really raise desirability, interest, relevance of luxury watchmaking, it was mandatory to treat the public the same way we were treating the media, the influencers, or the collectors. So they were able, I mean, to come for free. And it was, since the first year, quite a success. And then by 5, 6 o 'clock, we turned, I mean, the public into the evenings of the fair. So every evening, we were gathering under the pavilion, the participants of the fair, meaning on the one hand, the visiting media, retailers, influencers, collectors, and on the other hand, the representatives of the brands, namely, I mean, the CEOs and their teams.

6:22And this was also world first, totally departing from traditional first, where usually each brand is really defending its own interests and tries every evening to capture as many good clients as possible and to take them to a party. Here it was the opposite. I mean, we didn't prevent brands, obviously, to invite clients at Freedom, but there was a location where every evening any brand could invite its clients, its collectors, and where retailers, media collectors could meet many CEOs altogether. So it was like creating a new community where despite being competitors, we were first and foremost, I mean, a community of passionate people all revolving around jewelry.

7:13And last but not least, the organization was done directly by the brands. So it was led by a group of founding brands. And each founding brand did delegate a couple of people to organize a fair in just three months. Because, I mean, we decided that in March, April, first for June, then reported to July, and then eventually end of August. We followed the pandemia. and thanks to the decentralization of the showroom and agreement with the hotel that if it had to be postponed, there wouldn't be any penalty. So it was win-win or lose-lose, but it couldn't be win-lose, which was also, I mean, enabled by the strong support of the Geneva State and City.

8:00They were so happy that one big event would happen in the city a year where everything else had been virtually canceled. and eventually we could run them end of August. It was the first time ever. It was small. I mean, we started, I mean, with less than 20 brands, but it was not bad at all. A good affluence, mostly European, of course, because we were in the time of COVID, but also Middle Eastern. And I would say for very limited investments and last, we made it extremely accessible also to small brands So that instead of applying a fee per square meter, per share of the pavilion or whatever, we decided to have a tariff, which was integrating the size of the companies.

8:48So we had four or five different clusters, starting as low as 10 ,000 Swiss francs for the very small startup of niche brands, up to much more, obviously, for larger brands like Breitling, Bvlgari, Ulistada, and so forth. And this was also a world first to analyze that watchmaking was a huge diversity of very different realities, not only in terms of style, in terms of expertise, but also in terms of economics. And that if we wanted to organize something representing well the Swiss watch industry, we'd also to take into consideration the resources of those different realities which we did and which we still do nowadays.

9:35So nowadays, it's a seventh edition, so it's incredible.

9:38Jean-Christophe Babin:Yeah, I mean, the question now is, I mean, obviously, lots has changed. There are different gatherings since the launch of Geneva Watch Days. Obviously, Watches and Wonders has been born. There's many other gatherings. Dubai Watch Week continues once every two years. What is the place and purpose of Geneva Watch Days now, and how has it evolved? Well, primarily, I think that it's today very complementary to Watch and Wanderers, and it's commonly analyzed as a second major watch event globally, which, you know, run by a group of amateurs, which primary skill is to manage watch companies and not to organize watch fair.

10:27is quite interesting. And by following the initial principles of decentralization, self-manage, affordability, accessibility, and this community approach, it has become a real cultural event going much beyond a watch fair only. And I will come back on that. Very complimentary to Watch and Wonders as we are welcoming more or less the same amount of brands. This year will be 68, but let's say around 60 and 70. We don't want to go further because, I mean, you all participants need time to have quality relation building and not a rush, I mean, between one brand to another brand. So we want to limit it.

11:17It's not easy. Catherine is a kind of gatekeeper of the show. Right. What makes it different for Watch & Wonders is primarily, and besides the approach I described already, the diversity. Watch & Wonders is primarily welcoming the major established global brands. And there's little room for the smaller ones. First, because of lack of space. Second, because of a pretty high cost for a small brand. It works by square meter. So whether you are Rolex or you are François-Paul Journe, you place the same amount per square meter, which makes quite a difference on the P &L. And then, you have to build a booth.

12:03Yes. Early, ACHH was very minimalist, so people didn't spend too much. Now, if you go to Watch and Wonders, I mean, the booths are back again. And obviously, the cost is quite substantial. Very affordable, I would say, probably for the major brands. but not even thinkable for a startup, a young brand. And then comes a complementarity where the GOS days have some, I would say, major white brands. I was mentioning Breitling rather than Bulgari, but it's much more skewed towards smaller brands, more specialist brands, startups, revamped brands like, for instance, Ferdinand Berthoud, which is historical, but disappeared.

12:53And thanks to Carl Ferdinand Schoffel, it's coming back to life. So it's an incubator. And it's really appreciated as such. Because on the one hand, you have the reinsurance of the Pillar brands, which Boulogne is pretty much representing, but not only, with many others. But at the same time, for collectorals, It's definitely their privileged destination because they are passionate by watches, of course, and always eager to discover first real news and ideally from new brands. And one of the strengths of the GOSDs is really the huge collector's community, complementing the public move by curiosity and visiting the pavilion.

13:40But the collectors are also visiting the showrooms. We take them to the manufacturers and they can buy directly also from the brands, the pieces that they're interesting for their collections. So it's all about diversity. And out of the 68 brands of the January West days, less than 10 are also in Western Ronders. meaning that between the 60 of Western Wonders and the 68 of the Jaguar's days, eventually we managed to have room for 120 different brands to express their style, to express their DNA, to express their news in Geneva every year at a distance of four or five months. We talk about April versus early September.

14:31such providing, you know, collectors, retailers, media with a huge panorama, I think, a very common panorama of what luxury watchmaking means nowadays. And not only the institutional part represented by the major brands, but also the very creative and unexpected part represented by maybe smaller brands, but which from a purely horological standpoint are considered as extremely interesting having in mind that some of them could become the major brands of the future, you know. It takes decades if not centuries to make a major brand and so being an incubator of the future major brands is also for us a mission and we are passionate about it.

15:22Jean-Christophe Babin:And should we think though in terms of the ambitions of Geneva Watch Days as it continues Do we want to see more brands? Do we want to see more larger brands, similar brands that are at Watches and Wonders? Or how should we expect the event to evolve in terms of its participants and in terms of the focus for those who attend? Well, I believe the mix of brands is perfect. You know, a few anchor brands and many smaller brands, either because they're young, either because they're just in a revival cycle or because purposely the brand owner or owners are focusing on very small niches, which are very interesting for the watchmaking industry, but not compatible with the watchman owners concept.

16:19So I think the concept is proving success goal. So the main effort won't be to have more brands, but to ensure the diversity of what we offer to participants in terms of variety. And the second point is to further turn it into a major cultural event and not a transactional event. Obviously, there are transactions, and we are very happy about that. but I would say the cultural dimension of the event is as important as the transactional dimension and in that it's totally different from any other multi-brand watch event existing nowadays. By culture I intend, for instance, every morning you have some SEO panels but not discussing necessarily directly on watchmakings.

17:14Some themes are related to watchmaking, others aren't at all. It can be about design, it can be about lifestyle, it can be about luxury in general, it can be about Gen Z or Gen X and their relation to our luxury versus self-luxury. We have some panels and some, I call them, symposium in the afternoon where it's open to a different public. And where, again, I mean, you have experts, you have moderators, and always led by experts of the industry. But again, I mean, going much further and beyond the Silicium Spring rather than a new waterproof system. And then we have an educational part. We work very closely, I mean, with Geneva Watchmaking School.

18:08We also organized an auction to the benefit of the watchmaking school so that they can reinforce their structure and the content of their own programs. So we are also fostering the emergence of future watchmakers, which we believe is absolutely mandatory, providing more resources to the most famous school in Geneva. We organize some workshops also for kids. Quite unexpected, but, you know, the familiarity, the proximity to what she is should start as early as possible. You know, what you discover early in your life often remains in your mind forever. And this, we believe, is also part of our missions.

18:52We have some interactive activities like chronometry contests where you have put in competition several CEOs, but not necessarily limited to CEOs, in a very short timeframe to try to set up movements as close as possible to the cost requirements. So it's really a big event, a big celebration of watchmaking with a very strong cultural dimension, which really makes it something standing apart from all the other events you were describing. I'm not mentioning any longer watch and holders, which remains, I mean, the major transactional event of the global brand. But I'm talking about the many other events that you can see here and there, which are really primarily transactional and regional, if not local.

19:48Here we talk about something which is regular every year, which is very emblematic of the diversity of the Swiss watchmaking genius and also some foreign brands which were welcoming because, you know, we don't want to be close to good creativity, to good ideas. So, I mean, as long as the brands are presenting some interesting novelties and comply with some criteria which we define in terms of transparency, integrity, authenticity, we are also very happy to welcome brands coming from other countries. And this participates to putting watchmaking in the top of mind of 21st century clients, which is not obvious.

20:36Jean-Christophe Babin:Interesting. And, you know, talk about, I think, the whole industry and then, you know, governments from the local Geneva government to the federal Swiss government have become more conscious and more interested in promoting watchmaking in Switzerland's role and Geneva's specific role as a watchmaking hub. I mean, talk about the place, the location where this event takes place in Geneva and then the role that the government and the local municipality plays. And also that, you know, sort of changing desire and awareness of watchmaking as a cultural institution here in Switzerland and in other places.

21:24Well, I have to say that we are very much supported by the Geneva State and City authorities, not only, I mean, financially, but also facilitating all the access to security. you know 68 brands exhibiting means extra security putting pressure on the hotels so that during that period they give very good rates to the participants of the event wherever they come from whether they are media whether they are collectors whether they are people from your brands because not everyone is living in Giseleba myself I'm living in the chateau so I have to sleep somewhere so we have a very strong support and we are today the only officially endorsed watch event from the Geneva State and city, which says long about the vision, I mean, of those authorities and their understanding that the future is not only made of established big brands which you can meet at Watch and Runners, but is also very much related to the emergence of additional players with different ideas, different philosophies, and attracting to watchmaking.

22:44Perhaps people were not so much interested by the existing anchor brands, but more about more exclusive, more original, more creative, more daring niche brands, which eventually create more jobs, eventually equip more wrestlers, and eventually add a layer, which is very interesting, to the traditional group of brands, which usually come to your mind when you think about Swiss watches or luxury watches. And it's not just a statement. It's a fact. If I take the last seven years, you won't believe, but you surely know them in the Hollywood red carpet of watchmaking, the Grand Prix d 'Horlogerie de Genève.

23:38Since seven years, so the seventh edition of the January Days, 35 % of all awards, 35 % of all awards which have been awarded by the Grand Prix d 'Horlogerie de Genève have been awarded to participants of the January Days.

23:56Jean-Christophe Babin:So 35, 3.5%, yeah. 35, 3.5, one out of three has gone to a brand attending the January World Days. So I would say, except winners like Bulgari, which are not really emerging brands or small brands, but mostly to small emerging brands, thus providing those brands with further legitimacy and thus proving our concept right that we are a real incubator and a real spotlight on the category of brands which are very important already nowadays and which then, after the visibility of the Genewash Days, get a second visibility at the most prestigious World Watch Award, which is the Grand Prix d 'Algerie de Genève, which is a close partner, by the way, with Fédération Photorlogerie with the Chamber of Commerce of Geneva of the General Watch Days.

24:58I don't know any institution in Geneva not supporting the General Watch Days, which, again, is something which is pretty unique.

25:06Jean-Christophe Babin:And, you know, you talked earlier about, you know, the cost for participants and how it's quite different than salons like Watches and Wonders and inflation and the increasing cost of inputs and raw materials, the price of precious metals, all these things have contributed to rising costs in the industry. How have the costs for participants at Geneva Watch Days evolved over time? And have we seen a big change in terms of how much it costs for brands to participate? Well, we didn't change much. the tariff have not evolved. We have just created an entry level at 5 ,000. Why? Because we have noticed that during the Geneva Watch Days, many smaller brands were organizing in Geneva, taking advantage of the presence of 500 media, 300 retailers, probably 2 ,500 collectors, took advantage of the Geneva Watch Days to organize here and there their events.

26:15And with Catherine, we thought that it would be better for them to join the bandwagon, to have access to the website, for registration, for hotel fairs, for the programs, to have access to our pavilions, to be exhibited together with the others. But we were conscious that if they did that, I would say autonomously and isolately, half of them did because the entry level was felt for them a bit too expensive. And so by creating a new level, with obviously less advantages at the former entry level, because it's logical as well that if a brand like Bvlgari paying full price and high price gets, I don't know, three displays in the multi-brand showroom, if you have access at the new tariff, you will get a nice visual of your watch of the year.

27:15So obviously there are some differences, but basically you are welcome in the pavillon the same way. You can come with your clients, with media and meet and greet there, participate to activities, participate to the cocktail. So you benefit from most of the advantage for an amount which is quite symbolic and make your life easier. And it has been successful because eventually we had even to refuse some participants because this really was a strong leverage for them because they thought, yes, it's not crazy to be. and if they are pleased and happy and many have been, they are asking to step up to the next level the year after which is quite interesting as well because they see what kind of extra privilege they could get paying an extra 10 ,000 which remains I mean compared to a traditional watch fare and yeah, ridiculously low to give you an idea, I mean the budget of the Geneva World Days is less than the size of a small booth at Wash & Wonders for one brand.

28:26And here we have 68. Of course, some have to pay some sweets because they don't have a presence in Geneva, which adds a great cost. Others are using their boutiques, so there's no extra cost for showcasing. It's just, I mean, arranging the boutique diversely. Others have their own manufacturer, and so, again, there are no extra costs. So I would say that the direct costs are just a fraction of a single brand booth in Wach and Wonders. And the total cost remains a fraction because the total cost is probably, if you account, I mean, for the suite which are rented here and there, for some private cocktails which can be given in the manufacturer.

29:08We talk anyhow, I mean, about very little amount of money compared to any existing watch event. Yes. Even secondary, regional, local events organized here and there, as you were mentioning yourself.

29:24Jean-Christophe Babin:And so, you know, you've been around this industry for decades and you just finished up a run as the head of the watch unit at LVMH. You know, from your perspective, give us a sense of where the watch industry is right now and what are the biggest, you know, business challenges facing the industry as a whole right now that, you know, we may see attempts to demonstrate at Geneva Watch this. Well, what we see since, I would say, the last 10 years and probably accelerated by COVID is a kind of depolarization of the market where the bigs are becoming bigger, but fewer. and where small, exclusive, creative, daring brands, even though they represent medium-low turnovers, are gaining more and more traction in terms of growth, of interest, of coverage, and where the brands a bit stuck in the middle are really struggling.

30:31And we see it with our logical federation statistics, where you see that the market in value has not suffered much from the last two, three years unstable international context. The value, I mean, plus one, minus one overall is there. But the volumes have dropped by 10 million in 10 years, which means that the average ticket has increased so that the share, I mean, of extensive brands is higher and higher. And extensive brands are not only, I mean, the major brands, but often are those niche brands I was mentioning to you, which you can discover at the gym I wear days. Often, I mean those brands because they craft, take Ferdinand Bertout, they don't craft thousands of watches per year, but the watches they craft are selling for hundreds of thousands of euros.

31:24And it's an example, but I could mention many others, I mean, in that direction. So this is a bit, and probably the challenge for the Swiss industry now, is to stop the volume drop, so to continue to innovate, of course, to continue to have mandatory big players that you absolutely want on your wrist, in your collection. I mean, useless to mention the names, but you can easily guess them. To offer even more newcomers or revived brands coming back after 30, 40, 50 years, you know, many disappear during the quartz crisis and some entrepreneurs or other brands are reviving them right now. And this is very interesting because it adds diversity.