Cartier’s $60,000 watch shows risk of extending luxury brands
The watchmaker has suffered a 45 per cent profit drop and job cuts
For over a century, Cartier has sold elegant, if simple, timepieces such as the Tank, which starts around $2,500 — affordable by Swiss watch standards, and never confused with the level of technical finesse from brands like Patek Philippe.
Then a decade ago, Cartier sought to prove its own prowess, investing millions to build one of Switzerland’s largest watch factories and bringing in an industry veteran to head a fine watchmaking unit. The jeweller delved into the segment for connoisseurs known as “complicated pieces”, which sport analogue mechanisms such as calendars that adjust for leap years and require painstaking hand craftsmanship. The effort culminated last year in the Rotonde de Cartier Grande Complication Skeleton, a glassbacked confection priced at more than $600,000.
But then the Chinese demand that had supported the market collapsed. Wednesday, Cartier’s parent, Richemont, said first-half profit will fall about 45 per cent, a level Chairman Johann Rupert called “unacceptable”. In response, Cartier has cut jobs, bought back unsold inventory from retailers, and is refocusing on more affordable pieces. The retrenchment is a cautionary tale for the industry and for businesses in general — a reminder that luxury demand is ephemeral and that stretching a brand beyond its comfort zone carries considerable risk.
“Cartier has a very classic style, and that alone is already perceived as a status symbol,” said Manfred Abraham, a partner at consultancy BrandCap in London. “Consumers still get the same impact with a 2,000pound watch as they do with a 8,000pound watch, because people will still say, “Oh my God, it’s a Cartier!’”
Cartier began its push into fine watchmaking in 2008, creating a division led by Carole ForestierKasapi, a watch-industry veteran who had worked at Audemars Piguet. While Richemont doesn’t say how much it spent, the Geneva-based company probably invested about ^150 million ($168 million) in Cartier’s watch business, with about a third of that focused on higher-end complicated timepieces, estimates Jon Cox, an analyst at Kepler Cheuvreux.
In the following years, Cartier developed dozens of new movements — the engine of a watch — to improve its reputation and show that it belongs in the same league as the likes of Patek Philippe, Vacheron Constantin and Breguet, which have focused on complicated timepieces for more than a century.
For Cartier, a brand traditionally associated with jewellery for women, joining that men’s club was a stretch. Unlike the brands it was chasing, which are focused almost exclusively on watches, Cartier has a broad luxury portfolio of leather handbags, fragrances and sunglasses.
But the company saw rich rewards in going upmarket: brands that have hyper-expensive handcrafted watches at the top of the line-up can typically charge more even for their less expensive offerings.
“In the man’s connoisseur world, Cartier wasn’t taken seriously enough,” said Patrik Schwendimann, an analyst at Zuercher Kantonalbank. “But to change an image can take decades.”