Dominika Trawka, Luxury Consulting Online:
Your company introduced the first mechanical smartwatch in the world. Could you tell me more about this revolutionary project?
Peter Stas, CEO of Frederique Constant: In 2015 we have introduced our first smartwatches with quartz rate electronic caliber. The other specialty was we displayed the connected information with hands of a dial. These watches look traditional but they were battery driven. Almost from the beginning we had questions from our customers if we would be able to integrate this new smartwatch technology into a mechanical caliber. We worked on that for the past 2,5 year and then, in the beginning of this year, in February and later at Basel we introduced Hybrid Manufacture. It is one of our own in-house developed, in-house produced and in-house assembled manufacture caliber and it has smartwatch functionality, for example step tracking, activity level, sleep monitoring, health insights. The last technology we have integrated is called “analytics” that is the mechanism that checks the mechanical caliber – checks the rate, amplitude and the beat error.
This is your answer to growing smartwatch market. How does this trend threat the traditional business nowadays?
My personal opinion is that especially the 3rd generation of Apple Watch has become quite successful and it is reaching quartz watches from Switzerland. You can see it in the statistics, that 3 years ago there used to be still 21,5 mln quartz watches exported every year and last year it dropped to 17 mln, so over 4 mln pieces in just 3 years and I think it is mainly due to smartwatches. Last quarter, last year Apple sold 8 mln pieces and whole Swiss watch industry sold 7 mln pieces – so Apple itself sold more than Swiss industry together.
What can we expect from the future in this situation?
Apart from the Hybrid Manufacture, the mechanical smartwatch we also introduced the AlpinerX which is our 3rd smartwatch with hands and digital display but still emphasizing the beautiful design. It still has the real dial, real indexes, real hands – typical Swiss type of product. All our smartwaches represent around 12% of our revenue so it is quite important and we see this has compensated the slope of quartz watches. It is possible also for Swiss companies that with this type of product we can come up with something that is still very Swiss in terms of DNA of typical Swiss watch – beautiful design and high quality.
How far into the future you plan your business?
With my wife, we sold the watch business in 2016, meaning the brands Frederique Constant, Alpina and Ateliers de Monaco, however we kept the company called MMT which is the developer of the software and hardware modules of smartwatches. There we have engineers, they produce new modules but also the formula that runs on the module – the Android apps, the iOS apps, the clouds functionality. That company is actually responsible for the development of this kind of future products and there we have new modules in development but also new functionalities – especially the functionality that goes into health. This company delivers the technology not just to Frederique Constant or Alpina buy also other brands we collaborate with. This drives the future development for the next 3 to 5 years.
So now you drive the watch industry, but how it all started? How have you managed to build such a successful company from nothing?
That’s a long story! We started with market opportunity we saw: traditional, Swiss type of watch design but with some new technologies during the quartz crisis 30 years ago and then we built the company step by step, adding new markets. Now our brands are represented in more than 100 countries. We also built the company by constantly innovating – with heartbeats, heartbeats complications, manufacture, horological smartwatches. It is very important to see all these steps and continue to innovate the company if you want the company to grow and till today that’s what we do and will continue in the future.
You also follow the strategy of accessible luxury. What does it mean and who are your clients?
That started also 30 years ago. We wanted to wear beautiful watches to go to the office for example, that’s why we designed the first Frederique Constant watches and we priced them in the range of 1000 to 5000 CHF. Today we’re still in the same rage for the most of our production and we sell 160 thousand watches per year. There are some a little bit lower and a little bit higher but the core is what we call accessible luxury. Our customers are also still the same – the core customer is 30-45 years old, businessman and businesswoman who buys classical watch to wear to the office or to wear for special events as a part of their outfit.
And you persuade them to “Live your passion”. What do you focus on in your communication and marketing activities?
The sentence “Live your passion” came from our passion to develop these watches, later when we hired more watchmakers it started to represent the passion of people from the company and finally it is also like an invitation for our customers to share this passion by wearing Frederique Constant watch.
What are your ideas for future development of you company?
We will continue to focus on grow step by step. We now produce 160 thousand watches per year, we see this to grow in coming years to 220 – 250 thousand. We are also building new factory of 3000 m2. It is going to be ready by 1st quarter of 2019. We expand the capacity both on the production side and on the support side to be able to continue to grow.
Thank you and good luck with all future initiatives!