DFS Group Chairman and CEO Philippe Schaus talks to Doug Newhouse during the 6th Masters of Time Gala event in Macau at the weekend.

 

You have talked about the growing sophistication by creating events such as Masters of Time in Macao, while also acknowledging the growing share of luxury purchases outside of China which you referred to as ’fast becoming a mature market’. Has much of this changed with regard to watches and jewellery business?

Not really. If you look at more recent studies and some of the results – and I can give you actual numbers – some of the recent surveys show that PRC customers who travel outside of the country still spend about RMB6,000 ($973) on luxury on average and that can be split almost 20% to 30% between cosmetics, 20% in accessories and 10% to 20% on watches.

 

Now we also know that the number of people travelling is expected to continue growing. We see right now there was this estimation over ten years that the number would grow from 100m to 200m travelling outside of the country and today when you look at the recent statistics, that seems to be still quite a ball park number you can rely on.

 

So people continue to travel and of course it is directly linked to the urbanisation. As China urbanises more, the urbanisation creates a higher appetite for travelling, and of course, an appetite for discovering international brands – and amongst that luxury brands.

 

So that is a movement that is going to continue over the next years and of course it is not going to be a straight line. There can sometimes be bumps on the line, but the long-term trend I would say is quite there.

 

The DFS team congregates for a photo opportunity at the DFS Masters of Time event in Macao.

 

Now you come from a luxury background as do some of the people speaking at Masters of Time this week. Who in particular are you looking forward to hearing speak?

We have four speakers at this conference and the first of them is an old friend and colleague of LVMH Jean-Claude Biver, who I always love to hear.

 

That is because he is forward thinking, unconventional, yet extremely deeply rooted in marketing and in the understanding of his customers. So that makes him very interesting.

 

Then you have somebody like Benjamin Clymer who is from the US and who is a collector and an editor around the world of watches. He, of course, speaks with the passion of somebody who has been around the world of watches and especially vintage watches.

 

When we sell a watch we sell really an element of emotion rather than a piece to tell you the time, so I think he will be great talking about that.

 

DFS Group President of Global Merchandising Harold Brooks welcomes guests to last weekend’s 6th Masters of Time event where more than 400 guests crowded into the Shoppes at Four Seasons, where a lively and informed panel of pioneering industry experts discussed some of the latest watch and jewellery trends. Moderator Lorea Solabarrieta looks on.

We have also Matthew Green who is one of our merchants here at DFS and Matthew has been with us for many years. He comes from a family of watch specialists and boutique owners. When I arrive here I always look to him to explain the collection to me because he has this knowledge and this capacity to tell you more than what is visible at first sight.

 

Then I met here another speaker that we have invited here which is Vivienne Becker. I had read some of the things she had been writing in How to Spend It [Financial Times magazine-Ed] and I thought it was very interesting.

 

Now we always consider the world of watches to be a such a masculine world, but one of the themes we wanted to bring up here by diversifying the collection and also in terms of her coming and speaking to us is to remember for ourselves that watches are as much a feminine topic as a masculine topic.

 

(Left to right) Leading watch commentator Benjamin Clymer, the founder and Executive Editor of the popular luxury watch blog HODINKEE who is widely considered to be a leading voice in the wristwatch industry; Jean-Claude Biver is a veteran of the watch industry and currently Chairman of the board at Hublot and President of the LVMH Group – Watches Division; Vivienne Becker is a jewellery historian with many years experience and was also one of the experts who helped DFS put together this year’s event.

 

Well that is the first time I have ever seen this done, so congratulations.

Well it is almost obvious when we do it, but as you say, it is done quite rarely.

 

Actually in our business we see that the ladies’ watch segment is rather growing in share versus the total segment. So discussing women’s watches is another interesting topic that I am looking forward to.

 

I like this discussion about the fact that on the women’s side it was Jean-Claude Biver who very much said that it is all about colour and the colour is the material and the material is the stone.

 

Face painting – but not for kids: real artistry in motion at the Masters of Time event in Macau.

So a high-end women’s watch is about colour and stones and then today – thanks to laser technology – you can also actually do things which you couldn’t do twenty years ago.

 

So there is a new world of creativity which is open today and you see it when you look at this collection. There are actually pieces here that would just not have been feasible to be manufactured twenty years ago, because we did not have the technology.

 

How proud are you to be able to put together this extraordinary mixture of brands. I remember seeing the very first Masters of Time and you being quite critical where you didn’t feel that it was quite right… so do you feel you have got it right now?

I am always looking for the next step, so for each one of these events I have been looking at how we can do it better the next time… how can we make it even more interesting? Now I would say each success of the Masters event has become much better.

 

Talking about this one… 400 pieces… 40 brands and looking at what we have, I think we can be pretty proud. This is a year in preparation. At the moment when this event finishes, the team starts working on the next one because it is so difficult to get the pieces together and create a collection.

 

 

Masters of Time also features a very fine jewellery collection as shown off here by DFS models.

 

So if you do it right, then that means there are going to be even less pieces?

Yes, absolutely. That is the other thing of course and then you have the commercial aspect of it. But really I think we are very proud of it and we are proud of our teams. We have, I think, one of the best merchant teams in the industry doing this and having all of these incredible watches.

 

I think that is just a testimony to the capacity of the team and also the relationships we have with our brand partners. There will be a lot of the brand partners here tonight and they will want to see their customers coming in and watching their products.

 

There is a whole relationship that you create with an event occasion like that for very demanding customers to meet the brand principals and the designers and to have that incredible moment of discovery of exchange. This is part of what makes this whole category of watches so exciting.

 

At the Beijing China’s Century Conference last year you talked about the average spend by PRC customers as being around €200 ($245). But with all life cycles there will always be pressure points. Are you seeing people spend less on watches and jewellery at the moment within DFS?

Well you know we are in the world of travel retail and it is a volatile world. Now we have seen quite a lot of volatility this year. We have seen the Malaysian situation with the aeroplane and we have seen the Thai situation with diminishing travel to south-east Asia.

 

We have also seen currency movements to an extent which we haven’t seen for many, years. Just in recent days when you look at how the yen has evolved over the last two months it is quite amazing. We have also seen the Occupy Central events in Hong Kong which have blocked some points at times in parts of the city.

 

Master of Time caricatures – all part of the theatre of the event.

 

But DFS has been only marginally affected by that hasn’t it?

Yes. All of these events have affected us in some way. We were fortunate in Hong Kong that our stores were not physically located in areas which were that much affected by the blockage of streets.

 

Yet along with the rest of the retail industry in Hong Kong we nevertheless were affected by these events and by a certain diminishment with other customer types travelling to other destinations, rather than Hong Kong during these events.

 

And again it is part of the business we are in. You have to accept – and especially in Asia – if you are doing travel retail and selling luxury brands to Asian customers, then you will regularly have events which will trouble the continuous flow and we are aware of it and that is how we plan our business.

 

Now the question was, has this particularly affected the watch and jewellery world? I would say probably not. I think it has been quite even.

 

The least affected business has been beauty and cosmetics and then I would say it has less affected the very high end of the market. It has affected the middle end of the market more and we are seeing a lot of it coming back right now.

 

(RIGHT: The Christophe Claret – Margot, which is regarded as a small marvel by many).

 

Everything is relative. So to what degree are the depressed marketplaces in Europe and the US making the situation in Asia look worse than it actually is in your view?

Well nobody has the right answers to your question. I guess if you look at the underlying long-term trends and eliminate for a moment the short-term fluctuations, then the underlying long-term trend is that Asia is growing and the middle class is growing.

 

The middle class is the core customer for luxury brands. That is really where the volume comes from. We have seen what happens with the emergence of the Japanese which was enormous for the luxury industry and this was all middle-class driven.. it was not higher class.

 

So we have a middle class coming up in Asia and predominantly in China in a very big way and that is a trend we think will continue for many years.

 

The proportion of people who are travelling today who are buying is still very small compared to the entire population and the population is increasing its wealth regularly.

 

(LEFT: The very distinctive Vacheron Constantin – Metiers d’Art Florilege Collection – Queen).

 

You only see it when you travel through China. You go even to cities that you have never heard about, or villages around the cities and you are amazed by the amount of infrastructure and development.

 

So that’s one underlining trend. Conversely, in Europe or Japan you have the underlying trends of the relatively fixed or even diminishing demographics and you have an underlying trend of diminishing purchasing power in real terms.

 

So you can deduct from this that in the longer term they will not be the most dynamic markets for luxury products and then North America has a remarkable capacity to reinvent itself and find new areas of growth to create new wealth and to create new middle classes.

 

So I would say that America is going down the most when it is difficult and coming up the most and – thanks to immigration – it has a slightly positive democratic. With the whole immigration in America, these are going to be the future customers of luxury as well.

 

So I would say that the North American market will continue to be very attractive in the long term

 

As the CEO of a huge organisation like DFS, you also have to look forward to what would happen if things don’t always go as well as we would all like. You would have to have a plan if suddenly China went south, just as Ed Brennan did when the Japanese went south. As a planner you obviously do have to look at that don’t you?

Well let me say that as a company compared to other operators or travel retailers, we do a disproportionate share of our business with Chinese consumers. So from that you can derive a certain fragility or dependence, which is true.

 

Now there are maybe two or three answers to this. Yes, we have to have our back-up plans. When you have a solid balance sheet, which we have, we need to have solid shareholders.

 

Now I sometimes say to my team that being so focused on the Asian traveller is a little bit like being in the nineteen fifties in the car industry and being dependent on the US market.

 

You still have many years to grow and you have many years to rethink your strategy and diversification… and that’s where I think we are today.

 

So your answer would be that you think you are OK for the moment?

Well I think we are OK for the long term and for the very long term. Now of course, if there is a disaster we will have to deal with it as we did with SARS when that came along, or as we did with 9/11.

 

But I think this should not diminish our continued investment in this market and continued build up of this customer, because it is a customer – who, for the next 20,30 or 40 years – will be the driver of the luxury industry.

 

MORE PHOTOS FROM THE MASTERS OF TIME EVENT LAST WEEKEND:

 

Over 400 fine watches and jewellery were unveiled in Masters of Time, held at T Galleria by DFS, Macau, Shoppes at Four Seasons. The collection this year was themed around space, the symbol of pioneering design and craftsmanship. The exhibition also featured the award-winning works of astronomy photographer, Mark Gee.

 

The 2014 Masters of Time collection was displayed both within the exhibition space and T Galleria by DFS, Macau, Shoppes at Four Seasons.

 

 

All together: The Masters of Time panel of experts and DFS executives pose for the camera: (From left to right) John Gerhardt, Harold Brooks, Sibylle Scherer, Benjamin Vuchot, Benjamin Clymer, Philippe Schaus, Jean-Claude Biver, Christophe Chaix, Matthew Green, Vivienne Becker, Andrea O’Donnell, Winnie Ching.

 

Another shot of the expert panel (From left to right): Moderator Lorea Solabarrieta, Jean-Claude Biver, Matthew Green, Vivienne Becker and Benjamin Clymer.

(TOP IMAGE: DFS GROUP CHAIRMAN AND CEO PHILIPPE SCHAUS SHOWS OFF HIS TEAM AT LAST WEEKEND’S MASTERS OF TIME EVENT).