TAG Heuer formally opened its first-ever USA boutique with a ribbon-cutting ceremony at Crystals at CityCenter in Las Vegas on June 2. Attendees included TAG Heuer worldwide CEO Jean-Christophe Babin and Philippe Pascal, president of the LVMH Watch & Jewelry Group. WatchTime spoke with both. We look at the store, and the strategy behind it.
Nothing about this boutique opening was ordinary. This is not any brand, but TAG Heuer, an industry force. This is their first U.S. boutique. It was not just a boutique opening, but also the official launch of the new Link, one of the brand’s iconic models. The boutique is in the highest-profile shopping center in one of the country’s highest-profile cities, and as noted, the top executives were on hand.
Boutiques and the Brand Experience
Boutiques are a hot topic. Why do brands open them? Are they profitable, or simply architectural and geographic halos? What thought process and business strategies underlie them? How do they impact nearby multi-brand retailers? Do customers buy watches at full price? WatchTime’s Joe Thompson posed these questions to TAG’s top gun. Babin explained TAG’s goals for a boutique this way: “TAG Heuer is a very successful brand with a long history – we celebrated 150 years last year. We have many epic stories and legends, and all of that is part of the brand emotion and the boutique obviously showcases the brand spirit, history and character better than a multi-brand retailer, where, by definition, you have to split the space. It is difficult for a multi-brand retailer to express a brand identity, spirit and emotion, where a boutique allows you to do that because it is only your brand.”
Beyond telling the brand’s unabridged story, the boutique lets the brand present its finest products to the market. “The [independent retailer] might decide not to display some very important timepieces” said Babin. “We need to further express the brand, especially the higher end. Often they won’t carry the Grand Carrera or pieces like the Mikrograph which is coming soon at $50,000. A lot of retailers will hesitate because it is not part of the basic collection. The boutique will display this and sell this.”
The boutique does indeed present the full TAG Heuer brand experience. At 800 square feet, the shop stocks about 240 timepieces, while a multi-brand retailer might stock 60, 90, or 120. The boutique also allows TAG Heuer to control every aspect of the layout and product presentation. “The layout and the amount of space lets us highlight new products and also tell the story of different collections” said Alyssa Mishcon, vice president of strategic planning.
Designed by architect Eric Carlson, the boutique largely forgoes the standard countertop retail formula. Gone are the traditional floor-standing glass cases in which the watches on the top shelf are obscured by things sitting on the case, and watches on lower shelves can be viewed only from an uncomfortable squat. Instead, vertical cases built into the walls put watches at eye level.
The boutique also carries TAG Heuer lifestyle accessories such as sunglasses and leather goods including wallets, belts, tote bags, and leather racing jackets. These items are exclusive to TAG Heuer boutiques. Customers will also find the complete line of Meridiist mobile phones, which have very limited distribution in the U.S.
Now that the boutique is here, TAG Heuer will also offer new watches that are either boutique only, or that are available exclusively at the boutique for some period of time. The Las Vegas boutique has a worldwide exclusive on the new Link through August.
Babin said that boutique exclusives will continue to be part of TAG’s strategy. “If not boutique only, then boutique exclusive for the first three months. Even the Link which we are launching today will be a worldwide exclusive for Las Vegas through August. So, it’s not only the high end. The rose gold Monaco we started in China only in the boutiques. The Link we start in the U.S. in Las Vegas. So, whatever the price range, we tend to give to the boutique a certain amount of exclusive time.”
Higher-priced watches that can be purchased at the boutique and nowhere else are also part of the plan. Babin explained: “We are also going to develop boutique specials which will be masterpieces you find only in our boutique network, all having in common that they will be over $5000. These are price points where independent retailers are not carrying TAG Heuer, or carrying very little. So we will offer new Grand Carreras, new Monacos that will be boutique specials.”
A Stunning Location
The boutique is situated in the architecturally impressive Crystals at CityCenter. Opened in December, 2009, Crystals is home to about 40 of the finest luxury retailers, several restaurants and a nightclub. Because this is Las Vegas, Crystals is open 365 days a year until 11 p.m. weekdays, and until midnight on weekends.
When considering where to locate its first USA boutique, TAG weighed several factors. Alyssa Mishcon told us: “We consider market research – what do consumers want? There has to be demand on the consumer side. Some people like jewelry stores, some like department stores, and we have fantastic distribution and great partners, but there is a segment of the population that really wants to shop in the brand’s store. They want that experience with the brand and with the sales people. They want the knowledge base that goes with that. We do feel the boutique serves a customer need. And when you stand with customers in the store, that’s what you get back from them.”
Boutique Customers and Discounts
Babin agrees that some customers want the boutique experience, and those customers are not typically motivated by discounts. If they are, they will be disappointed. “Not all consumers are discount-driven. Some are driven by the choice, by the uniqueness of the products that you can’t get at other stores, and by the experience. They enjoy being treated like VIPs by people who are extremely knowledgeable about all facets of TAG Heuer. And also discovering categories that you cannot discover in traditional retailers, like the mobile phones, like the eyewear, and the leather goods. So there are very good reasons to come to the boutique.”
“Since we opened, the average discount has been 2%, so it is like no discount. And we have very high sales – we are above our business plan…”. TAG minimizes the sales staff’s financial incentive to discount. “Commission is always part of the compensation” said Babin, “but it is minor compared with the fixed part. The sales staff are first and foremost TAG Heuer employees.”
Effect on Local Retailers
According to Babin, multi-brand retailers remain by far TAG Heuer’s primary sales channel, and boutiques do not harm the brand’s retail partners. “In December we will have about 4000 multi-brand stores, so you can see that the multi-brand retailer remains by far our primary channel, and the boutiques are coming in as a compliment to support the image of the brand. It is interesting that since we opened here in Las Vegas, our wholesale in the U.S. has grown faster than the world average. The boutique has been open 3 months already, even though today is the official opening. It has created a substantial business without cannibalizing the business we do here in Las Vegas with our multi-brand partners. The same thing happened in Australia., We opened a huge boutique that did incredible business, beyond all expectations, and the area retailers benefited from it. So a boutique is an all-around image booster with a benefit to retailers.”
TAG’s boutique formula must work. The brand currently has 116 boutiques worldwide, with plans to reach 250 in the next three to four years. Babin said “We would not have done 116 if they were not profitable. And there is a reason they are profitable – we are obsessed with being in the right location. In Las Vegas we were patient enough to wait for Crystals, and inside Crystals we were patient enough to wait for the right spot. So we prefer to wait up to two years to make sure we have the right location…. Good location combined with strong brand image is the secret of retailing properly.”
If Babin is correct, the Las Vegas flagship boutique should do very well indeed.