Re-launching a brand that has stumbled is difficult in a good economy. Imagine starting the process in October, 2008. That prospect lay before new Chronoswiss North America president Hartmut Kraft. Facing the worst economic downturn in decades, Kraft devised a plan to turn the North American market around. WatchTime traces Kraft’s progression from young watch lover to brand executive, and we explore how his unique experience translated into a plan to re-launch Chronoswiss in North America.
From Enthusiast to Collector to Pro
Hartmut Kraft was born and raised in Germany. He fell in love with watches at age 14, his interest sparked by Patek Philippe ads in the local newspaper. “For the next 20 years I pressed my nose against the window of every watch store I passed.” He could not know at age 14 that his new-found interest would lead to a career change and take him to a new country.
Kraft moved to the U.S to attend law school, graduating in 1998. He landed an associate position with the Hartford, Connecticut office of a global, New York-based firm. The salary was generous, and as fate would have it, his office building housed a fine watch retailer. During his lunch breaks, Kraft would visit the store’s owner, asking “newbie” questions and expanding his watch knowledge. When payday came, Hartmut visited the store and usually left with a new delight on his wrist. His first piece was an IWC Mark XV that he proudly shared with fellow enthusiasts on TimeZone.com. Next came an Omega Speedmaster, then a Blancpain, and you can guess the rest: Hartmut was on his way to building a collection that would eventually number more than 40 pieces. (In a move that might take some collectors’ breath away, he would later sell his entire collection to purchase an engagement ring for his fiancé.)
In September, 2001 – 3 days before 9/11, Hartmut moved back to Germany. He continued to practice law full time, but his watch fever did not diminish. On the side, he created the “H-Box” – a popular Zero Halliburton-style aluminum briefcase that held several watches. In 2003, Hartmut joined TimeZone.com as co-moderator (with Hans Zbinden) of the German Brands forum. “The watch bug was so strong, I felt I was never going to be in the top one percent of attorneys because my heart was someplace else. I thought ‘Why don’t I just follow my passion?’ So I put together a list of people to call in the watch industry; it was a Who’s Who: the Sterns, Fabien Krone of Lange, Dr. Müller from GO, Mr. Biver of course, Rolf Schnyder from UN…. I planned to call each of them to ask if they would meet with me for 5 minutes. The first name on the list was Gerd-Rüdiger Lang at Chronoswiss.” The call to Herr Lang would prove fateful.
“I called Chronoswiss and I was actually connected to Mr. Lang. That would not happen at the other brands.” Hartmut presented his credentials as an attorney, consultant, and watch collector. “There was a 30 second pause. I thought he had hung up on me, but that was just Gerd-Rüdiger Lang digesting things. After the pause, he said ‘Do you have time for dinner tonight?’ I thought ‘OK, I’m in Berlin, you’re in Munich. I can get the next flight…’ and I said ‘Of course I have time for dinner tonight.’ So I flew to Munich and we met.”
Shortly thereafter, Kraft went to work for Chronoswiss, at first acting as a consultant and assistant, and after a short while as Mr. Lang’s deputy. “We developed a relationship that is really unique. For a time, I was literally sitting in the same room with him, and then at the new factory, in the room next to his. For those 4 1/2 years, to the dismay of my wife, we spent 7 days a week from 8 a.m., sometimes until past midnight, working on the plan for Chronoswiss. There was some fighting, but also a lot of laughter and joy and ultimately a really wonderful relationship developed, and I think we brought about great change during those years at Chronoswiss.”
Returning to America
One of Kraft’s major assignments at Chronoswiss was to research restructuring major markets, including the largest – the United States. At that time, Chronoswiss was represented in the U.S. by an independent distributor. “Toward the end of the project I said ‘Mr. Lang, I would advise you to establish a subsidiary in the U.S.A., and if you want me to, I would be happy to go there to run it for a period of time to set it up right. I could find a brand president for the U.S. and then come back.’” Mr. Lang listened, but his financial consultants advised against a subsidiary. Mr. Lang still wanted to entrust Kraft with the U.S. market as a reward for his efforts at headquarters in Munich. The U.S. market was down the drain. Everything was in horrible condition. The market needed attention, and soon. Kraft said “It’s going to take a lot of money and a lot of investment of time, energy and effort to try to re-build this.” Mr. Lang said “OK, let’s do it.”
While in Munich developing restructuring plans, Kraft devoted considerable time to the U.S., including trips to visit retailers and study the market. “I would spend a week on the sales floor to see where the brand stood and what the market was like.” When he arrived in the U.S. in October, 2008, now in charge, he thought he had a complete reorganization strategy. “But within two weeks, I saw that I had to take even more radical steps than planned. I closed everything. I closed 60 out of 60 doors. I closed the service center. I closed down operations completely and said ‘OK, we have to start from scratch.’ I was shocked to see how little-known the brand was beyond the collector audience. I was shocked to see how the watches are sold, and the knowledge of the retailers’ sales staff.”
Kraft spent the next 5 months identifying new retail partners, and on May 28, 2009 the new Chronoswiss North America opened its first door. During the following 2 weeks, 5 more opened, and the brand now has 8 retail partners. “Our strategy was to have fewer than 10 retail partners in 2009. There are a few reasons for this low number. I put strong emphasis on the concept of authorized retail partner. Chronoswiss is building on its strengths: we are family-owned, and we are very up-close and personal with our customers. If there is a problem with a watch, the customer will speak with the brand president. We also realize that for the retailer, this is a business. We will not open a new retail partner unless we know that in the first year, the brand will be profitable for them. In 2009, in this economy, we were able to achieve that.”
For Chronoswiss, the up-close and personal approach also extends to their retail partner relationships. “When working with the retailers, I try to make things as different from the way they were as possible. Retailers do not talk to sales reps, they talk to the brand president. Every salesperson has my cell phone number. They can call me 24/7/365 and get an immediate answer. I have some insight into how other brands do it, and I know we are very different. We hand-picked the retail partners that we want to work with, and we want them to hand-pick us. We’re teaming up for a common project that we will work on together. It should be a long-term partnership.”
Step 2 in restructuring the brand was to focus on product, and to do it from a collector’s perspective. Kraft knew this meant doing something distributors hate – reducing prices. “Our Number 1 core value at Chronoswiss is to offer the best watch value for the money. I come from a collector background, and I have seen every supplier of every component in Switzerland from the inside… Rolex has raised their entry-level price to $4200. I believe that below $5000, next to Rolex, we are the only brand that makes a 100% Swiss-made watch. Every gasket, every hand, crystal, crown, dial, every part of the case and movement has to be manufactured in Switzerland. I don’t know of another brand in the market at that price that does that.”
Kraft is also addressing a pet-peeve of many collectors – slow service turn-around coupled with poor communication from the manufacturer during the service period. “To address this, we created Factory Signature Service. Every watch sent to us for service now goes to Germany for repair. In the past, we used a major U.S. service center – one many brands use, and I was surprised to see how inefficient the service was. We feel it is important for the watch to be serviced by the same people who created it in the first place. Now, every watch is overnighted to Germany. If a watch comes in on a Tuesday, it usually arrives at our office by noon. By the end of the day, the owner has a confirmation of receipt and an estimate. We guarantee this will happen within 48 hours, but it usually happens in less than 12 hours. We also photograph the watch in detail and note the condition. On Wednesday morning, the watch is on the bench with the watchmaker in Munich. Even the most complicated pieces are done within 6 weeks. An Opus will usually be done in less than 4 weeks. A Kairos can be done in as little as 1 week, depending on the season.” During the service, Hartmut often contacts owners directly with updates, and when the watch comes back from the factory, it not only looks new, it has a new 2 year factory warranty. Kraft says “I have a pile of letters in my office and a collection of wine bottles from customers who were overwhelmed by the way we treated them. That leads me to believe that we are going in the right direction.”
Kraft is also expanding use of the internet with official Chronoswiss North America Facebook and Twitter pages. “The use of the internet grew out of my experience at special events, like watch fairs or collector dinners with retail clients. I got frustrated when I found that outside the collector community, almost nobody knows Chronoswiss. Attendees would say things like ‘Thank you Mr. Kraft for showing me the Opus. It is stunning. Why have I never heard of this brand before?’ I used to think Twitter was the most ridiculous thing in the world, but now I don’t care – I decided to spend time on these things. When I started it, I was overwhelmed, because within 2 weeks we had over 12,000 followers on Twitter. It was amazing to see how it picked up. Obviously Facebook is a more complex site, yet we have almost 2000 fans there. Within 3 weeks, Chronoswiss discussion on Facebook became very lively. There was more activity on Facebook than on the traditional watch community sites. I hope to have 2500 or 3000 fans by the end of 2009, and to keep it growing in 2010.”
In 2010, Chronoswiss plans to add up to 4 new retailers in the first 6 months. The second half may or may not see additional retailers. Chronoswiss also opened their first boutique in New York City’s Soho this month. Another goal for 2010 is to focus on retailer sales staff training. “The sales staff should know more about the product than even very knowledgeable clients” says Kraft. Currently, every retailer has designated Chronoswiss ambassadors on the sales staff. These individuals are identified on the Chronoswiss website, and customers are urged to ask for them when they visit.
The new Chronoswiss Boutique in New York City’s SoHo
Looking at the U.S. economy, Kraft’s forecast is good for Chronoswiss, but he fears the first half of 2010 will bring moments of truth for some brands and their retailers. “Chronoswiss will be profitable again in 2010. We will increase revenue, we will increase the number of retail partners, the number of units shipped… all of the key figures will point upward.” Looking at the broader watch market, Kraft says “We expect the first half of 2010 to be a dramatic time. Many retailers and brands that do not make their numbers during the 2009 holidays will go out of business. We will probably see more retailers and brands go out of business in the first half of 2010 than we have seen during the past 18 months. In the second half of 2010, we will see lasting recovery, and 2010 will be a true holiday season again. The retailers I talk to share that vision.”
For Kraft and for Chronoswiss, the past 10 years have been a wild ride. The journey from young watch lover to top industry insider is complete, and a new journey is under way. Kraft’s rare experience as an enthusiast, collector, and online pioneer give him an important perspective on how brands should adapt and develop greater appreciation for the needs of the ultimate consumer. Focusing on value, service, and customer relations is a good start on the road to rebuilding Chronoswiss North America.