Moving on Part 2 – Why and What Next?

If you missed my post yesterday, I am leaving my position with MB&F.  First of all, I got so many amazingly nice emails and phone calls.  Thank you very much.  It is great to know that people appreciated the job I did.  Another common comment was that of surprise or shock that I would leave, and curiosity as to what I am doing next.  I want to provide a bit more information.

First, my leaving in no way reflects on MB&F.  They are fantastic people, running a fantastic company.  I greatly enjoyed my time there and am proud to have helped them get to where they are.  We are parting on very good terms, and I have made it known that I am available to help them in the future should they need anything.

So leaving really came down to two things – personal goals, and timing.  Most importantly, I am ready for a new challenge.  Learning a completely new industry, new skills, and meeting so many great people has been an amazing challenge and growth experience.  Now I would like to synthesize that and all of my previous experience to create something really big.  And the timing was right to make the switch.  I am confident that the gains I have achieved and contacts I have made are stable enough that I can hand them back to our Geneva office, and they will continue here in North America without losing too much momentum.

So what is next?  Honestly, I am still deciding.  I have a few ideas of businesses I would like to start and some interesting job offers.  Some are watch related, some are not.  I got into the watch industry almost by accident.  Now I want to take a step back and make a real decision if I want to get back into it or not.  Most importantly, I want to work with super bright, driven people who are focused on creating something important.  I was lucky to have that experience with MB&F, and I hope to find or create it again.

Of course I will keep the blog going and keep everyone updated here.  If you have any questions about my leaving or my time in the industry, now is a great time to ask and I’ll try to write them up as posts.  Thank you again for the support – the future is very exciting!

Moving on…

I have just sent the below out by email.  I will comment further here in the next few days.  It is an exciting transition for me and I look forward to sharing everything here on TickTocking.

Dear Friends,

After 3 great years, I am resigning from my position at MB&F. I consider myself extremely fortunate to have been able to work with such an amazing team that is creating some of the most fantastic mechanical sculptures in the world. Max and I set out to firmly establish and grow the brand in North America. I believe we accomplished that goal. I have tried to do everything with the integrity I would expect as a watch collector myself, and am honored to have helped foster MB&F’s reputation for passion and pride. I feel comfortable handing the reigns back to our Geneva office as I pursue other projects.

It has been an absolute pleasure meeting and working with all of you. I hope to keep in touch. My personal email address is xxxx, cell phone is xxxx, and Twitter @SDHallock. I will hopefully now have more time to keep up with my blog, www.ticktocking.com, and write for other outlets, so you can follow me that way as well.

Sincerely,

Steve

How I Got into the Watch Industry

A lot of people have asked me how I got into the industry. Generally I take it that they would like to get in themselves and are looking for some advice or replicable successful actions. My response is usually, “Oh I’ll write a blog post about it so I don’t have to write the same story a hundred times.” And yet, I’ve procrastinated. So, thanks to my twitter follower, @Elder_Poptarts who nudged me to write a new post, here goes…

I will start by saying that in general, I don’t feel that my path was very replicable, but there are some lessons to take. I never wanted to work in the watch industry. Frankly, I’m still not sure if I do. I happened to get an opportunity to work with an amazing team, led by a brilliant entrepreneur, who produce spectacular products. That the products are watches is almost inconsequential to my desire to be involved.

My background is in finance and technology. I created my first company at a young age and went on to start a few other interesting projects. I had some decent successes and some spectacular failures, like most entrepreneurs. Along the way I was able to make a bit of money – and as a young guy with no real responsibilities, I was happy to store some of it in toys: cars first, then watches. I’ll write another post sometime detailing how I really got into watches, but suffice it to say I went down the rabbit hole quickly. I immersed myself in the online forums, learned everything I possibly could, and attended every meetup or brand event that I could – even though I was routinely 20 years younger than anyone else there.  It was at one of these dinners that I met Max Busser, years before we would work together.

Living in Los Angeles, I was able to meet Thomas Mao and eventually was asked to help as he transitioned from ThePuristS to PuristSPro.  This brought me further into the industry, if nothing more than forcing me to think about it on a deeper business level than I had as a collector.

I had sold my last business and was taking a year off when Max and I sat down for coffee in 2008.  He was in Los Angeles and we had kept in touch.  I admired what he was doing and he recognized that I was someone early on who “got it”.  But the meeting was to be nothing more than two friends chatting.  Over the course of the meeting it became clear that he needed some help in the US.  I thought about it overnight, asked him to meet the next day, and from there we decided to start MB&F North America.

My path into the industry was not traditional, and in fact my job is not traditional.  I don’t believe there really is any analogous position in the watch world.  However, there are a couple points that I believe are important not just for the watch industry but for any.  First, learn everything you can about the subject.  Become an expert.  Meet everyone you can.  Opportunities will arise and you will already be a value added employee.  Also, be generous with your time and help.  When the opportunities present themselves for you to be helpful, do it.  Don’t worry about getting paid for everything or lining up whatever comes next.  If you help enough people, it will work out.  Other than that, the only truly important piece is to only get into watches if you’re passionate about them and only with a company that you truly believe has integrity.  The last thing the world needs is another hired gun watch salesmen peddling marketing BS.

I hope that answers the question from those who have asked.  If not, feel free to post in the comments and I’ll try to answer.

Currency Comeback, USD/CHF

Last time I wrote in, the US Dollar (USD) was crashing with respect to the Swiss Franc (CHF), or perhaps more accurately: the CHF was surging against the USD.  Most major world currencies right now have a severe risk of inflation, as central banks are printing money to try to get out of their debt.  At some point, this money started to flow into the CHF as it was perceived to be one of the most stable currencies.  As Euros and dollars were traded in mass for CHF, their value in CHF terms plummeted.  The bottom came at .70 CHF/USD, a true disaster level for the watch industry in the US, and a major problem for the Swiss watch industry in general.

Especially at the high end, almost all of the costs of producing a watch are in Switzerland and denominated in CHF.  However, most pieces are exported.  So the expenses are fixed, and suddenly the revenue is worth 30% less.  Big problem.  Of course the “solution” is to raise prices.  That is why you saw multiple price increases this year from almost every brand.  In general, they are not gouging, simply trying to retain their necessary margins.  That presents it’s on slew of problems.  Of course as price increases, quantity decreases.  It becomes increasingly hard to make revenue numbers, not to mention you start to see inventory levels build up in showcases.

About 6 weeks ago, the Swiss National Bank decided to intervene.  They basically set a target for CHF/EUR and started buying EUR to get there.  Again, if you are buying EUR and selling CHF, the CHF will start to be worth less with respect to the EUR.  This is a dangerous move for Switzerland.  They are a small country and they are growing their reserves dramatically, not to mention those reserves are now denominated in EUR which is a particularly risky currency right now with all that is going on with Portugal, Ireland, Greece, and Spain (they are basically all bankrupt and since they are on the EUR, have no central bank to print their way out of it).

But here in the US, we don’t particularly care about the financial help of the Swiss, we just want our watches!  And thankfully, the move has greatly lessened our pain.  With USD now at around .90 CHF, we have seen our purchasing power come back dramatically.  Unfortunately some brands were a bit overzealous with their price increases and now are a bit stuck.  It’s hard to lower prices and tell retailers or end customers who have bought the watch that it is now cheaper (for a retailer that kills their margin).  I was in a retailer the other day and saw a showcase of a usually hot brand that is now filled with double the inventory of normal – the sales people were all complaining that they cannot sell them at the current prices.

Luckily with MB&F, I saw this coming and postponed our last price increase as long as possible, eventually canceling it when CHF started to fall.  We did not have much to invoice, and I sensed that something was going to give.  It’s easy to raise prices, but, as I mentioned before, difficult to lower them.

I don’t think there is a bigger story in the watch industry than this.  It affects all of us at ever step along the chain.  Now all eyes are on the Swiss National Bank to see how long they can stick to their policy.  Hopefully it works out well for everyone.  I will keep posting on it here as developments occur.

USD to CHF Woes

We, American watch collectors and professionals, are in for some rough times.  As of this writing, 1 US Dollar = .86 Swiss Francs (CHF).  Here’s the one year chart:

Unfortunately there are no good solutions here.  Earlier this year, MB&F had to raise the USD price over the CHF for the first time ever.  Now we are going to have to raise our USD prices again to keep up.  Even at $205,000, an HM4 in the US is STILL cheaper than the 178.000CHF world price.  And, if you’re lucky enough to snap one up at the current $188,000 retail, you’re getting nearly a 10% discount at full retail.

All the big brands either have already or are just about to raise prices.  Unfortunately that’s not the end of it.  It’s likely that prices will not be able to be raised as high as they should for fear of stalling sales, so that is going to mean dealers are simply not going to get the same quality of inventory.  I’ve been fighting to keep my MB&F deliveries on schedule, but I know it’s tough for a head office to send a piece out and immediately lose significant margin due to the exchange rate.  I have already heard from various retailers who are struggling to secure inventory from many of the big groups.

The scary part is there is no end in sight.  If you had to bet and knew the USD was going to move 5 points, would you bet it jumps up to .91 or down to .81?  Unfortunately I’d take the negative side of that bet.  For foreign buyers, the US is going to become a true bargain.  For the rest of us, I fear it’s going to be very difficult to find what we want here – and if we do, we better be ready to pay up big time.

Baselworld Approaches

Tomorrow I leave for Basel.  This is MB&F’s third year in a row exhibiting there and the second in The Dream Factory.  The Dream Factory comprises MB&F, URWERK, Speake-Marin, and Christophe Claret – certainly one of the most exciting areas of the fair!

 

The Dream Factory is in The Palace Hall.  If you will be in Basel, please do stop by.  We are open to the public and will have some of our collecting in showcases to view.  However, if you would like to get a more personal look at the collection, I have a few appointment spots in my schedule left.  Contact me through the link at the top of the blog and we’ll book a meeting.

See you there!

Marketing Budgets

Sorry I have not been writing much.  My head is a bit out of it all with the new baby.  If there are any topics you would be interested to hear my take on, feel free to suggest in the comments – a jumping off point might help me.

That is exactly what I got when Fred Wilson blogged yesterday about marketing budgets for venture stage tech companies.  If you have a moment, you should read his post and some of the comments.  I found it particularly relevant to the watch industry, where marketing budgets are sky high.  Here is the comment that I left, reproduced below:

I could’t agree more, Fred.

My current business, high-end mechanical watches, is dominated by marketing budgets. The big brands fill the ad space of every magazine you can pick up on the rack, and little guys pop up every day with millions of dollars who want to start their own brand – their first step is always a huge marketing budget.

Coming from a background in tech, I had never seen anything like this. My company is structured a lot like a tech startup. We have (comparatively) no money, but we have ideas. We believe that if we make the best products, tell an interesting story, and work hard to tell it to the right people, good things will happen.

The results have been tremendous. I, the President here, and our CEO in Switzerland do all of the PR ourselves. We create personal relationships with the journalists and clients and therefore have full control. We administer our social media accounts and connect for free wherever possible (have ~9000 fans on facebook and make 150 watches/year!) We can launch a new product on an hour’s notice and are widely admired in the industry for having some of the most covered, most talked about product releases.

Precisely the fact that we do not spend money and instead fully exploit free resources and our skills is perhaps the single biggest factor that has let us reach the top of our field. The drawbacks are that it is incredibly time consuming, and you need to find people with unique and broad skill sets (being capable of successfully communicating is, unfortunately, not as common a skill as it should be, and often comes without other necessary skills for running a business).

Thanks for the thought-bait. I could go on this one for a long time.

Best,
Steve

 

The comment itself even turned in to a bit of marketing, although it was completely unintentional.

Geneva SIHH Report Part 2: The Retailers

As I mentioned in my pre-Geneva report, the first line of meetings during these shows is with retailers.  Right now I have four in North America.

These meetings are a great chance to sit down, look at the full collection, discuss any issues we or they might be having, and plan for the coming year.  This year everyone was in a great mood!  In order to have a happy relationship, I only open points of sale that I am confident can turn their inventory at least once per year.  This means, if you stock five pieces, you must sell at least five per year.  That way everything moves fluidly.  This year all of my retailers turned their inventory at least 1.5x.  And happy clients makes for easy meetings.

We show our retailers the watches we are releasing to the press, but also the next round of launches too.  This way we get the orders in advance so we can deliver as close as possible to the launch.  We pride ourselves on delivering on time.  When we speak about a new piece, it is always nearly ready for delivery.  No “vapor” releases from MB&F.  So here is our launch schedule for this year:

  • Jan/Geneva: HM2 Final Editions (SV-Red, SV-Black)
  • March/Basel: two more variation releases
  • June: new Only Watch piece unique
  • September: HM5 (!!)
  • November: a very fun, funky variation

So now the retailers have seen the first two.  In Basel we will show them the rest.

I’m extremely pleased with how 2010 turned out and expect 2011 to be even better.  I hope this post gave some insight into the nitty-gritty of these shows.

Geneva SIHH Report Part 1 – Before the show

Apologies again for the long absence.  I’m back now and looking forward to continuing the blog.

Each year, the shows in Basel and Geneva are some of the most closely followed happenings in the watch industry.  Blog and forum traffic sky-rockets as everyone checks in to see what novelties are presented.

There are plenty of places to find novelties, so I thought it would perhaps be interesting to give an account of what these shows are like behind the scenes.  Today I will start with preparation.

During SIHH, we take a suite in the Hotel de la Paix in downtown Geneva.  We have three rooms to the suite: one used as a back office, one for Max to take meetings and one for me to take meetings.  As we have very limited space and only two of us accepting meetings, scheduling is of the utmost importance.  While the actual SIHH goes from Monday-Friday, we start Sunday afternoon and to through Saturday.  During that time we generally take upwards of 120 meetings between the two of us.

So, for the 6 weeks before the show, my primary job is to book as many meetings as I can.  This is not easy.  First of all, the SIHH pays for many of the journalists and retailers visits.  As such, they try to keep them busy at the show for the whole time.  Everyone’s schedules are crazy, so finding time to visit a little brand like us is not always easy.  It is quite a juggling act.

Of primary importance is booking our current retailers.  The true point of the show is B-B.  Approximately 33% of our yearly orders are taken in that week.  Next is to book other stores who we could potentially work with in the future or who are interested in meeting us.  These tend to be tricky as their primary drive is to meet with their current brands.  However, it is important as we rarely have a full collection to show outside of these show weeks.  Next we book press.  As Max and I do all of the PR ourselves, we have personal contact with everyone.  And lastly, when I have booked everyone else and have slots left, I like to invite collectors.  The show in Geneva is not very friendly to enthusiasts.  Getting passes to SIHH is nearly impossible.  However, it is a great opportunity for collectors to see all of our rare pieces in one sitting.  And, selfishly, nothing recharges my energy better than a meeting with people who really understand and love what we are doing.

This year was a great success in terms of scheduling.  I saw nearly everyone I hoped to see and had very few issues of meetings stacking up or needing to be moved around.  I’ll do a Tech Tuesday post tomorrow and then come back on Wednesday with an account of the show itself.