The Rise of the Independents

[TimeTexas]

I've been thinking more and more about the LVMH/Akrivia LVRR-01 collaboration and the planned 4 additional collaborations. If you haven't read the article from King Flum here, go do it now --> https://www.screwdowncrown.com/p/sdc-weekly-17

I keep trying to wrap my head around what this means for the independent watchmaking industry as a whole.

From a Robb Report article.

Quote

 

Two years in the making, the Akrivia and Louis Vuitton co-creation is the first in a series of five collaborative timepieces Louis Vuitton has planned for the next five years, said Arnault. Together with the prize, whose inaugural recipient is due to be named in 2024, the partnerships are part of a broader effort to ensure that the interest in independent watchmaking, a category Arnault discovered about six years ago, doesn’t fade over the next few decades.

“LV is not a brand that’s going to disappear and hopefully we can use the huge brand name we have to shed a light on that part of the industry, which in my opinion, will move the needle more than the traditional part of the industry, which has very similar product and very little soul,” he said.

He pointed to the Akrivia model displayed behind him. “These products have soul,” he said. “It’s always a human story behind it. We’re not looking at a chart and saying, ‘Oh my God, I’m missing a product between $150,000 and $200,000 so let me do something,’ and many brands work that way, unfortunately.”

 

https://robbreport.com/style/watch-collector/louis-vuitton-rexhep-rexhepi-akrivia-1235332874/

LVMH is the 4th largest fashion brand in the world, essentially tied with Adidas for 3rd and only behind Nike and Gucci. And the LVMH group has an enormous advertising and marketing budget which has expanded dramatically over the last several years.

*Chart/Data provided by https://www.statista.com/statistics/410677/lvmh-group-s-ad-spend-worldwide/

Despite a slowdown during the Covid year of 2020, the advertising and marketing spend from LVMH has gone up by 50% since 2019 and was nearing $10B in 2022. I imagine 2023 will see continued growth. To generate trends to support fashion products, advertising and marketing is vital and LVMH is a powerhouse. The quote above from Arnaut indicates LVMH is looking to continue to support independent watchmaking going into the future. While a lot has been made about how this impacts LVMH and Rexhep Rexhepi, I think the bigger story here is the impact on the independent industry as a whole.

This will have an enormous impact to independent watchmaking going forward. Independent brands saw a surge of interest during Covid and the meteoric rise of hype brands like Patek Phillipe, Audemars Piquet, Rolex, and even Vacheron. This hype filtered down to many of the higher-end, popular independent brands as people who previously collected the big names realized gains by selling pieces and also due to the near impossibility of getting allocations. The business practices, which in my opinion, were discreetly supportive of the grey market pricing also left a bad taste in many collector's mouths.

With time to spare surfing the internet, there was increased awareness of independent watch brands by the watch-buying public and a year ago I wrote a post about how Independent brands were in danger of becoming unobtainable. The slowdown of the madness and hype has seen a somewhat return to normalcy. Yet the increased awareness and interest in independent watchmakers has made the availability of these pieces to newcomers relatively difficult. I think indie brands are still struggling with how to manage the increased demand to keep existing customers happy while also catering to new collectors.

As to the impact of LVMH, as they become more integrated into high-end independents and haute horology, the marketing and awareness of independent watches will increase significantly. But for a few of the very well known independents, these watchmakers don't have marketing and advertising budgets of any significance. Much of the awareness is spread through word of mouth and if you know, you know.

The demand for Akrivia watches was already crazy and a limited edition piece of 10 watches will be unattainable. LVMH has a monetary incentive to allocate these 10 watches to people who will promote the watch and the brand and increase awareness of LVMH's desire to be more than simply a fashion brand, but a brand that has serious watchmaking bonafides. There isn't a better way to do it than with Rexhep Rexhepi and the following four watchmakers who are to be a part of this project.

With the release of the Tambour, Arnaut explained a completely different approach to watches within LVMH.

Quote

We’re changing our whole philosophy about watches in general,” Jean Arnault says. He’s looking at an ambitious repositioning of the watch brand — quite the audacious move from a young gun who at 24 appears to be as knowledgeable as he is passionate about horology. His plans allow the specialists to concentrate on true watchmaking, with (uncharacteristically) not a logo in sight. He describes how watches had been grouped with all the brand’s other products but, he points out, they can’t respond to a six-month timetable like fashion. It takes much longer to create a timepiece. Now liberated from that timetable, the watch division can focus on “never cutting corners and what we’re trying to achieve in terms of finishing and expertise”. So out go the fashion-oriented timepieces — and the incoming will be solely high quality.

https://www.thetimes.co.uk/article/jean-arnault-louis-vuitton-watches-times-luxury-3rzv05fsx

This is not a short-term strategy or money grab to simply ride the previous Covid-generated hype. As the director of watches, this is a fundamental shift away from fashion and into high-end watchmaking.

The hype for Rolex and PP and AP was based on the perceived unavailability of these watches. I say perceived, because they were available, just limited to people who could afford the outrageous aftermarket prices. It was a flaunt of wealth and excess. But the number of Rolexes and PP/AP/VC is orders of magnitude greater than the availability of small haute horology independent brands. There is no perceived unavailability. They are unavailable simply because the numbers aren't there because they are made by hand and they take a signficant amount of time by extremely skilled and talented watchmakers.

With the focus of LVMH on haute horology, it only makes sense these Akrivia pieces will be allocated to highly visible celebrities and renowned collectors who get a fair share of the spotlight. The goal from LVMH's standpoint is in part to support independent watchmaking and to establish itself as a  true watchmaker starting with the Tambour. But what happens when the world at large is introduced to Rexhep Rexhepi and Akrivia through the wrist of Jay-Z or any of the other numbers of celebrities Jean Arnaut is personal friends with?

What happens when LVMH partners with other haute horology brands? We know there will be at least four others. I expect this may increase as well depending on the success.

The boon for these brands is obvious and significant. But the effect on independent watchmaking as a whole is the bigger story. As these select brands are introduced to the world, they will be nearly impossible to purchase and those that become available will be one of 10 or 20 or 50 watches, meaning the demand will far outweigh the supply. Prices for these on the grey market will skyrocket. The demand will be less about bling and flex, but exclusivity. Yes, the flaunt of wealth will still be there as prices rise, but having something so completely unattainable and exclusive will be the main driver. And supply for any single watchmaker that gets this exposure will dry up nearly immediately causing demand to filter down to the next brand and so on.

This is a sea change for independent watchmaking. A tipping point that will take independent watchmaking from the confines of knowing collectors and thrust it in front of the world to see.

Interested in your thoughts. Am I overstating the potential impact? 

More on this soon.