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Serious collectors and aficionados have long been the market for luxury watches but for Mr Michael Tay, executive director of leading specialty watch retailer The Hour Glass Limited (THG), watch collecting is a pastime that should not be limited to the elites but “an inclusive hobby for many.” Long been an advocate of educating consumers about the basics and merits of watch collecting, THG launched the Tempus event, an exhibition cum conference in 2004 and held again last year that aimed to put the watch culture in Singapore a notch higher. The strategy seemed to have worked, judging from the financial results of THG and the growth in luxury watch spending in the past years. Going back to its rootsMr Tay’s heritage in the watch business runs deep.His grandfather started the Lee Chay & Company, one of the oldest watch retailers in the country in the 1940s. His parents Henry and Jannie Tay joined the business in the 1970s, but due to differences in their vision about the luxury watch industry, the couple decided to branch out and set up The Hour Glass together with Metro Holdings in 1979. The first THG store opened at Lucky Plaza and offered luxury Swiss watch brands. The store later expanded into other local and overseas outlets and listed on the Singapore Exchange Sesdaq on October 3, 1988 and on the SGX Mainboard on October 7, 1992. Mr Tay joined the business in January 1999. Since its listing, the company had gone through several cycles. It diversified into specialty watch manufacturing by acquiring two Swiss watch brands Daniel Roth in 1994 and Gerald Genta in 1996, but sold these later to Bulgari in 2000 due to operational difficulties. The Asian financial crisis in 1997 and 1998 also wiped out more than half of the company’s revenue and had its management re-thinking their focus. The mass consolidation of brands in the watch industry, where groups such as Swatch, Richmond and Gucci started acquiring brands, that happened from 1999 to 2000 was a heaven sent to THG as its deal with the Bulgari group enabled it to get a fresh start, so to speak. “It helped strengthen our balance sheet, we were able to pay back all our loans, and we actually sold it for a profit,” Mr Tay said, indicating a five percent internal rate of return. With managing director, Dr Kenny Chan, they have since devised ways of refocusing the business towards a retail platform. Their strategy included clamping down costs and expenses, reorienting sales and marketing emphasis, and working with higher yielding brands and merchandise. They have also taken some risks by setting up stores in Japan and expanding aggressively in Thailand. THG’s re-positioning to be a specialist multi-brand watch retailer in Asia bode well, basing on first half results of financial 2007 to 2008 ending September 30. Growing 130 per cent in net profit to $12.7 million, THG’s 31 per cent increase in total first half sales of $236.8 million, exceeds its turnover of $200 million seven years ago. The company’s earnings per share grew by 132 per cent to 11 cents from 4.74 cents during the first six months of the previous financial year. “What you see today is the product of our five and a half to six years’ worth of work in trying to re-orient this ship and sail towards the direction on where we want to go. And I’m proud to say that we are today probably the most efficiently, the best - managed multi-brand specialist watch retailer in the industry,” said Mr Tay. THG has stores in Australia, Hong Kong, Japan, Malaysia, Singapore, Thailand and in Jakarta, Indonesia. Some of the brands the company carries include Gerald Genta, Breguet, Daniel Roth, Burberrys, and Christian Dior. It also retails Patek Philippe, Cartier, Tag Heuer, Omega, Brietling, Rolex and Gucci, among others. With presence in nine cities in the Asia Pacific region, The Hour Glass with its 23 stores carrying 60 brands is in a position to benefit from the increase in demand for luxury timepieces in Asia, particularly in Hong Kong, Singapore and China, which have become big markets for Swiss watch exports. Analyst Jessica Zhang of UOB Kay Hian has issued a ‘buy’ call for THG in a January 4 report at a target price of $2.37 as the company rides on the growing trend with its plan of further expansion in the region. The proposed one into two stock split by THG is also seen to increase the company’s liquidity and affordability of the company’s shares, thus broadening its shareholder base. Growing the marketThe number of watch collectors and enthusiasts in Singapore has seen an increase in the past years and according to the Lifestyle Index and Spending Trends (LIST), a consumer spending report by American Express, the overall growth in spending for luxury watches was at 44 per cent in 2007. Mr Tay believes their efforts in educating the market has now borne fruit with more people realising the intrinsic value of watches. THG initiated various gatherings for watch aficionados by inviting Swiss CEOs to Singapore to speak at organised cocktails and dinners, which have empowered consumers in their purchase. “Educating makes life easier for us; it makes it easier for us to close a transaction; to upsell. It broadens the market so more clients are coming in,” said Mr Tay. This strategy, he added, is part-andparcel of THG’s thrust to enlarge the market base, not only for itself but for the whole industry. “If we think strictly about business, we will never grow. The only way for us to grow is [by] growing the market. The more people interested in watches, the better it is,” said Mr Tay. Singapore has a very sophisticated watch market, with very knowledgeable watch collectors, he said. “We see them to be more individualistic with their taste. They are more daring; more adventurous, they like to buy a lot of new innovations that come out in the market place. Very much unlike the Japanese or the Thais, who still tend to stick to the highly-established international brand names,” he said. Collectors here tend to be quite fluid and confident about their own choices, going out to purchase a phenomenal watch even without a brand name attached to it, Mr Tay added. The LIST report for the second quarter showed affluent customers to spend an average of $3,465 per watch, indicating that they are prepared to pay premium price for quality, service and rarity of products available in Singapore. At THG, the average retail price of watches is at $10,000. THG’s prospectsMr Tay said the four key territories they are looking into for THG’s expansion include Tokyo, Singapore, Hong Kong and Bangkok and he sees retail to be the continuing thrust of the company in the coming years. He added that for a mature business like theirs, the outlook for the luxury watch market is still very bright. Among the challenges he sees the company to be facing in the future is about deliveries of merchandise, as emerging economies like China and Russia are getting the lion’s share of exports in Swiss luxury watch brands. Since he joined the business, Mr Tay is happy to note that they have been able to not just develop the business and ensure its profitable growth, but also focus on the more cultural aspect of watch collecting. “I believe that the man on the street — if they want to — can acquire a good luxury timepiece. Once you get emotionally attached to this hobby, it’s very difficult to stay away. You’ll find a way to scrimp and save to own your dream watch. So I never say ‘never,’” Mr Tay ended.
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