Interview: Luc Perramond, CEO, La Montre Hermès


Sophie Doran | January 30, 2013

Luc Perramond, CEO of La Montre Hermès, uncovers the brand's century-old relationship with watchmaking and details his growth plans for the future

Luc Perramond, CEO of La Montre Hermès, uncovers the brand’s century-old relationship with watchmaking and details his growth plans for the future.

“Watches have always been very close to the hearts of the family members,” explains Luc Perramond, as he regales the story of timepieces at the house of Hermès. “The Hermès family was very inventive, very interested in functions and always looking for functional products that could be made in a beautiful way.”

La Montre Hermès was officially incorporated in Biel, Switzerland, by Jean-Louis Dumas in 1978. But what is perhaps lesser known is that the Hermès watchmaking tradition dates as far back as 1912, when its saddle-making talent was first exercised on watchstraps.

Though timepieces were not officially introduced into boutiques until the late 1920’s, several models were developed amongst family members, which went on to form the basis of La Montre Hermès collections as we know them today.

“One of the family members invented the belt watch as he was a golfer,” Mr. Perramond enthuses. “He couldn’t wear a mechanical product on his wrist as it was too fragile, so instead he invented a belt with a clasp that you could open and inside the clasp he inserted a clock.”

“Our history is marked by many such details, many inventions, which are not only very interesting but also show that the family was always committed to the functional dimension of a product. Our products need to be functional, useful. It is at the heart of the philosophy of the company and that is why watches are so important.”

We recently spoke with Mr. Perramond about the repositioning of La Montre Hermès, in its quest to become a truly autonomous high-end watchmaker with in-house mechanical movements.

“ Hermès has been making watches since 1912. It’s one of the oldest metiers after leather & silk ”

On History

“La Montre Hermès was established in 1978 by Jean-Louis Dumas, who served as the CEO of Hermès for more than 30 years. He became CEO in 1978, and one of his first decisions was to create La Montre Hermès in Switzerland, which at the time, was quite audacious as all Hermès crafts were based in France.

“But few people realise that Hermès has been making watches since 1912. It’s one of the oldest metiers at Hermès, after leather and silk. From the 1920’s to 1960’s we worked with Swiss watch manufacturers like Jaeger LeCoultre, Vacheron Constantin and Audemars Piguet, who produced our designs, which we then sold in our stores worldwide.

“This is how we learned the watch business, through cooperation with very prestigious Swiss watch makers. And then eventually we went on to create our own factory. It’s a very long heritage of watchmaking.”

The first Hermès watch, made for Jacqueline Hermès by her father

On Heritage

“Watches have always been very close to the hearts of the family members. The Hermès family was very inventive, very interested in functionality and always looking for functional products that could be made in a beautiful way.

“The first Hermès watch was made for Jacqueline Hermès by her father. It was a pocket watch that transformed into a wristwatch, after he invented a leather strap in Paris workshop that enabled the pocket watch to be worn on the wrist.

“If you look at our collections you will notice design ties strongly to the identity of Hermès. Many of our pieces find inspiration in our equestrian roots, as we come from being a saddle maker and a harness maker, so the horse is very important in our heritage.”

“ From the 1920’s to 1960’s we worked with Swiss watch manufacturers like Jaeger LeCoultre, Vacheron Constantin & Audemars Piguet ”

On Creation

“The creative process flows between Paris and Biel. We have a product strategy that we plan for the next five years, and here in Switzerland we have a creative director with a department of creation, as well as a technical development department.

“We develop the brief here for new collections, then we of course work closely with our colleagues from Paris on the artistic direction. In terms of design we have a very open approach, with access to Hermès designers in Paris like Henri de Linares, designers at La Montre Hermès and specialised watch designers in Switzerland.

“And sometimes we approach designers that have never designed watches before. Two years ago we created a watch called Carré H, which was designed by French architect Marc Berthier. It was his interpretation of the square for Hermès.”

Carré H designed by French architect Marc Berthier

On Manufacture

“Our watches have to reflect the Hermès values in general, which remain the search for the finest quality and the search for beauty, but in a distinctive way. With watches the inside of the product it is obviously very important, not only the outside design but also the mechanics.

“This is why we have been investing quite significantly since 2003 when we started to work with Vaucher Manufacture Fleurier, a manufacturer of high-end of mechanical movements. In 2006 we took a 25% stake in this company to ensure access to this very specific know-how of high-end mechanical components.

“In order for us to have our own collection of manufacture products, we introduced for the first time ever the Hermès in-house mechanical movement, which we started to design in 2006. It was a big step for us as a watchmaker in 2012, to introduce our own movements.”

“ In the last 5 years we have progressively moved towards the ‘prestigious’ segment of the watch industry ”

On Positioning

“Our strategy in the last five years has been to progressively move towards the ‘prestigious’ segment of the watch industry. In the 1980’s and 90’s we were more positioned in the fashion or accessories segment, with very accessible price points.

“Our strategy is very much value driven, not volume driven, as is the case in general with Hermès. We look for quality, for products with added value, so we have developed more sophisticated products with mechanical movements, with complications, using double materials like rose gold. We are also developing the ‘precious’ segment, watches set with diamonds and precious stones.

“So as a result our average price has drastically increased. Today we have an average price point above €3000 globally and I think there is still potential to go higher. But our current price range and offer is certainly more consistent with what our clients expect from Hermès, both in terms of quality and level of product.”

Arceau Le Temps Suspendu by Jean-Marc Wiederrecht

On Distribution

“We have a very well balanced distribution between Hermès multiproduct boutiques, our more recent watch-dedicated Hermès boutiques and some of the best independent watch specialists around the world. And then there is eCommerce, which is a smaller part of our business but a part of the global eCommerce store for the house of Hermès.

“Our representation in Hermès flagship boutiques gives us really unique exposure on a global basis in the top retail locations around the world. To compliment this core distribution we are also working with independent specialty stores in a very selective way, with the very best watch specialists.

“More recently we have developed watch-dedicated Hermès boutiques. We started this initiative four years ago and we have around 20 Hermès boutiques dedicated only to watches, which is a very important way for us to develop our visibility.

“Our stores range between 50 and 120sqm. Not only does this give us enough space to present the depth of our collections, but it also gives us also the ability to have staff that are specialised in watches that can really give the right level of service and advice to our clients.”

“ France remains our number one market for watches, but we are also expanding in the Middle East & Southeast Asia, which is booming ”

On Markets

“La Montre Hermès has been growing fast over the last five years and we were fortunate in 2012 to see each region contributing to our growth. We are growing double digits, not only in China but also in North America and Europe.

“France remains our number one market for watches – we have a leadership position in France – but we are also expanding rapidly in the Middle East and Southeast Asia, particularly Singapore, which is booming. Indonesia in particular is becoming an engine for growth in the future.

“Of course North Asia with Greater China is very powerful and the Chinese consumer has become one of our major customers. But Japan is also rebounding; we see double-digit growth in Japan. So it is very satisfying for me to see that we have a balanced mix and that the growth is coming from all parts of the world.”

Hermès Arceau Paille

On Vertical Acquisition

“In the last few years we have done quite a lot in this area in terms of integration upstream. First was the investment in Vaucher, in movements manufacturing in 2006. Then in 2011 we invested in a case manufacturer Erard and in 2012 we acquired 100% of Nateber, which is a dial manufacturer.

“So we now have control over three strategic components that altogether represent close to 95% of the product. Sometimes even more if you consider our leather straps, as we obviously manufacture these in-house. We are the only watch brand manufacturing our leather straps in-house.”

“So in fact more than 95% of the cost of the product is in-house now. The remaining components are the hands but this is not an area we feel we should integrate. This kind of manufacturing requires very high volumes in order to have economies of scale. And we are not in the business of producing millions and millions of hands.

“As I said we are more driven by value, so we prefer to have strategic partnerships with some very good Swiss hand manufacturers. For the moment we need to concentrate on our most recent acquisitions and help them to best develop their capacity. And have optimum control over the process and the quality.”

“ I think the big risk for luxury in the future is overexposure & dilution, we need to continue our focus on selective distribution ”

On Challenges

“I think the big risk for luxury in the future is overexposure and dilution, so we need to continue our focus on selective distribution. We have to make sure that the brand and the watch products are found only in the best possible locations, with the best possible staff.

“Another key challenge lies in training our sales staff in boutiques. As our products become more sophisticated, complicated and technical, we need to invest more and more in education. Not only the heritage of watchmaking and product specifications, but selling techniques and how best to serve the customer and answer their needs.

“The same goes for after-sales service, again driven by the growing interest in mechanical timepieces, especially in Asia. These products are much more fragile and require on-going servicing in order to be properly maintained.

“This almost assumes that we need a network of after sales service centres and expert watchmakers around the world, in order to service our clients very quickly.”

La Montre Hermès Retail Concept

On The Future

“Watches at Hermès are considered a growth driver in the future. It is one of the few metiers that has been identified to grow the business in the future, beyond leather, silk and very established product categories.

“We have huge potential. What I intend to do is continue to invest more in products with high added value and to surprise our customers as much as we can with innovation, consistent with the universe of Hermès.

“If we do all those things well, in keeping with the poetic values of Hermès that make you dream, then we will be successful. Whether or not La Montre Hermès will one-day account for 10% of the entire business I do not know, I cannot answer that question. But I hope we do, and I think we can. And I think there is a potential for it.”

For more in our series of conversations with Luxury Leaders, please see our most recent editions as follows:

- In Conversation with François-Henri Pinault, PPR
- In Conversation with Remo Ruffini, Moncler
- In Conversation with Deepa Harris, Taj Hotels & Resorts