Patrick_y's original post delves into Audemars Piguet's groundbreaking decision to self-insure new watches against theft for 24 months. This initiative, announced by then-CEO Francois Bennahmias, represents a significant shift in how luxury watch brands address client concerns regarding security. Patrick_y critically examines the program's financial implications for AP and its potential benefits for collectors, offering a timely analysis of an evolving industry challenge.
Audemars Piguet, the venerable Swiss Watchmaker has an important new program. CEO Francois Bennahmias announced that AP will provide all owners of 2022 and 2023 watches purchased new through official AP dealers will receive 24 months of theft insurance.
CEO Bennahmias, an innovative executive with out-of-the-box thinking, who has held the CEO position at AP for over a decade (and before that he was the General Manager of AP North America), is looking to retire from AP later this year. During his tenure at AP as CEO, he has grown the turnover/revenue of the brand multiple times - and also made the company more vertically integrated (especially on the retail side) and by reducing many costs. Thus, while AP sells approximately 50,000 watches a year, the brand has been able to capture more margin - an estimated 2 billion Swiss Francs.
The 24 months of theft insurance is retroactive for all watches sold in 2022 and 2023 - thus buyers from last year will benefit, even though the program has only been recently announced.
CEO Bennahmias stated that crime is one of the biggest concerns of their clients and that this program is intended to be a value add for their clients. When asked if other brands offer such insurance, Bennahmias stated that AP is the first and only brand to have ever offered this service.
The average watch sold by AP is around 60,000 US dollars. AP watches are frequent targets of crime because the watches are recognizable, valuable, and fairly liquid. There are no reliable estimates of how many watches are lost or stolen each year. However, insurers typically charge nearly 2% of the value of a watch per annum, suggesting that total loss is well under 2% a year. The CEO implied that the insurance will be underwritten by AP itself and that there were no involvement from typical insurance companies. Furthermore, AP is only dipping their toe into this insurance program - the other foot is still on dry ground; the whole insurance program is done on a trial basis and the program may not be extended for future years.
With around 2 Billion Swiss francs in Revenue per year, assuming a worse case scenario that 1% of the value is lost per year, that the program is offered for 24 months for 2 years of production, that'd be a risk of 80 million Swiss francs in potential claims. A lot to pay out - especially considering AP is self insured - for a two year experiment. Of course, AP benefits in another way - it can offer a replacement watch - which obviously costs AP much less than the retail price.
The program seems to be innovative and beneficial at first. Bennahmias has a reputation for innovative and groundbreaking products and services. But then after some critical thinking, I also realized that there are ways AP can recoup a lot of their losses. Assuming a stolen watch is resold and eventually returned to AP for repairs or maintenance, AP can seize the watch and recover much of its insurance payout.
Watch crime is an increasingly large problem. In the UK alone, there are an estimated 20,000 watch related crimes per annum! As watches become increasingly popular and mainstream - rap music lyrics now mention watch brands by name - those crime numbers are expected to increase further.
Brands are trying to combat crime, but also realize it's not always in their interests as wealthy patrons will likely replace their stolen goods generating more sales. Richemont, owner of the famous Cartier and Vacheron Constantin brands (among many others), has built an online database platform called Enquirus; where watch and jewelry owners fill out a comprehensive list on an internet database along with serial numbers and can thus keep track of their pieces with the use of the Cloud. Critics of Enquirus, have said it's a great tool for robbers to hack since owner's names, addresses, and their collection is all bundled in a gift-wrapped package - citing the leak of client information at multiple Richemont brands (notably Cartier) in the past.
I spoke with some Silicon Valley intelligentsia about the new program and many of them immediately dismissed it as a marketing stunt; their argument is that the buzz created is worth more than all the payouts. Another Googler claimed that the value of the highly specific crime data could also be valuable and this insurance program would allow more information for crime research. In my conversation with a former Tesla employee, we came to the conclusion that all brands including AP should offer insurance on its own watches (since they have control on servicing the watches and can seize a stolen watch while the watch is being serviced) - like how Tesla offers insurance on its own cars in some markets - and suggested that this may be a first-step for data collection.
What are your thoughts? Is this a marketing stunt? I see that there is definitely a value add. especially considering that AP definitely doesn't need to do this and that it really is unprecedented. Will you be less afraid to wear your recently purchased AP more often now that you have insurance coverage?
