Tuesday 5th July 2016
Breaking the mold - Revolution speaks to James Kennedy managing director and CEO of Emerald Group about the changing landscape of the Australian market and the business’s expansion plans.
by Adi Soon
Let’s just start with the story about the Rolex that you got when you were 16.
My parents started the watch-and-jewelry business in 1976, before I was born. Growing up, I was exposed to rare watches and jewelry, at a time when luxury goods were still really new to the Australian market. I was constantly in the store, watching how the staff worked and looking at the different brands. It was when I was turning 16 that I got what I’d always wanted — a Rolex. It is still in my collection today, a 34mm Datejust, in steel, with polished bezel, a black dial and Oyster bracelet. It is pretty simple, but it still keeps time as good as the day it was given to me — it has been going on for 20 years!
In what capacity did you serve during the time that you’ve been exposed to the business?
I was still in school, so I was never really working directly in the business — it was more of hanging around in the stores, or the office. I always heard and saw what was [going on] — my parents always had discussions of work and business. I was 17 when I finished school in 1996 and I started working from the floor, selling part-time for some three to four days a week.
Were you good as a salesperson?
I would like to think that I was a good salesman! (Laughs) My mother was a very, very good salesperson, and what I’ve learned from her is that sales is not as complicated as what people make it out to be. Fundamentally, you want to build rapport with the customer, and engage them without putting the hard-sell on. I think that there is a sense of trust, when you’re working and transacting a deal. You are as good as your word. That’s probably the value that was instilled in me from an early age. When I decided that I wanted to build my own career, I studied finance and got into banking for a period of time. I was in derivatives, an operational role, which taught me a lot about corporate structure and operations. It showed me that it is an incredibly important part to an infrastructure, as well as transactions and trades, from a back-office perspective. It was quite an experience. I’ve been facing clients for a long time in retail, in the family business, so it was nice to see the other side. After that, I became a stockbroker, which was again another experience that I learned a lot from.
Has your background in finance helped you in your business?
Across my working life for around 10 years, I was in very different components of business, and as the CEO of a group now, I am still constantly learning. It’s funny because I don’t focus all that much on the macroeconomics of the business. It’s fundamentals that are more important. It’s not all about category or positioning in the market, it’s about people coming into our stores and buying the product. It has to be that simple. In that sense, you have to sometimes ignore the white noise, ignore your surroundings, and really focus on customer engagement, service and the experience. What I’ve done a lot is that I use a lot more instinct and the reality of my surroundings in my business decisions, as opposed to statistics and data to drive my thinking. If you want to see if the business is successful, walk into the store — you know, you don’t need to look at the P&L and balance sheet to see if it is a good business or not. You just need to walk around there, and see the service, see how many customers there are, and see the products.
So why did you decide to return to the family business despite a successful career in finance?
Fast forward to 2008: my father passed away, and the business at that point was 32 years old. I spent another year in my stockbroking role after, but I really wanted to help my mother, who was transitioning out of the business. In 2009, I had my first visit to Basel, and I was blown away — as anyone who has seen Baselworld for the first time would be. It was really at that point that I sat down with my mother, and she was getting older and thinking about where the business would go for the future. I came in as a general manager, in early 2010, and I made a move to Melbourne even though I grew up and lived in Sydney. And then I realized, when you aim for a goal, you should not be afraid to change it mid-way. When I went to Melbourne, I was ready to just be the general manager; I was going to run one store, a small 40sqm boutique, but then we decided to open another one not too far away, a bigger store at 80sqm with a new design. This was an incredible learning experience and something I had never done before. So you know, I was trying to find builders, marketing events and handling inventory management. I was very much focused on Melbourne, but then, at the same time, Star in Sydney approached me, saying that they really wanted me to open a boutique with them. I said no — I was still a bit green, and young, and wanted to focus my attention on Melbourne, where I had just moved to. But then it was such an incredible offer, that it came to a point that I just had to take it, and so I did. That’s when all our tremendous growth really started, and when we really began to experience significant double-digit growth year on year, over the last four to five years. When I took over the business, there were only two stores and four employees. Today, however, we have 150 to 200 employees and 20 stores across Australia, in various divisions.
What was the brand mix then?
It was still mainly Rolex and Patek Philippe at that time. We took on a few brands along the way, Hublot, at one point, Dior, and we also had Chopard.
How did your mother react to your different style of doing business?
Like any family business, there are always different challenges to deal with, different opinions and ways of doing things. My mother perhaps was a lot more risk averse, given that she had operated the business in the same way for many years. For me, I was just starting out and I have more of an appetite for risk, and more aggressive ambitions. But she left it to me to do what I saw fit. I became the patriarch of the family — I am responsible for my mother, for my brother, and for the rest of the family, and for all the employees. When I look back, I think it was a pretty smooth transition.
Did you encounter any situations where your age was looked upon by more experienced people as a concern?
Well, look, there’s always going to be that point to make. But experience is a funny thing — it is what you make of it. Some people can go through life, 50 years of doing the job, and never be as capable as someone who has been doing it for two years. For me, I’ve been doing what I’ve been doing for six to seven years. To be honest, it could be equivalent for someone who has been doing for 50, because I had a very steep learning curve, I had a lot of decisions to make, a lot of responsibilities to deal with. When you run every inch of the business, one that is growing rapidly, you’ve got no other options but to learn on the job. People can look at you like you’re young and inexperienced and brash and sometimes arrogant, but it’s just par for the course. I don’t take naysayers and what people tell me I can’t do as a negative [thing]. I would probably take it as a positive — I believethat there is nothing wrong in life to have that little chip on your shoulder, and wanting to prove people wrong.
You’ve worked in the watch industry for a decent amount of time, so you’ve been able to see how the brands have evolved, how the Australian watch market has evolved. Can you share your insights with us?
Many of the retailers are family-owned, and they go generation to generation. There’s only a handful of [descendents] my age that are coming in to take over the management. It’s my parents’ generation that are still running a lot of these retail businesses. For me, the biggest advantage I have is that I don’t accept things the way they are because it has to be — I don’t believe in that. I think you have to be able to challenge the status quo. How can you keep doing the same thing and expect [different] results? The watch industry is a very traditional industry and sometimes it’s frustrating because you want to change the landscape, or you want your ideas to come out in a different way. My focus is very much on service, and the experience in stores, the product knowledge of the staff, the training of the staff. We have a recruitment-and training company that does the training on sales and luxury, and also we have an internal training department within the organization that focuses on the products we sell, the branding we do as a company.
How do you think your business has performed over the time you have been in charge?
We’re near the top of the watch-and-jewelry industry in Australia. And I’m pretty sure that we’re pretty close to it, if not already there now. I didn’t really care about competition. I didn’t care about what my competitors were doing. I cared about my own business; I focused on what I believed were the fundamentals of getting a great-quality service to go with the great-quality product that I was already getting. Again, you don’t need to reinvent the wheel. You may need to think outside the box differently, but again, like I said, I don’t look at the macro, I don’t make decisions because the Chinese stock market is having a bad run, or you know, the US dollar is down to 70 cents — there will always be issues for sure, which you have to consider when you’re strategizing. I believe that you have to consider them, but they’re not what drives your decision-making.
What are your plans for the next five to 10 years?
A big part of my strategy when I first came in was diversification — not only diversifying the brand portfolio, but also diversifying the industry. I recognize that the markets, particularly Australia, are becoming more polarized. The gap between the upper and lower class is growing, and in actual fact, there almost isn’t a middle class anymore. You know, you’re either on one end of the spectrum or you’re on the other. That polarization is sort of created, when you look at some of the biggest retail organizations in the world. They’re made up of your discount, budget businesses like Walmart and Costco, and your premium luxury goods like LVMH or Kering Group. Taking all this in mind, I started to work towards organically evolving towards having more brands. It was for me, creating a luxury retail-service group which will serve the Australian market, which would have a combination of running Australian businessesvand international businesses — be it partnerships, subsidiaries, or master dealer agreements — we’re very flexible in how we want to partner with various companies. I guess this is really the catalyst for the establishment of Emerald Group Investments — and that’s my role, I’m the managing director and CEO of Emerald Group Investments, which covers the fashion division (Loewe) and the tech division (Bang & Olufsen), which all came off the back of the watchand-jewelry division (LK Boutique, Graff Diamonds, Rolex). We’ve got three strong divisions of the business: the watches and jewelry, the tech, and the fashion — and these will continue to grow. We’ve got six development plans, as in constructions and developments for various projects — boutiques or otherwise — for the next 12 to 18 months. In 2010, we were at four staff and two stores, and by the end of this year, we should have 200 staff and 20 stores, and all of it is really built from the ground up.
Let’s bring it back to watches. Let’s say your house is on fire and you can only pick five to grab.
Firstly, of course, it would be the Datejust from my parents. I would shove that in my pocket and grab the rest in a box! I would take my Pateks — you don’t leave any Pateks behind — the World Time, and steel Annual Calendar (from two years ago). And then, I would have to take my yellow-gold 40mm Day-Date (from last year), and I would have to take my IWC double moon perpetual calendar in rose gold.
So far there are only three brands on your list: Rolex, Patek, and IWC.
Yes. These are my three favorites. And I’ve got other brands in the mix, but if you’re asking me to take my favorites, inarguably I’m going to take the ones which will cost me the most to replace. Now, obviously, as we develop, we’re going to be padded with more brands this year, and I tend to get the ones that we’re partnering with. Because then you will understand the product as well. Yes! Correct. So maybe ask me this question at the end of the year, and I might have a different list for you.
Last question: why should I come to your store to buy a watch? What will the experience be like for me?
I’ll give you a very simple answer. Because the store is of a global standard, so the experience will definitely be world-class. We will treat you like a person, before we treat you like a transaction.