By Bani McSpedden, AFR Magazine - 9th December 2015
At 36, James Kennedy has ruffled feathers in the local watch scene. But as the retailer tells Bani McSpedden, that’s just the beginning.
Watch retailing in Australia has traditionally been a stable affair populated by well-known names and families: the Farren-Prices, the van der Griends at Watches of Switzerland, the Fungs at Monards and Swiss Concept, the Bishops of Wallace Bishop and Hardy Bros. Along with The Hour Glass, these have long been the names that resonate with watch buyers and, despite the usual battles with brands over stock and prices, you could say they've pretty much been undisturbed.
Until now. The fly in the ointment is a young man who's seemingly come from nowhere but already snapped up an enviable prize or two, with more on the way.
Well, almost nowhere. In the mid-1970s his parents set up a small watch and jewellery shop in Sydney's Double Bay, called LK Jewellery. Their son now presides over more than 13 such stores. They include multiple outlets branded LK Boutique together with the Rolex stores in Sydney and Melbourne, the latter a business venture with the Swiss brand that he secured over more experienced competitors.
Let me introduce James Kennedy. I meet him in Double Bay on a sunny Saturday, a compact young man, energetic in jeans and Nike Roshe Run trainers, Rolex on the wrist. Decades ago I used to pass by his parents' narrow shop almost daily. That space is now his office – at least, one of them.
Kennedy and I first chatted about watches over coffee almost six years ago, just as he was embarking on his horological adventure; he didn't feel timepieces were being retailed with much verve. Today I've invited him to tell his story. We decamp to the nearby Ritz Carlton for a bit of quiet.
"Getting into the watch business was inevitable, I guess, although I took a different route. I studied and got a job in investment banking with Deutsche Bank, spending six or seven years in finance. I thought I would end up in the family business at some stage, although my knowledge, even now, is more as a consumer of luxury goods. That's something I think has helped me. It gives you a different view of the business.
I came in earlier than I thought I would. Dad died in 2008, he'd been ill a long time and Mum was working pretty hard taking care of him and the business. But it was getting a bit difficult. It was time for me to step in. I was 29 when it happened and it was incredibly challenging. This is an industry steeped in tradition and difficult when you're trying to reinvent the wheel or come at it in a different way.
I worked alongside Mum for the first year or two, and it's funny how it worked out. We're arguably one of the fastest-growing companies in this space in Australia, but back then there was really just one store, by then at the Sheraton in Sydney. We had Rolex and Patek Philippe and a bit of jewellery.
On the tale of two cities:
We also had a small store at Crown in Melbourne, so I was going to move and build things up there. With the watch brands that was difficult because I didn't have the credibility. I was down in Melbourne when we were approached by Star who were keen on having a watch shop in their Sydney development. It was an offer I kept knocking back because it was a bit daunting. But I couldn't refuse.
So in 2011, I found myself opening two LK boutiques, an expanded Crown one in October, the Star in December. At that point I had one full-time employee, our internal bookkeeper, and two to three floor staff in each store.
Today we have more than 100 employees. It was great training for me. I was responsible for banking, reconciliation, inventory management, invoicing, ordering, hiring staff, event management, marketing and executing it all. We really turned it around.
On the appeal of luxury:
My fundamental approach was to concentrate on service and quality staff, and build a strong culture. There are two segments to the market: the aficionados who understand watches and brands, and the affluent who have a discretionary income. I wanted to move away from the traditional retail emphasis on watch experts and look at broadening the market … I felt there was going to be growth in luxury retail overall.
At the beginning of 2012, I looked at the former Fairfax & Roberts site that had come up in Sydney [on the corner of Martin Place and Castlereagh Street]. I wasn't thinking of it in terms of a Rolex boutique. I was focused on diversifying; not only were we reliant on one industry, we had just two brands. Yes, incredible ones, Rolex and Patek, but I was also thinking of fashion and felt Asia was going to be a big catalyst.
But our business was taking off too quickly and the challenge was to build the infrastructure to support it. We were selling more watches than ever, staff numbers growing, it was difficult.
On the Sydney Rolex boutique:
Slowly but surely I pieced a team together and that gave me more time to look at something. I went back – months later – and was surprised to see the Fairfax & Roberts space was still available. I was thinking of a mono-brand store – look at what Louis Vuitton and Chanel have done with their stores – and then it seemed to happen very quickly with Rolex.
I was never concerned it wouldn't be profitable – it was more about could I build it, get the right staff, get it open on time. Which we did at the end of 2013. I think having a customers' perspective gave me an advantage, and we did our homework.
I was always up for challenging the status quo. This is not an overly complicated business. When you're selling a good product it's providing it in a quality environment with quality service attached. How do you get that? It's the right fitout, the right location. Quality service. It's the right culture and that starts from the top down.
On rapid expansion:
Our growth has given us scale and credibility, and the opportunity to look at other things in the marketplace. We acquired a business we'd worked with, MO Luxury, which specialises in luxury retail recruitment and consulting, and we established Emerald Group Investments to sit above all our businesses.
Then Bang & Olufsen … this year we were approached by the parent company in Denmark to represent them in Australia. They want to focus on manufacturing and product, and get away from retailing, which makes sense.
We knew they had a good product, saleable and distinctive. We have a good store network and good management team and it ticks the box for diversification, so it's just the right deal for us at the right time. We have exciting plans for it.
On what's next:
The second Australian Rolex boutique, in Melbourne at Crown, opens before Christmas, and we're bringing Graff exclusively to Australia. Graff is one of the strongest quality‑diamond companies in the world. Our initial focus will be on this, but we'll have a selection of their watches as well.
The last word:
I go by my gut and instincts, supported by information. If one could make decisions based purely on data, everyone would be successful and making money. Business to me is like a sport, it's fun, challenging. But it's more than money that motivates me, I want to build something and be the best. I want to establish myself in the luxury space as the man who spearheads change.