Quiet revolution at Johann Rupert’s golden child

Johann Rupert-owned Richemont has undergone a significant shift towards direct-to-consumer sales over the past five years, giving its brands greater control of how they are presented to the public. 

It has reaped the rewards from this shift, with Richemont’s luxury jewellery, watch, and leather goods sales proving to be more resilient than its peers amid a global slowdown. 

Richemont has tripled its earnings in the past five years due to the outperformance of this model in comparison to the third-party seller models of some of its competitors. 

This is, in effect, a transplanting of the operating model of Richemont’s hugely successful jewellery maisons across the company’s other operations. 

These maisons are notorious for the tight control over the environments in which their products are presented and sold, with no third-party operators involved. 

Cartier and Van Cleef & Arpels have taken this model to the extreme and benefited in the form of unrivalled heritage and desirability. 

For Richemont, this translates into outperformance relative to the broader jewellery market, with its revenue growing every single year since 2010. 

More importantly for shareholders, the outperformance in terms of sales has not come at the expense of margin expansion. 

Richemont’s jewellery brands enjoy higher gross and operating margins than their peers. This is nearly impossible to do with commoditised products that rely on the price of precious stones and metals, rather than brand desirability. 

This model can clearly be seen in Richemont’s financial performance, with its annual report revealing that direct-to-consumer sales make up 77% of overall sales. 

This is extraordinarily high for a company that generates over €22.4 billion (R428 billion) in revenue.

Among the jewellery maisons, the number of direct-to-client sales is even higher at 84%, emphasising the incredible control they have over how their brands are positioned. 

Ultimately, while the rest of the luxury goods industry is feeling the pressure from a slowing Chinese economy and global uncertainty, Richemont’s sales are accelerating. 

It reported a 11% rise in sales on a constant currency basis for the 2026 financial year, surpassing the 9.7% expected by analysts. 

Tighter control than ever

Over the past five years, Richemont has been working hard to replicate the success of its jewellery maisons across its other operating units. 

In particular, it has focused on its watchmaking business, which has historically been dominated by third-party sellers. 

These sellers often stock multiple brands in a single store, resulting in little control for the watchmaker over how the product is presented and sold. 

In comparison to the jewellery business, Richemont’s watchmaking unit’s direct-to-client sales historically only made up 40% of its overall sales. 

This tends to result in the product, even on a speciality level, being commoditised to an extent and lacking the same appeal and desirability of the jewellery maisons. 

Richemont has looked to fundamentally shift its approach to this market in the past five years by transforming the watchmaking business to a client-centric model. 

This meant doing away with the historically wholesale-driven business into a new retail business model with far greater control over product placement and sales. 

In executing this plan, Richemont invested heavily in the upgrading and expansion of its physical boutique network. 

This was coupled with a decline in use of third-party retailers, effectively replacing external sellers with its own boutiques. 

As a result, the watchmaking brands transitioned the historical multi-brand wholesale points into directly-operated spaces, as seen with Richemont’s jewellery maisons. 

Examples of this include IWC’s new engineering-focused flagship stores in Amsterdam, New York, and Beijing. This is been followed by boutique concepts for Piaget across Asia and the Middle East. 

A forgotton part of Richemont’s control over its brands is its digital infrastructure, which gives it control over the online sale of its products. 

This required investment in new technology to provide online clients with remote digital interactions, video consultations, and 3D product models. 

Its brands focused on providing access to its timepieces “anywhere, anytime, and with any device”. This further eroded any reliance on third-party sellers. 

This does not mean that Richemont is commoditising its own products, with it actually giving itself greater control over sales to heighten desirability. 

In the most recent financial year, it provided a ruthless example of this with the sale of Baume & Mercier as it felt the brand’s “accessible price positioning” and wholesale model did not fit within Richemont’s curated portfolio. 

This has been immensely successful, with direct-to-client sales for the watchmaking business rising above 55% in the most recent financial year. 

Richemont noted that dedicated branded environments note represent three quarters of its watch sales.