I visited with Stephen Paterson, the Executive Director of Hamilton & Inches, while I was in Edinburgh, Scotland. Founded in 1866 in Edinburgh, Hamilton & Inches is the leading retailer in Scotland and their main store (they also have a small store in London) is located on the Royal Mile, the street that runs from the Castle down to the Queen’s residence where she resides while in Edinburgh.

Stephen Paterson

Europa Star: How’s business?
Stephen Paterson: We’ve been very lucky. We just finished our financial year and we were far better in terms of gross profit than anticipated. The watch business has helped, it’s about 48% of our turnover. We have very good relationships with our vendors and we’ve managed to get some quite nice allocations, like higher priced Patek Philippes, which helped our figures. We’ve found, in these times, that trust plays a big part in our business. If people are spending large amounts of money, they need to know they are getting value. One of our unique selling points is that we manufacture our own silverware. We have fantastic silversmiths upstairs. We do nice commissions, which help us - it’s a bespoke service and it’s something that not everyone in the UK can do. For many years, we focused on repairs, but for the last 20 years, we’ve turned it into manufacturing.

ES: Please give me the history of your store and your background.
SP: I started in August of 1979, straight from school. The business was a family store orig-inally, founded by Robert Kirk and James Hamilton and it was family-owned by the Inches family until 1992. In 1992, the company ran into some financial trouble and it was bought by Asprey of London. In 1998, four of us here did a management buyout and bought it back into private Scottish ownership. Our heritage is Scotland and it’s something that people up north of the border quite like.

ES: How has business changed in recent years?
SP: It all started in September in 2008 and at that time, coming up to Christmas, we got caught out a wee bit. We thought people who were buying would continue to buy nice things. We were caught out by the guilt factor and this has been an underlying tone for the last couple of years. People who owned businesses and were letting people go, felt that they shouldn’t be coming in and spending money. Now, people are beginning to feel more confident and are spending, but they are looking for value. People are more discerning than ever. Rather than being a company that sells jewellery, we wanted to become our customers’ personal jeweller. There’s quite a difference. It’s easy to be a shell and let the brands sell, which gives no identity. It’s better to be a jeweller that advises customers.

ES: What is the secret of your success?
SP: When the founders set up the business, they wanted to provide the best quality products at correct prices. We have stuck to that principle, we haven’t gone down market, so as a result of that, we have been able to attract the big names like Patek Philippe and Rolex. Over the years, we’ve had a very constant staffing. When staff come to us, it’s very rare that they leave. From one decade to another, there is very good continuity. People quite like that there is a face they know in the store.

ES: What do you like about your job?
SP: Because we have all these high priced items, even though we have earrings for fifty pounds, people can get intimidated because there’s a big door and a grand interior. Many people have this perception of us as an in-timidating place. We often get young people coming in looking a little sheepish and one thing that gives me great satisfaction is to find something a young woman can afford, wrap it like it’s worth 100,000 pounds and she can enjoy the experience. I feel very lucky to work here.

ES: What is the biggest challenge facing your store right now?
SP: It would be easy to say the websites, but I think that anyone who wants to buy something of value still likes the comfort of a jeweller. Some people talk about the watch companies setting up their own shops, but the big boys still honour the family tradition and work through retailers.

ES: What is the biggest challenge facing the watch industry right now?
SP: Service is certainly one of the biggest challenges. The industry also has to control the number of pieces made, keeping them ex-clusive, and also to control the number of doors open. One of the problems we have with the watch houses is the discounting that goes on at airports, and in the UK, especially in Heathrow Terminal 5, some watches we have are being discounted by the VAT factor, which is 17.5%.
We have an online shopping part of our website. It’s not a big part of the business, but we want to grow it. The website is more like a shop window for us to bring people into the store.

ES: How do you market your store?
SP: We do it through our window displays, that’s our strongest part of advertising. We have a catalogue that goes out once a year to our mailing list, which is at about 14,000 people right now. We advertise in national UK press and magazines, but we also try to focus on more local publications. We are trying to encourage customers to brings friends into the shop to do tours of the workshops. It’s great to take people up to meet the craftsmen. We also do events. We are the official jeweller for the Open Championship at St. Andrews, with Rolex. We have a number of charity events, as well.

ES: Who is your customer?
SP: We have local customers and travellers. We get quite a few customers from England. Our core customer is Edinburgh based, and we get quite a few visitors coming into the city. We are across the board in age, but the ma-jority of the business comes from the 30 – 65 age range. Men and women are about equal. More men buy watches while more women buy jewellery. We have a very big repeat customer business, probably as high as 70%.
We try and offer another service rather than discounting, for example we occasionally do gift with purchase.

ES: Are you optimistic about the future?
SP: We’ve budgeted for this new financial year to do a flat turnover. I think things will be relatively tricky, but I’m quite confident we are going to have a reasonable year. We are watching our costs and I would be disappointed if we didn’t have the same result this year as we had last year. It’s a period for consolidating, getting the platform right and having a look next year.
There is no plan to add watch brands this year. We have a lot of watch brands knocking on the door. We prefer to invest in the watch brands that are performing now and getting more stock in for Rolex, Patek and Cartier.

ES: What is your favourite watch?
SP: The watch I wear most of the time is a watch given to me by my wife and children for my 40th birthday, which is a Rolex Steel Submariner.

Source: Europa Star August - September 2010 Magazine Issue

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