Annoushka Ducas grills Leighton on the brand’s provenance and growth.
Allan Leighton became chief executive of Pandora in 2013, having led business giants Asda and Royal Mail. As part of our guest editor issue, Annoushka Ducas took the role of interviewer, grilling Leighton on his move to Pandora, its product provenance and global plans for the brand.
As part of her role as guest editor, Annoushka Ducas was handed the task of choosing someone from the UK jewellery industry for this month’s lead interview.
When business heavyweight Allan Leighton’s name was given, only eight months after his appointment as Pandora chief executive in April 2013, it became clear that Ducas had big plans for the conversation.
Leighton spent his early career working at Mars, helped to turn around the fortunes of Asda and, among other roles, has sat on the board at Sky. He became chairman of Pandora in 2010, and stepped up to the helm last year, cementing what has been a period of positive growth for Danish company.
Armed with a set of questions covering expansion, online sales and Pandora’s future, Ducas and Leighton met last month, sitting down with coffees in hand, ready to talk business.
Annoushka Ducas: How interesting that, after Asda and the Royal Mail, you are now in the jewellery business…
Allan Leighton: I’ve done lots of things; I’ve worked in confectionary [at Mars], been a chairman of house builder Wilson Connolly and on the board at Dyson. The common thread is the customer. I was bought up at Mars where the saying was ‘the consumer is our boss’. So, if it is anything to do with end consumers buying end products, it is much the same, the product is always different but the way you structure a business and the way you think are always the same.
AD: You don’t think it matters that the product in question is jewellery?
AL: It is easier to run things, chair a business or be part of a team when you are only thinking about one thing, like the end customer. But it does matter [what the product is], and as a result you will have to have specialisation in different parts of the business. It matters to those in Thailand making our jewellery. But running or directing a business is much the same, no matter the product.
AD: Did the size of Pandora as a company appeal to you?
AL: All of the things I do and invest in are always different in terms of industry. Pandora is a jewellery business, and I liked the model. Per Enevoldsen, who founded the brand, had just one shop in the beginning, [but today] it is vertically integrated, designs everything, decides which points of distribution to go into, has its own stores and lots of franchise concept stores. It is like James Dyson invented the ball barrow; I like stuff that comes from somewhere.
AD: What drew you to the brand?
AL: Per thought ‘if I can make fabulous jewellery and I can make it affordable, I’d sell more’. It is a very simple idea, but that’s what he did. He went to Thailand, found a few people to work with, and now has 6,000 people working and making jewellery for the brand. Pandora is in a sweet spot in that we make high quality, beautiful jewellery, but we do it at
really affordable prices. We had this phase where people thought we were [trying to emulate] Tiffany, which we’re definitely not.
AD: Do you think Pandora has any competitors?
AL: I don’t really think we have any, which is a good thing. Someone told me a long time ago that there is nothing you can do about your competition; instead focus on what you do yourself and make your own business and brands the thing that everybody talks about, rather than being the organisation that talks about what everyone else does. So we’re just doing what we do. Pandora admires other businesses, but really we focus on our thing and doing it well, such as improving the product range. We used to only have a couple of product drops a year so sometimes the stores looked a bit staid, but now we do seven and there’s that freshness, which is important, and freshness brings traffic, which is key.
AD: Is the strategy to slowly increase the price of Pandora jewellery?
AL: No, we aren’t aiming to up the price. We’re in the sweet spot that is affordable luxury, but as soon as you get out of it, it’s no longer [the Pandora] business. So I am very keen to keep the prices as they are. At the moment the notion of affordable luxury works everywhere in the world because everyone wants it. Gold and silver are the biggest cost of goods, and they go up and down in terms of price, but the objective is to stay at this sweet spot.
AD: The Pandora product is arguably very similar to other brands’ product. Will Pandora evolve from charms and stacking rings?
AL: Pandora is not like the next product, because what we do is manufacture emotions. Pandora was driven by being something different in an industry that is not very different. It has mass appeal, which is really important, we own the whole chain, we do everything within that chain and our bracelets are a point of distribution and onto that point of distribution goes all of these emotions. Everybody’s bracelet is different, everybody’s charm means something to them. The whole Pandora Moments idea is powerful; they are not just charms, they are not just bracelets, they are how we created a brand. Moments is how we built the business in the UK. We now have the Essence collection too, which is different again as it is all about values. We did some research about four or five weeks after launching Essence, and found that people understand [the concept]. This is something new and special; Essence represents the values the customer has or can aim for. It is a concept too, and that’s what we turn into brands – something much more than just product.
AD: How big is Pandora’s design team?
AL: The team is four people; there are two in Denmark, and two who are travelling regularly. It is a small team but I quite like that. We also have product developers in Thailand, and some trendspotters. In time, the team will expand, and we hope to set up a design centre here in London too.
AD: And do the designers get information about which of their pieces sell particularly well?
AL: Yes, they can see by SKU, by concept store, by day. Hence our reason to go to seven collections [a year]; we are doing the same number of DVs – design variations – but they come in chunks so you get that freshness but you can also see very quickly what works and what doesn’t work. So it is very much that the brand’s creativity is supported by real core data, which can be picked out by store or by market.
AD: Who is Pandora’s creative director?
AL: It’s Stephen Fairchild. He’s the chief creative officer and he’s awesome. He previously worked at Armani and Gucci, and has been with us for two years. We have a very tight team and he is probably the most commercial person in the organisation, which is very unusual. Stephen is highly creative but he understands the cost of everything; I think that has been very key in keeping Pandora’s product affordable. As a result, the team has done a great job, certainly in the past 18 months.
AD: Do you think the provenance of Pandora jewellery will be problematic in the future?
AL: I go to Thailand every three of four months and it’s brilliant. Per [Enevoldsen] went there 15 years ago and started [a manufactory] with six people, and yet it still feels like that because we treat today’s 6,000 staff members as though there are still six. Where they work are not factories, they are amazing, and we look after people very well. There are no dormitories, we have very low turnover of staff and even have families working together. We love to take people down there and anyone who goes is completely knocked out by it. The benefit for us is that we have an incredibly skilled workforce. In fact, we’ve hired 1,000 more people in the last six to nine months.
AD: But do you think in four year’s time you will have to stamp Made in Thailand on your products? Could it make a difference from a customer perspective?
AL: No, I don’t think it makes any difference. I think it is great that provenance is talked about, but if people see [jewellery] they really like, where it’s from isn’t important, it is the brand that needs to be responsible for how things are made.
AD: How do your wholesale partners feel about you opening more stores?
AL: Very good. The UK is a good example, our retailers are generally in good spirits – they should be as they are often doing better than others.
AD: When we started opening our own stores with Links of London, and went from wholesale to retail, our stockists were not keen. How have you found it?
AL: Less than 10% of our concept stores are owned and operated by Pandora, and 90% of our 10,000 distribution points are owned by our partners, franchisees and multibrand retailers. So in reality we only have a very small number of owned and operated stores, and it will stay that way as we’re not in the real estate business. When it comes to owned and operated stores, we tend to open them in two places: one, where it is expensive for franchisees, like the Marble Arch store in London, and secondly in markets such as Italy. There, we’ve got about 10 owned and operated stores; one in Rome, one in Milan, one in Napoli, and so on; you then have somewhere franchisees can build off the back of.
AD: Is the web your biggest store front?
AL: Not quite yet, as we’ve only been trading online for a year, and only here in the UK, nowhere else. It’s been very successful, and what is interesting is that the male share of Pandora’s online sales is higher than the male share of offline sales. Blokes aren’t very comfortable in jewellery shops, but they’re OK online. I’d say online is the next dimension for us, and there is no reason why Pandora’s online sales shouldn’t be 10% to 15% of total sales, but at present it is not quite 10% in the UK. We have very low [product] returns, very high conversation rates, and returning customers which is ideal. We are about to launch online in Germany, and expect it to become 10% of the German business. The main thing is that we have controlled growth. I don’t want to grow at 25% each year, because that involves millions of pieces and someone has to make them, so our idea of controlled growth is 3% to 5% like-for-like in our core markets.
AD: What about Pandora online in the rest of the world?
AL: It is dead easy to put a retail site up, but the most important thing is the fulfilment. For example, we have no online presence in the US at all and won’t for a couple of years yet. People ask me ‘well, why don’t you sell online in America?’, and I say because we don’t need to go online in America yet. Secondly, to set up the fulfilment in the US for 10% of US sales you really have to think about it. We’re not in a great rush; the idea is that Pandora will be around in 100 years, not for 100 days. We didn’t go online in the US first because you don’t take a big risk in your biggest market; you learn how to do things, and then expand.
AD: Is there another business you admire that has shown similar growth or potential to Pandora?
AL: Not in a global sense, but [fashion retailer] Forever 21 is interesting. That business has built very quickly. You have to offer something that is durable, sustainable and compelling, which will be around for a long time, which itself goes back to being more than just a product.
AD: Do you get a lot of people coming to you saying they want to open Pandora concept stores?
AL: Yes we do, and we have a waiting list. We like people to operate more than one store, and that’s the really great thing about the UK, as there is a great franchise business here and the franchisees tend to have a number of shops that have grown really quickly.
AD: How do you vet applicants?
AL: Clearly you have to put a big financial piece up front, so that’s the first bit of vetting, and then there is the company itself and its history, and how they fit with what we do. Our UK franchisees are some of the best in world and we have more than 100 franchise concept stores here. It is a pretty well oiled machine and there is a great closeness with the franchisees. [Pandora UK president] Peter Andersen probably spends about 50% of his time out with the franchisees; he’s built a fabulous business here.
AD: How far in advance are you working on new collections and marketing?
AL: About six to nine months. Pandora buys more gemstones than any [other jewellery company] in the world, so not only do we have to think about our factory’s capabilities, but someone has to manufacture the stones in the first place. If one forecast is wrong, another is wrong. We have to be fast, too, as I believe speed and turnaround times are our competitive edge.
AD: What’s the future for the Pandora?
AL: The US, UK and Australia are doing really well, Germany is not doing very well but that will be sorted out soon. Russia, Italy and France are growing but are not quite halfway through their evolutions to being core markets. So we still have room to grow, and then we have China and Japan, which really should be 20% of the business. I believe the business has settled down in the UK, but we need to go at a controlled pace. There are also things we can do to make life easier for our franchisees; sometimes we overcomplicate things, so right now we are having a push to see how we can make working with Pandora easier for everybody.
This interview was taken from the January Guest Editor issue of Professional Jeweller, overseen by Annoushka Ducas. To read the issue in full online, click here.