Gerhard D. Wempe KG

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Gerhard D. Wempe KG

Steinstrasse 23
Hamburg, D-20095
Germany
Telephone: (49 40) 33448-0
Fax: (49 40) 33448-666
Web site: http://www.wempe.com

Private Company
Incorporated: 1878 as Gerhard D. Wempe
Employees: 460 (2005)
Sales: EUR 193 million ($243 million) (2006)
NAIC: 448310 Jewelry Stores; 339911 Jewelry (Except Costume) Manufacturing; 334518 Watch, Clock, and Part Manufacturing

Gerhard D. Wempe KG, with headquarters in Hamburg, Germany, is one of Europe’s oldest and largest retailers for top-of-the range watches and jewelry. In addition to selling the world’s most exclusive watch brands, including Cartier, Rolex, A. Lange & Söhne, Jaeger-LeCoultre, IWC, and Omega, Wempe manufactures its own line of branded watches in Glashütte, Germany’s traditional center of the mechanical watch making industry. The company’s top performing outlet is its 2,500-square-foot flagship store on New York City’s Fifth Avenue. Nineteen of the remaining 24 Wempe stores are located in Germany’s largest cities. Wempe stores are also found in exclusive downtown locations in Paris, London, Vienna, and Madrid. In addition, Wempe maintains a small shop on board the luxury cruise ship MS Europa.

Watch sales account for roughly two-thirds of Wempe’s total revenues. About 6 percent come from watch repair services, which are carried out by a staff of over 20 highly skilled watchmakers at Hamburg headquarters. Wempe’s Chronometerwerke division is the only remaining manufacturer of mechanical ships’ chronometers in Europe. The division is also a leading manufacturer of electronic chronometer systems for large cruise ships. Wempe’s jewelry department carries collections that combine a traditional appeal with modern elements, and crafts its own lines of jewelry along the same principles. Wempe is one of the few world’s jewelers that are allowed to participate in Tokyo’s pearl auctions. The company is owned and managed by the Wempe family.

WATCHMAKER WITH “GOLDEN HANDS” BUILDS FOUNDATION OF WATCH AND JEWELRY EMPIRE

The company had its beginnings in 1878 when master watchmaker Gerhard Driedrich Wilhelm Wempe decided to open his own watch store in his hometown of Elsfleth, located between Oldenburg and Bremen in northern Germany. As the location for his store he chose his aunt Caroline’s house. It soon became obvious that the 21-year-old son of a general goods dealer had a knack for marketing. Trying to make the most of only the small amount of start-up capital which he had saved, he built large picture windows into the front of the house and turned his aunt’s living room into a showroom for his watches, and later also jewelry. Then he made his own display cases and little trays covered with velvet to present his merchandise. Wempe’s business took off in the small whaling and shipbuilding town and soon he was able to hire an assistant and buy himself a penny-farthing bicycle, one of the status symbols of the time. His commercial success earned Wempe the nickname “Gülden Gerd” or “Golden Gerd,” a fellow with hands of gold.

About a decade and a half later, when Elsfleth’s shipbuilding industry experienced a crisis, Wempe set his sights on expansion. In 1894 he opened another store in the old imperial city of Oldenburg, where he was the first German merchant to open a store of that kind. Again, this move turned out to be a success. Only four years later he enlarged this store and developed a reputation for an exceptionally broad selection of watches and jewelry. To keep up with market trends, Wempe traveled to Paris in 1900 where he visited the World Exhibition. After the turn of the century Wempe went to Switzerland and developed his first business contacts with Swiss watchmakers.

The next major step followed in 1907. With his debt paid off and some money in the bank, Wempe decided to open a store in Hamburg. Located in a popular shopping district, the shop, which was opened with much fanfare, was an instant success. Equipped with an impressive giant three-display-clock over the door, the store was easy to spot and became a magnet for shoppers. Within three years the store was generating annual sales of 100,000 marks, a large sum at the time. By 1914 Wempe had opened four additional stores in Hamburg. Some moderately priced items in Wempe’s huge selection of jewelry and watches turned into early bestsellers. Among them were a line of wedding rings, Wempe’s own “Seagull” watch, and “GDW” watch chains.

When World War I began in 1914, sales plunged by 75 percent. Fortunately, Gerhard D. Wempe’s son Herbert, who had joined the family business in 1905 as a 15-year-old and had become a shareholder in 1911, was not drafted to fight in the war due to his poor health. As a result, he was able to attend to business matters in the evenings. In the second year after the war was over, after 42 years of building the business, Gerhard D. Wempe passed away. By that time, Wempe had gained an excellent reputation for watches and jewelry in northern Germany.

COMPANY PERSPECTIVES

Our Customers appreciate the individual pieces presented in our jewelry and watch collections, valuing them as precious messengers—messengers bearing a deeply personal note which have grown to become symbols of special events and emotions gathered over the course of a whole lifetime. This demanding standard, we have set for ourselves at Wempe, implies a high level of responsibility and a very special relationship to our Customers: For you and you alone, we feel privileged to share and to help create the wonderful experience of giving and receiving gifts. In full knowledge of this privilege, we maintain a culture of the highest level of expertise and service dedicated to such precious moments, a culture which continually asks of itself not merely what needs to be done—but to do all that is truly possible. Our entire firm is dedicated to the most beautiful moments of your life: You may rest assured that we are fully committed to honoring such unique occasions.

MOVING TO NEW HEADQUARTERS, SELLING SWISS WATCHES AND FIGHTING THEFT AFTER 1921

Herbert Wempe carried on the business with the same vigor and vision as his father had before him. Only one year after the company founder had passed away, a new store was opened in Hamburg’s famous amusement district Reeperbahn. In 1923, when the ruinous hyperinflation in postwar Germany reached its height, Wempe, who was fortunate to be doing business in goods that did not lose value, acquired a large building in Hamburg’s popular Steinstrasse. The Kaufmannshaus or Merchant’s House, became Wempe’s headquarters. Two years later Wempe was able to secure exclusive distribution rights in Hamburg for a number of wellknown Swiss watch brands. Due to his father’s and his own efforts to build close business relationships with some of the world’s best watchmakers, his Hamburgbased stores carried famous brand names such as Omega, Zenith, Longines, and Movado. In 1927 Wempe began to work together with renowned Swiss watchmaker Patek Philippe. One year later, another store opened on Hamburgs’s shopping strip Alsterarkaden. By 1929 the Wempe stores were generating an annual revenue stream of three million marks.

Having such valuable items on display not only attracted the wealthy of Hamburg who were able to afford them, but also a less desirable element. Despite the fact that Wempe’s shop windows were barred with heavy iron grillwork at night, thieves managed to break into the store one night in January 1929. The night watchman had arrived shortly after midnight to begin his shift and went to the second floor to lower the iron grillwork. Within roughly five seconds, with about four feet remaining between the iron grillwork and the bottom of the shop window, the thieves threw a newspaper-covered stone into the shop window and grabbed about a dozen diamond rings and diamond brooches worth 30,000 marks. When the night watchman came downstairs to begin his watch for the night in the store, it was already too late. There was no trace to be found of the thieves. Herbert Wempe “solved” the case in his own way. He put a large ad in Hamburg’s newspapers that read: “Einbruch at Wempe Alsterarkaden in the night from January 12 to January 13. We congratulate the gentlemen burglars on their success. We prefer to buy the merchandise from you and we will pay you more than anyone else would. Determine a neutral location. We guarantee with our name that we will not hand you over to the police. Wempe.” The thieves responded to the ad and met with Wempe in Hamburg’s city park where they received the money from him. Wempe also kept his promise not to call the police. However, the criminals were later captured.

BUILDING SHIPS’ CHRONOMETERS DURING WORLD WAR II

In 1938, after lengthy negotiations, Herbert Wempe acquired Hamburg-based Chronometerwerke, a manufacturer of ships’ chronometers. Founded by a group of German ship owners in 1905, Chronometerwerke was established to produce a substitute for the expensive English ships’ chronometers that dominated the market as well as to cut costs for their repair and maintenance. Wempe’s primary motivation for this move was to extend the craftsmanship of the watchmakers he employed. Chronometers provided a time standard used on ships to determine their longitude via celestial navigation. To keep such time standardized, chronometers had to be ultraprecise and reliable, so building and repairing them was considered watchmaking of the highest art. In addition to repairing ships’ chronometers the company also produced new ones, about 36 per year. At the time of the acquisition, the company employed 21 workers and had 200 orders on file. However, the annual turnover of 55,000 reichsmarks, the new German currency, was rather small compared with the revenues derived from Wempe’s stores.

KEY DATES

1878:: Watchmaker Gerhard Driedrich Wilhelm Wempe opens a watch store in Elsfleth, Germany.
1894:: Wempe opens his second store in Oldenburg.
1907:: Wempe establishes a store in Hamburg.
1923:: The company moves to Merchant’s House in Hamburg’s Steinstrasse.
1925:: Wempe secures exclusive distribution rights in Hamburg for a number of well-known Swiss watch brands.
1938:: The company acquires Hamburg-based Chronometerwerke.
1942:: Wempe pioneers a unified ship chronometer.
1963:: Hellmut Wempe takes over the family business following the death of his father.
1970:: The first Wempe store outside of northern Germany opens in Frankfurt/Main.
1980:: Wempe Jewelers opens on New York City’s Fifth Avenue.
1999:: Wempe opens a “mobile store” on board the cruise ship MS Europa.
2003:: Kim-Eva Wempe becomes the new CEO.
2005:: Wempe sets up its own watch manufacturing subsidiary in Glashütte.
2006:: The company’s own watch brand Zeitmeister is launched.

During World War II, ships’ chronometers were in high demand and the Nazis pressured Wempe to boost production in order to equip their war fleet. Wempe Chronometerwerke, as the company was now called, set up additional production facilities in Hamburg, where the firm employed up to 200 workers during the war, including forced laborers from Russia and France. In 1942 Wempe Chronometerwerke developed and patented a unified chronometer for the military and manufactured about 900 per year in cooperation with A. Lange & Söhne in Glashütte. The chronometer division also built chronometers for submarines and airplanes. When the war returned to Germany, Hamburg, a city with high strategic importance, became the target of extended bombings. All Wempe stores were destroyed during the war.

RAPID EXPANSION FOLLOWS RECONSTRUCTION AFTER WORLD WAR II

Not only did Herbert Wempe lose all of his stores in the war; he also lost his oldest son Herbert. To make things worse, Wempe lost the ultimate control of his business after the war was over. Although later in the war some Nazis accused him of treating the prisoners of war who worked at Chronometerwerke “too well,” Wempe had sympathized with National Socialist ideas when the Nazis first came to power. Therefore, he had to surrender the management of his business to a trustee from 1945 until 1950. However, his younger son Hellmut, then 13 years of age, was able to take care of some business matters on behalf of his father. In 1951 Hellmut Wempe officially joined the company. Herbert Wempe was later rehabilitated.

Rebuilding the business after the war was a tedious task, but one that Hellmut Wempe took it on with great drive and enthusiasm. After the currency reform took effect in the three western zones of Germany in 1948, business gained momentum very quickly. Within five years, five Wempe stores had reopened in Hamburg. In 1950 Wempe Chronometerwerke moved to new premises on Hamburg’s Reeperbahn. In the following decade the subsidiary was experiencing an exceptionally high demand for its chronometers, from Japanese customers in particular. In the mid-1950s, postwar production even exceeded wartime levels, with some 240 chronometers being built annually by 22 specialists.

A milestone in the 1960s for the company occurred when Hellmut Wempe secured the rights to carry Rolex brand watches in Wempe stores. Although his father disliked their design, thinking they were too clunky, this was the first in a series of steps to reposition Wempe as a top-of-the-range brand. However, the early 1960s also had less fortunate events in store for the Wempes. In February 1963, shortly after Herbert Wempe’s 73rd birthday, the company suffered another major loss when burglars again broke into a store, this time through the floor from a kitchen below. They took only jewels worth more than 2000 deutsch marks a piece, as well as some expensive items that needed repair. All in all the loss amounted to roughly 600,000 deutsch marks, an extremely large sum. A few months later, Herbert Wempe passed away. At a later date, police captured the two Italians who had committed the crime. However, a third accomplice, a Frenchman, was never found, nor were the stolen goods.

Under Hellmut Wempe’s leadership the company expanded rapidly in the late 1960s and throughout the 1970s. The demand for fine jewelry increased significantly during that time period and so did the competition. In addition to other established jewelers, Wempe also competed with a growing number of department stores that were adding upscale jewelry sections to their sales floors. The only way to win the race in the long run, Hellmut Wempe was convinced, was to move to the very top of the market. In order to achieve this lofty goal, Wempe formulated a clear strategy: set up shop only at top inner-city locations, preferably in historic buildings that possessed a special flair and at least 40 feet of showcase window space; besides Wempe’s own brand name items carry only the most respected and exclusive lines of jewelry and watches; and follow the company founder’s principles regarding the way customers were to be treated at a Wempe store, offering them the largest selection of the best merchandise and treating them with the utmost courtesy. Based on these guidelines, new Wempe stores opened across the country, in Bremen in 1967, in Hanover in 1969, in Frankfurt in 1970, in Cologne in 1971, in Stuttgart and Munich in 1973, and in Dusseldorf in 1977. Two additional Wempe stores were established in Hamburg during the 1970s.

SETTING UP SHOP ON FIFTH AVENUE AND ELSEWHERE IN THE WORLD

In 1980 Hellmut Wempe took a major strategic step, fulfilling a long-held dream at the same time, when he set up shop in one of the world’s most fashionable upscale shopping districts, New York’s Fifth Avenue. Located in midtown Manhattan on the ground floor of the Peninsula Hotel, the store placed Wempe in close proximity with the world’s most renowned jewelers. With high rent costs and gold prices three times as high as usual in the early 1980s, Hellmut Wempe did not expect miracles. However, he was determined to stay for the long term. Every prospective customer who entered the elegant store located between 54th and 55th streets was seated at a table where a sales associate served a hot beverage before showing him or her the desired items. Wempe limited its watch selection to only 20 of the world’s most famous brands, among them Cartier, Rolex, A. Lange & Söhne, Jaeger-LeCoultre, IWC, and Omega, but carried all models of these few selected brands that were available on the market. Since the main focus was on customer service rather than sales, Wempe sales personnel was not encouraged to go for the sale by paying commissions. Rather, they were trained to engage in conversation with upscale watch enthusiasts to create a memorable experience. In addition, Wempe practiced a very generous customer service policy by extending manufacturer’s warranties by three years; through a no-hassle exchange policy; and by performing minor repairs for free. Ten years after the store was set up, Wempe Jewelers on Fifth Avenue broke even. Meanwhile, Wempe had opened a second store abroad in Paris. Between 1985 and 2000 the company further expanded to Vienna, London, and Madrid.

At the turn of the millennium Wempe was showered with new business. Successful Internet entrepreneurs-turned-millionaires and American shopping tourists who were taking advantage of the depressed Euro spent their money generously at Wempe’s stores in Germany and elsewhere, resulting in double digit growth rates for the company. Additional revenues derived from nine new stores which were set up in large German cities, including Nürnberg, Berlin, Munich, Mannheim, Dortmund, Leipzig, and Dresden. In 1999 Wempe opened its first “mobile store” on board the luxury cruise ship MS Europa, which generated five million Euros in revenues in its first year. However, after the Internet bubble burst in 2001, business dropped back to more normal levels fairly quickly.

GENERATION CHANGE AND STRATEGIC INVESTMENTS IN THE NEW MILLENNIUM

At Wempe’s 125th anniversary, on May 5, 2003, 71-year-old Hellmut Wempe resigned from the day-to-day management of the company and turned the task over to his 40-year-old daughter Kim-Eva. After studying French, English, and Italian at a language school in Hamburg, she had gained experience during internships at jewelers and watch manufacturing companies in Switzerland, France, Italy, the United States, and Japan. Kim-Eva started working at the company in 1984 while studying business administration at a private academy in Hamburg. She joined the family business full time three years later and took on responsibilities in the areas of purchasing, marketing and human resources. When she turned 30 in 1992, Kim-Eva Wempe showed her talent for jewelry design when she presented her own collection named “Il Mondo.” Subsequently, Kim-Eva headed Wempe’s jewelry design department. In 1994 Kim-Eva Wempe became a personally liable partner in the family business.

The Wempes celebrated their company’s 125th anniversary with the launch of limited edition watch models by the world’s best manufacturers, created exclusively for the occasion. In addition, the company introduced its own high-priced Wempe Chronograph watch line, retailing at $10,295 a piece. The anniversary sale was a great success against the slowing market trend for luxury goods. In the following years Wempe intensified its event marketing efforts. From store receptions to new product launch parties to golf tournaments, the company missed no occasion to engage its customers. In 2005 Wempe invested in a brand-new production facility for watch manufacturing in Glashütte, Saxony. The launch of the company’s own comparatively moderately priced watch brand Zeitmeister in the following year was a strategic measure to fight the long-term trend of decreasing profit margins in the retail sector and to expand Wempe’s customer base beyond the super rich.

Despite impressive growth rates, promising ventures, and a solid financial basis, future prospects did not look entirely promising for Wempe. While the number of private retailers in Germany had been cut in half since the mid-1980s, the remaining ones, including Wempe, faced increasing competition from large international jewelry chains and luxury goods manufacturers. Hardly would a month go by without the Wempes’ receiving a takeover offer from a competitor. They, however, strongly believed in their proven concept of moderate but sustainable growth based on conservative financing. Possible future targets for Wempe stores were Milan, Brussels, Budapest, and Prague. Whether one day the company would be managed by the fifth generation of the family remained to be seen. However, an “unofficial contract” had been sealed between Kim-Eva Wempe and her 11-year-old son Scott, who with his fingerprint signature promised to join the family business after turning 18.

Evelyn Hauser

PRINCIPAL SUBSIDIARIES

American Wempe Corporation (United States); Wempe France S.A.; Gerhard D. Wempe Ges. mbH (Austria); Wempe Exquisite Timepieces & Jewellery (United Kingdom); Wempe Joyeros España S.A. (Spain).