Sunday, June 7, 2015

The Outlet

Anyone who has read even a few of the posts here is going to do a double-take.


James said THAT?

No, this is not a post where I will extol the "virtue" of Shinola ; )

But more and more I am beginning to think that the next logical step for the watch industry is to finally embrace the concept of the "Outlet Mall".

Does this run contrary to what I have been whinging and whining about for the past five years?


Am I more and more convinced that this is the only logical next step?


Now on the one hand, many of us tend to think of watches as more of a "durable" commodity.  The reality is that more and more, watch brands are tending to take a short view in terms of the models that they are offering.  They treat them like milk or eggs that will "go off" if they aren't sold in a prescribed time frame.

This is due to a multitude of reasons, but let's examine the key offender:

Over production -
Watch companies have budgets, and budgets are predicated on PROJECTIONS, not ACTUALS.  These budgets drive everything - sales goals, pricing of the actual watch, salaries - not the least of which the CEO's salary and bonus.  Because the CEO has proposed a budget that, in all honesty would only work during the "bluest" of moons, "creative" solutions are often required.  In order to meet the projected numbers, you will need a boat-load of product.  Oh, p.s. - you'll also need to SELL that boat-load of watches.  When it becomes clear that you won't sell all the units you have to save money in other areas - leading to lay-offs, dumping of watches on the grey market, etc.

This has been a problem that the fashion industry has been aware of for decades, and found a good solution for - the Outlet Mall.

For those of you not familiar, the Outlet Mall is an American phenomenon that is beginning to take hold in other parts of the world as well.  The concept is pretty simple:

Take all of the stuff from the previous season or two that you were not able to sell, place it in YOUR BRAND STORE in the outlet mall, price it at a more realistic price, and sell your stock.  Because YOU own the store, you control the price, distribution, etc.

It is also the place where you can market and sell the products that "didn't make the cut".  Yes, it happens, brands will come up with a line or collection that for whatever reason they decide NOT to move forward with even after they produce it.  Take it to the outlet and sell it, and you have turned a total write-off to a potential patch of black ink in the ledger.

Now if the watch industry would embrace the Outlet concept, it could do two very important things -

1.  Cut the grey market's allure, ending a lot of shady dealings, and reduce the inevitable feeling of betrayal experienced by the customer who bought watch X at full retail only to see it "blown out" by the brand and dumped on the grey market for pennies on the dollar.

2.  Convince brands of the need to better estimate production, and take better control of the distribution chain.

Now the temptation is to stare down our noses at the Outlet - but Giorgio Armani, Hugo Boss, Ralph Lauren and even Tag Heuer have outlets now.  Perhaps it is time to embrace this idea.

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