Sunday, September 13, 2015

Free Fall

And the bottom is still nowhere in sight.

Early reports from some folks is that the Hong Kong fair was not as well attended a many brands would have hoped, not enough orders were written, and as we are about to enter the final quarter of what has been overall a pretty shitty year.  Now unlike the denizens of a little community known as "Whoville", there are hundreds if not thousands of people that will most likely NOT have a very happy Christmas this year because the Grinch has his heels so deeply dug in and is so unwilling to consider any other possible outcome, well let's just say they better hang on to the "roast beast" and "who-hash".

SWATCH, Patek, Rolex and possibly a handful of others are deep enough that this will not impact them in the same way.  But for about 90% of the rest of the industry, a few rather large dominoes are teetering and should they fall, nearly every brand will see downsizing of, well, industrial levels.  And yes,  this is down to a failure to see what was coming down the pike.  Or more honestly, it is the result of an unwillingness to look at the reality of the situation and make the necessary adjustments.  When you continue to flood the grey market with product, when you set up seemingly limitless accounts on MEMO, when you change your regional management more frequently than the outfits of fashion week runway models...

Quartz nearly killed the watch business.  There is no denying this.  But now it would seem that greed, hubris and what could be considered a pathological refusal to consider other realities are the impetus of the current downturn and if the ship isn't "righted" quickly, it will have taken on too much water to make it to the next port.

This is not all down to China, the shift in currencies, famine or plague.

The watch business is challenging but not "unknowable".  It is based on a pretty basic premise -

Make a product at X, sell it at Y and if you LIVE WITHIN THE MARGINS of Z.  If your watches aren't selling, or selling poorly you stop flying first class.  You might consider informing your sales force that maybe, just maybe, $75 - $100 per night for dinner is perhaps a little more than they should be spending on the company's card?  If you have partnerships and ambassadors, try to ensure that there is a clear and understandable connection to the brand, rather than just random famous people.  And if you have them, promote them, push them, don't just sit back and wait for it to happen.  And maybe reconsider the incredibly expensive PR agency that in reality saves you very little time and often time is more headache than it is worth.

All of this is difficult, because it calls into question the way that just about everything has been done on the North American side of the business for the past 20 years.   It also involves change, and change hurts and can be scary.  But ultimately change is going to happen with or without the brands embracing it.  My suggestion?

Embrace it!

The news is simply not good.  Retail stores (for the most part) will not be taking in large orders until they sell-through, and many of them show no signs of sell-through.  The brands that make the adjustments - and more specifically, those individuals within the industry who embrace the challenge?  Once the dust settles, they will be here to stay.

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