Tuesday, January 5, 2016

What Barry Hearn Can Teach the Watch Industry - Part 7

7.     Reality is not such a bad place to live in

This was Mr. Hearn's 6th point, but I've shaken the order up a bit.  What rang true for me was the importance of the need to live within your means.  All too often the temptation is to borrow money or go into debt (taking on partners and investors) to try and create an instant impact.  There is a greatly mistaken belief that the public has regarding some of the "newer" brands.  By all outward appearances they seem to have leap-frogged into the public's consciousness and supplanted older, more established brands overnight.  A further misconception is that these brands therefore must be incredibly valuable!  This is aided and abetted by the posturing of the CEO and/or that horological hero of the earlier part of this century - the watchmaker turned rock star.  

But let's talk a bit about the part you seldom see or hear about - the investors.  Yes, the guys and gals who pump more cash into the venture than the GDPs of some countries.  Their largesse makes it possible to make watches, buy ads, host extravagant PR junkets, purchase a Lamborghini, and in the process maybe even buy the watch maker's name!  All that money flashing around creates a perception (or deception) as to how well the brand is really doing.  And when the actuals don't actually match the advertised projections? That same person who's name was on the dial is quietly (and in some instances not so quietly), escorted out of the building.

This is a business that is primarily based upon perception.  Many of these perceptions turn out to be misleading, aided by marketing programs designed to convince you that day is night, black is white, and that a loss is actually a gain.  Unfortunately, this same sort of false perception is often bought lock, stock and "spring barrel" by the media, and sadly, the potential customer.  

When you see boutiques in New York, Miami and other major destinations, you assume that business must be THROUGH THE ROOF!  When you see that watch maker-turned multi-millionaire behind the wheel of a super-charged Italian chariot, you have to assume that business is fantastic!  But ask yourself, honestly, how many watches would have to be sold to go from zero to sixty in a 2 - 3 year period?  It is a false reality.  Sales may be good, but they are not THAT good.  Investment is important, but sticking to the fundamentals is even more so.  Massive investment can distract you from an actual loss.  And massive investment then means that the person who has their name on the dial is no longer necessary at all - they have become surplus to requirements.

Think I'm full of it?  Ask the growing number of watch company staff who were laid-off these past weeks.  Glossy marketing pieces with expensive cars, press junkets to exotic locations, a watch on a Super Bowl MVP - none of these things are bringing up the sales numbers to the incredible levels that we'd be asked to believe are real.

Then look at the brands who are quietly, steadily moving forward.  Meeting modest, and dare I say it - HONEST projections.  They are careful about what they spend.  They invest in what is important, rather than the ephemeral.  Stars, parties, athletes and sports cars are exciting.  But they don't pay the milk bill.  

Will the laid-off employees get an invitation to the next red-carpet event?  Let's hope so.

Reality - it really is not such a bad place to live in.

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