Sunday, April 24, 2016

Never is Now, Even More!

I originally put this out there in early January, 2014.  A lot has changed since then.  Brand managers and CEOs have entered the Carousel and embraced the Time for Renewal as their smart watch "Life Clock" apps have gone red.  Sorry Mr. Biver, this idea's already "patent pending" ; )

But in speaking recently with some other brand owners and managers, they are starting to understand that it's not just a question of the Internet not going away, but buying watches via the Internet is not going away either. The biggest shift has been that some brand managers are FINALLY starting to realize that although a quick dump of watches to some of the grey market's usual suspects improves the balance sheet over the short-term, it continues to not improve their situations over the long term, continues to piss-off their retail partners and also frustrates their once loyal customers who are questioning their own intelligence in paying full or near full price for a watch that with a little sleuthing they could have bought (possibly without warranty) for at least 40% less.  

So more brands are now adopting the Direct Sales approach, and it is actually a GOOD THING for the brand, the retail partner, and the customer.  

So l thought I'd take a moment to re-heat this one -

Never is Now...

Remember that all the bluster, and blather about online shopping apparently being the death of the luxury watch industry?  Me personally, I REALLY do!  I remember going to BaselWorld and after the exchange of business cards the friendly small talk, the inevitable "voices of experience" would assure me that DOXA's model of  shopping directly online was NEVER going to work…

Well, gentle readers, it would seem that some of the most "exclusive" brands are now doing what they would NEVER do - they have opened online boutiques.  Chopard, Jaeger-LeCoultre represent perhaps two of the most intriguing entries into the online boutique world here in the US.

Now to be clear, I personally think that this is a very good thing.  Why?  Because ultimately, the brand sets the price, the brand expects the retail partner to respect and honor the price point, and frankly this will encourage (I say this gently) the brand to play by its own rules.

Now what this will do (on some level) is reinforce what the brand FEELS the price SHOULD be.  But it will also put pressure on a brand NOT to immediately flock to grey market vendors.  Moreover, it will also encourage brands NOT to do SO MUCH business with the three biggest trans-shippers doing business here in the US.

Will it end the habit of writing big orders to trans-shippers?  That won't happen overnight, it will take a bit of time.  It is all too tempting of course, the trans-shipper has a beautiful brick and mortar store.  In some instances they have TWO!  And they write BIG orders!  I mean, that makes your balance sheet look REALLY GOOD!  But this is a very short term solution that has a very negative knock-on impact.  Imagine that this trans-shipper has ordered 20 - 30 pieces of a specific model.  Your HQ is thrilled!  About a week before that watch even arrives at your retail partners, an online grey market store is listing it for about 30% off of retail.  The watch hasn't even "landed" yet and it is already being listed for BELOW (dramatically) the suggested retail.

So you have now essentially lowered the price of your watch because your trans-shipper (who looks like a beautiful retail store that does huge volume) has in many instances sold 50 - 75% of their shipment to grey market stores BEFORE it has even arrived at their own store.  As soon as the order has been checked in,  a big chunk of it is already being packed up and shipped to your favorite grey market vendor.  Now in fairness, they pay their bills, and the do order A LOT of product.

Now imagine what impact that has on your OTHER current retail partners?  They are probably on a 90 day cycle to pay you for their order.  They are also probably further down the pecking order in terms of shipping because their order is smaller.  And now they are working twice as hard to convince their customers who have patiently waited for the watch to buy from an authorized retail partner that they are not getting hosed on the price.  It is a vicious cycle.  And contrary to what the brands used to claim, this is not solely the fault of the Internet.  And when bewildered brand managers claim that the reality of trans-shipping is a new development?  Bullshit.  This has been going on for  many, many years.  The main difference is that now the trans-shipper has a great deal more "flexibility" in terms of moving the watches, and they can move MANY MORE of them thanks to the online availability of the watches through the grey market store's online buying options.  So in the past where these watches would change hands at a JCK event and wind up in a small "boutique" that "specializes" in obtaining the "unobtainable", now it is much more streamlined and accessible.

So let's wait and see, but if we're honest about the situation, until the brands step-up and NOT write such ridiculous orders to trans-shippers and out and out grey market vendors, the wounds they are suffering from online sales are self-inflicted.  Having their own online boutique could be a first positive step in the right direction.

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