Wednesday, May 11, 2016

The Shit Just Got REAL-ER

At first I thought about using a smaller size image so that the graph would be less blurry, but if I am honest - as honest as those calling the shots in some of the watch brands should be - I think the blurriness underscores their unwillingness to accept and start adapting to the reality of their situation.

Courtesy of the FH
My honest feeling is, sorry to say, we have still not reached the bottom.

It's now REALLY TIME to face some uncomfortable, but very real facts of life:

1.  Most purchase decisions for retailers have already been made.  A few might be squeezed out of JCK or other regional trade shows, but consider what attendance at JCK really costs - that being dollars for the booth / suite, dollars for entertaining, dollars for per diem for your staff, rental car/taxi cabs, airfare, etc.  Now do the math and consider how many dollars of watch orders you will need to write - AND REALIZE in order to just break even?  And yes, that goes for London, Munich and every other regional show.  

2.  Brands are now flailing, dumping millions of dollars into the sports partnerships, random (albeit popular with the non-watch buying public) partnerships such as DJs and music festivals hoping that something miraculous is going to happen.  This does not show any sort of visionary level marketing brio.  It shows a panicked marketing/PR team who have to spend a set amount of money, and truthfully don't know whether to bet on red or black.  Do celebrity endorsements work any more at the level that they once did?  It is becoming more and more clear that they probably don't, and it  continues to be George Clooney in Up in the Air that rings true:

Ryan Bingham: You know why kids love athletes? 
Bob: Because they screw lingerie models. 
Ryan Bingham: No, that's why we love athletes. Kids love them because they follow their dreams.

And when we get down to the brass tacks of publicity and PR, that is really what is going on.  The brand CEO / PR Manager has a boner for soccer, for celebrities for fame by association.

Several brands are most likely going to be laying off additional employees this year, it is beginning to appear to be inevitable.  Sponsoring a yacht, a car rally, a golf pro is not going to increase your sales and it will not save potential job losses.  Your laid off employees will not feel any sort of pride that their former company's logo is on the sail of a yacht when they are down at the unemployment office. At this point, brands would be better served hanging on to some of that "glitter money" and invest in some umbrellas because there are months' of rainy days ahead.

3.  Retailers are tired of all the bullshit.  They are tired of the "force feeding" of additional product that they have not ordered piling up on top of the earlier orders that they did not want and still can not sell.  The brands have overpopulated their own ecosystems and they have nobody to blame but themselves.

One retail store owner has made it clear to even the mighty Richemont and LVMH - No more watches come into my store until I ASK FOR THEM, PERIOD.

So a shakeout is coming, but this one is looking as if it could be even nastier than other recent  downturns.  SWATCH, Richemont and LVMH will no doubt survive.  But this current situation is not unlike my personal brush with necrotizing fasciitis back in 1999.  The surgeon came into the room and traced a map around the infected area of my right leg.  And he said without much emotion that if the "border got crossed", they would be operating right away.  Nothing like the thought of losing a limb to set your priorities straight.  Let's see if the big three are ready to make the changes necessary to avoid amputation of some of their brands, subsidiaries and most importantly, staff.

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