Friday, January 20, 2017

Fifty Shades of Grey Market

As the alarm bells have been growing louder and louder, the industry has continued to play ostrich and park its collective head in the sand.

Joma Shop,, - these are the obvious ones.  But then there are the subtler shades of grey - Touch of Modern and Mass Drop.  Interesting to relate, several brand managers have expressed surprise to find parts of their current collections on the discount block.  And I think maybe it is time to tell some unpleasant truths.

Watch Brand A  -  "We had no idea this was happening!" 
Translation - Watch Brand A controls their distribution from soup to nuts.  The "group buy" offer gave the customer the option to select from everything in that particular product offering.  Meaning that those watches could only have been coming from ONE place.  The brand.

Now interesting to relate, there is a waiting list for several of Brand A's watches among the brand's retail partners in other countries.  So what gives?

My suspicion (and it is just that pals and gals) is that Brand A needed cash quickly.  Consider that in the US pretty much everything is done on Memo (i.e. consignment) or Guaranteed Sale (meaning if the watch doesn't sell, the brand buys it back or replaces it with a newer watch).  So from a cash flow perspective, a quick jolt of sales can solve a lot of cash flow problems.   And what makes the Mass Drops and the Touch of Moderns so seductive is that they are speaking Millennialese - "Hey, it's fun!  It's group empowered purchasing!"  So it doesn't feel dirty or cheap.  The fact that in some instances you can purchase "adult toys" during the same virtual "shopping excursion" only reinforces the darkening hole these brands are allowing themselves to drop down in to.

And I do not foresee the brands adjusting their tactics anytime soon.  Clearly they need cash, clearly they are willing to burn bridges with their retail partners, and clearly they are willing to cheapen their brand.  Now how much of that is necessity vs. short term anxiety remains to be seen. 

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