Sunday, July 30, 2017

Summer Repeat - The Shifting Tides

This originally ran back in May, but after reading (I'm sorry) an incredibly lame-brained treatise on the watch industry from someone who has never actually worked in it, I thought it might be worth airing out again.


The Shifting Tides

At a time when Swiss watch exports are down, retail sales are dwindling, and the grey market and it's newborn step-child the "soft grey" market can't absorb all of the overflow, it is curious to relate that this same time period has seen a true resurgence in the "micro-brand".  

The term micro-brand used to be a bit of a back-handed compliment paid somewhat begrudgingly by so-called "big boy" brand reps, managers and CEOs.  A brand that produces a very small number of collections, relies heavily on direct sales, and operate on a shoe string.  Even more interesting to relate that several of those highfalutin guys and gals from the big groups are now in search of new career opportunities as they and their brands could not see that the winds were shifting. 

Now it is important to note and understand that there were precursors to this current trend.  Several of these enterprises were birthed, lived a quick and bright existence, then quietly disappeared into the night.  If we look at the years in question, there was a period of three to five years in the early part of this century (feels weird saying that) where the propensity of watch discussion forums created built in marketplaces to create, promote and sell a brand new watch.  The forums were populated by LOTS of people looking for information on watches and a place to exchange their own knowledge and experience.  

SPOILER ALERT - contrary to some (admittedly humorous) assertions, there were plenty of places to read about watches prior to Hodinkee ; )

But then a shift happened that a lot of these folks did not see coming.  And that was the emergence of the blog and the online magazine.  Where before a small brand owner only had to contend with one forum owner or administrator, suddenly there were more outlets than you could shake a free watch at.  But this took on a whole new complexion when these outlets realized that with a high page view rate (regardless of whether the clicks were legitimate or originating from a click farm in the Asian sub-continent), they could then lure advertising money away from print outlets.  Brand marketing managers got excited, unreasonably so.  So excited that they didn't even flinch when some of these outlets and "influencers" suddenly stopped running their content without the benefit of what we will gently refer to as a "sweetener" in addition to the advertising money that they were already paying to them.  A few outlets were silly enough to create rate sheets ($XXX for a review, $XXXX for a new release, etc.).  A few of these rate sheets fell into the hands of competitors who were more than happy to publish the information, exposing the "disconvenient truth" that payola was alive and well in the luxury watch industry.  And at that point, the little brands could not really survive.  I mean, maybe Richemont and LVMH have $1,000 per Instagram image they can afford to spend...

So at this moment, you might say to yourself - game over!  But then print magazines, feeling the lack of love from their former favorite advertisers started courting small and emerging brands.  This meant content that didn't cost anything other than the time to send some images and spec sheets.  And then one other interesting thing happened - Facebook emerged as the replacement to the watch forum, and to some extent the blog.  Think about it, a watch forum or blog you have to go out and look for.  Facebook is right there on your computer, phone and tablet 24-7.  And it then enabled the owners of these smaller brands to seek out and connect with people who would communicate about their brand - you know, people like me ; )

So the stage was set, but the final piece was somewhat surprising.  It was the steady slide of the big dogs who have been on a 3 year losing streak.  Because this triggered a few more things:

1.  Customers started becoming disillusioned by spending $3,000 US on a new watch from an authorized retailer only to  see it for half or even less than half price on a grey market Internet store that was receiving its stock directly from the brand.  These are folks who probably bought one or two watches a year.  And as they began to peel away the layers of the onion, they realized that to some extent they now REALLY had options.  And they also felt that the brands really did not care about them at all.  The micro brands?  Communicative, friendly and welcoming.  Unrequited love sucks - especially at $3,000!

2.  Some of the micro brands are now being launched by industry insiders.  But what is interesting is that they have shed a lot of the old thinking and are combining their experience with the new ideas brought forth by the new guys.  So you get the warm fuzzies along with the watch making bonafides.

3.  The suppliers that had never given the micro brands a passing thought?  Suddenly these suppliers are falling over themselves to catch the eyes of these smaller, emerging players because the big dogs are cutting off their orders.  And the micro brands owners are now in a position to say no thank you to a bad deal.

4.  A few angels have emerged  - people with the connections who have shepherded several of these aspiring new comers, helping them avoid the potential pitfalls that have bedeviled so many others.  One in particular comes to mind, and what he and his network have done can't really be bought or taught.

5.  Many of us who cover this stuff?  We're ready for something new!

So here's to the micro brands!  

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