This originally came out nearly a year ago. And I probably would have let it sit in the closet like an ugly Christmas sweater had I not gotten a promotional email from a "light grey" market site that offered me the rare and wonderful opportunity to purchase "BRAND X's" rare and wonderful price, at the rare and wonderful discount of 65% off! It also bears mentioning that this "group source e-tailer" also has a section titled:
Sex & Lingerie!
Good to know that after I save a boatload of cash on a grey market watch, I can then purchase some "adult toys", lube, and God knows what else that has fallen off the back of the "cyber truck".
Despite assurances to the contrary, I am still not convinced that the shot callers have really gotten their heads around what is going on right now, and so I am going to air this one out again -
The Myth of Black Friday
"What are you doing working, why aren't you out shopping? Isn't it what you call Black Friday?"
So before going any further I want to be clear that in some retail segments, the carrot of "low, low prices" is a strong motivator. And as the chaos done to a Nike store will attest, too much food and alcohol, combined a four day weekend and perhaps too much time forcibly spent with family members otherwise only seen at weddings and funerals can drive even the sanest, most rational person to lose their shit.
But what has started to creep into the luxury industry is a growing sense of uncertainty, and this has begun to manifest itself into more random short-term solutions that may (or may not) have the desired impact. And when we are talking about watches, at least those of a certain price point, we are not talking about the types of things that typically wind up under the average American Christmas tree. A discounted cashmere sweater? Sure! A G-Shock? Absolutely! And I have no doubt that there may well be people out there who awake December 25th to find that Santa has left a timekeeper with a retail value of over $5,000 in their stocking. But I think it's safe to say that in virtually every economy, that is an atypical household.
For those of you unfamiliar with the concept of Black Friday, allow me to inform you that this is a phenomenon that began in the US. The idea being that the majority of Americans had a day off from work on the day after Thanksgiving (Thursday) and therefore it might be the perfect way to kick off the holiday shopping season. So that's the Friday part, but the Black aspect was in reference to the ledger books. As anyone who has suffered through accounting will share, black is good, red is bad. Black means that you are not losing money. And the operating theory being that good year or bad, the amount of sales going on would push you firmly into the black for the remainder of the year and that everything after that would be profit. And from this, we then moved to Cyber Monday. And in fact, hell, let's just make it Black December because truth be told, nobody can tell the difference any more.
Now in the high end watch business (and let's lower the bar a little and say that is anything over $1,000), there might have been the 10% or 15% deal. Or retailers would park all of the "pre-owned" or discontinued models in a "Holiday Special" show case. But it was understood that this display case was the watch equivalent of the Island of Misfit Toys. If you wanted something desirable you were maybe going to get a small discount, but nothing of the magnitude of what we are seeing this year. And this discounting mania has moved beyond just the retailer to brands offering 25% off on their own websites. They are essentially working to move product under the guise of a holiday promotion. This, in turn, succeeds at then driving the grey market, Mass Drop and Touch of Modern prices to dip even lower than they already are. I received nearly hourly email promotions on the most recent price discount on Touch of Modern and Mass Drop over the holiday weekend.
Now whether or not these deep-discount sales promotions will succeed in saving the brand's bacon remains to be seen. But what this really all comes back to is what I've been saying for YEARS - over production. If your product is scarce, it will be desired. You can then demand a premium price. When your product is everywhere, it becomes less exclusive. Moreover, it manages to lower the desirability of other brands at the same level or price point. The only exceptions that readily come to mind are Patek Philippe and Rolex.
Put another way, just as a high tide will raise all the boats in the harbor, a low tide will bring them all down. Supply and Demand is a pretty simple concept, and when you continue to ignore it for years? Well let's just say it will take years to undo the damage. And maybe those brand CEOs who refused to forgo the high life for the sake of their brands and their employees should be getting coal in their stockings, and maybe a visit from Krampus ; )
|Happy Holidays from Krampus|