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ARIEL’S ESSAYS: To rescue itself, watch retail needs to discover itself — Authorised dealers in 2020 and beyond

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Ariel Adams.

With all the disruption in the watch industry, a fair question to ask is what are the retailers up to? Over the last few months I’ve been polling a number of contacts who work in the wrist watch retail space to get an idea of where their minds are at, and what they are doing with their businesses. The short answer is, not much it seems. That will have to change sooner than later, and my advice to watch retailers is to invest in marketing that focuses on promoting themselves while at the same time putting effort into contacting new customers. The days of waiting in plush shops for fat wallets to stroll in are mostly over.

Watch retailers are the front line of the luxury watch industry’s revenue strategy. As much as the manufacturers would love to be selling timepieces directly to consumers, most global sales still apparently seem to occur via third-party authorized dealers. Regardless, there does not seem to be much love between watch retailers and watch brands these days as mistrust between these two otherwise symbiotic partners runs dangerously deep. Both sides of the debate have valuable arguments in their defense… and at the same time a collective history of engaging in unfair business practices on both the manufacturing and retail sides of this quirky industry.

The two most important concerns watch retailers have about watches brands are ironically at polar extremes. Watch retailers fear that watch brands will take away their ability to sell high-margin marketable goods as a function of revoking their dealer status. Brands are known to use petty reasons to “close stores,” often as an excuse to open a nearby store which appears to be “hungrier.” Given that brands do not always play fair in their decision-making rationale, and also seek to end contracts when they appear to no longer serve their interests, watch retailers are justifiably concerned about taking any action that might upset the assortment of watch brands they cover. This is one of the risks retailers assume when taking aboard some of the larger, more marketing-strengthened luxury timepiece brands out there.

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The second worry watch retailers have is that watch brands will not end their contracts but rather bypass them and sell direct to their customers. The asset a watch retailer holds is their customer relationships. Take those away or bypass them, and a watch brand deprives a retailer of earning on locals who they would have otherwise sold to if the brand did not swoop in. The classic example of this is the feeling a watch retailer gets when a watch brand they currently carry as an authorized dealer opens up a mono-brand boutique in the same town.

Mind you, watch retailers are not simply points of sale for watch brands. They are part of the risk allocation system that goes into producing runs of timepieces. Few brands begin a product manufacturing run until at least a substantial amount of those watches are pre-ordered by retailers (or these days also end-consumers). Such pre-orders require huge sums of cash, and that cash often comes in large part from retailer orders. So, when a retailer feels nervous about their relationship with a watch brand it is made doubly intense given that retailers also feel they are entitled to be treated like investors.

Direct to consumer retail

The cumulation of the above watch retailer concerns has made them nervous to act, nervous to speak, and nervous to experiment with their businesses. Nothing could be more deleterious to the efforts of a market segment trying to adapt itself to a shifting economic environment. The watch brands themselves have so far been unable prove that they can command demand for their watches directly to consumers on any ongoing to stable basis. In other words, it isn’t as though the timepiece world no longer needs third-party watch retailers, rather, than watch brands are for the most part trying (and failing) to do it themselves. Not for all watch brands, but for many of them, the great “direct-to-consumer” experiment of bypassing traditional retailers in favor or higher margins never panned out as expected. In my opinion, the greater income received from each watch sale (by the brand) never really made up for the expectant increase in marketing and customer service costs. The adage I have frequently called upon to explain the problem is that traditionally, there are those businesses that makes things and those business that sell things, and there are very infrequently successful companies that do both. The watch industry should be particularly mindful of this logic.

For the traditional agreement between watch retailers and watch brands to work, both sides need to pull their weight equally. Trust will only be regained when watch retailers and watch brands have more equal leverage against one another. Today, watch brands have far too much of the leverage as compared to most retailers. That is because for the most part the watch brands own the product availability and the product message. That is, they both produce the product and invest in marketing it. Watch retailers comparatively have weak brands that are only maintained by the watches they sell. There are very few watch retailers who would be able to sell an equal number of pieces no matter what brands they carried, simply because they are a strong brand which is trusted by consumers. Watch makers know that consumers more value the product they are seeking to purchase than the purchase experience nowadays. That gives the watch makers more leverage in the relationship with retailers.

Taking ownership

The answer for watch retailers is to take back ownership of some of the purchase experience. Watch retailers need to start asserting their own brands and creating experiences and marketing personalities independent of the products they carry. An effective test to measure this is whether or not a watch retailer can drive interest via an advertisement that does not have a picture of any actual watches on it. A brand strong enough to attract consumer attention with its name and associated personality alone, is what more wrist watch retailers should aspire to. In this regard they can learn from some of the brands they carry (but very few).

A big part of such a direction is an investment in local advertising and brand building. Most big cities around the world have some form of watch brand advertising – and it is almost universally all dreadful. The problem is that these billboard advertisements are supplied by the watch brands (i.e., they are generic and offer zero local messaging) and merely slap on the watch retailer’s logo in the corner. On numerous levels such advertising (while arguably “better than nothing”) is a woeful waste of marketing dollars.

Since said in-market coop (cost shared between advertiser and brand) advertising is already being purchased, why not make better use of it with ads that actually define and promote the retailer in their own market. Next steps would be to expand that advertising message while also refining it to create a coherent personality that local consumers understand how to engage with.

What tools will watch retailers need in order to develop themselves more as brands? Most of the watch retailers I know do not have the staffing or bandwidth to do all of this internally? As is the case in other industries a branding and marketing campaign usually requires hiring a third-party creative company (result will vary) while also learning some new skills. Larger multi-store watch retailers will be in the best position to invest in branding and marketing, and as best practices will emerge, smaller watch retailers will have the confidence to invest themselves in this area.

Future battleground is online

The real battleground will be fought not in the physical world, but online. A watch retailer serving a local market need only canvas their own geographic region, where they probably enjoy some form of territorial exclusivity for the products they carry. The rules are different on the internet. At this time most internet sales for watches do not happen on the websites of the traditional authorized dealers. This was mainly because historically watch brands didn’t allow them to do so. That’s all changing very quickly. The new status quo is a more empowered watch retailer who can freely sell their watches online (typically with some reasonable territorial restrictions). Many are finding that e-commerce sales volume is easier said than done. Only the most sophisticated marketers will be able to drive handsome volumes of traffic to their website and develop on-going relationships with consumers online.

Circa 2020 and even the largest third-party watch retailer companies are only starting to invest in online marketing. Having a fully-functioning website to sell watches is one thing, having people visit the store and purchase from it as an entirely different matter. For many watch retailers who have already launched legitimate e-commerce platforms, the actual work has just begun.

There is plenty of hope. Watch media of various types have long since relied upon the imprecise fit which is working with watch brands as advertisers. Watch media and watch retail may soon be better friends than ever before as retail will experience more direct value from advertising with watch media.

Even though watch brands appear to focus on consumers as their customers, most of their customers are still watch retailers. Only watch retailers are so hyper focused on getting a consumer’s attention and then selling to that consumers. Thus, advertising to a consumer group has always been an odd proposition for watch makers as their larger goal is brand-building as opposed to direct sale driving. Sales transactions have traditionally been handled on a retail, not brand level. The reality is that while watch brands have constituted the majority of watch industry advertising spending, a more logical distribution of advertising spend today should probably be roughly half from watch brands, and the other half from watch retailers (promoting themselves and not the brands they carry).

To protect the size of their margins, watch retailers will have to accordingly invest more money into marketing themselves so that they can drive more sales. Long-term this works in the best interest of the retailer because doing so properly affords them brand power which frees them from being beholden to the allure of the watch brands they carry. Brand-building is a wise investment even if it will take a while to notice returns.

In many ways the future of luxury watch sales for many companies will probably look much like its past. There will be a few noteworthy companies who can mostly sell directly to consumers, but most watch brands will again rely on third-party authorized dealers. To solve the power imbalances between watch retailers and watch brands, watch retailers need to reassert themselves by owning more of the demand which they create among their followers and clients. This will only come as a result of creating and communicating why the said retailer is a good place to shop for watches and why consumers should trust in their selection of products to begin with.

Allow me to bring up my common point about risk tolerance. What I am suggesting involves necessary risk because marketing outcomes are both not guaranteed or predictable. Money will be lost as often as money is gained, but by sitting still, watch retailers who do not invest in themselves will fade slowly, but surely.

About the author:

Los Angeles-based Ariel Adams is owner and editor-in-chief for aBlogtoWatch as well as a commentator and consultant to the watch industry.

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