Much has been said about the acceleration towards online sales during the Covid-19 quarter and since. The facts are beyond dispute, ecommerce sales rocketed for the biggest retailers, and watch brands that did not previously allow authorised dealers to deal digitally were suddenly converts to the cause.
Even Patek Philippe allowed ADs to sell a selection of its watches over the internet for a brief (largely unsuccessful) period.
Richemont brands including Panerai, Jaeger-LeCoultre, Vacheron Constantin and Piaget allowed some of its partners to hit the information superhighway, as did Roger Dubuis and Grand Seiko.
Rolex, Patek Philippe and Audemars Piguet are among a dwindling number of hold-outs among the biggest brands that neither sell directly to consumers through their own ecommerce sites nor allow their retail partners to do so, even though rocketing sales with ecomm giants like Watchbox, Chrono24 and Chronext show there is strong consumer appetite to shop from their living rooms.
Before everybody once again predicts the death of physical stores, I would like to inject a note of caution because of a very real, very live problem based on how the secondary/grey market provides perfect visibility on the demand of all watches compared to their supply.
Economics 101 states that if demand exceeds supply, prices will rise, and vice-versa.
This is played out online where the recommended retail price can be compared with the price for the same watch — brand new with box and papers — on the grey market. If the price is above RRP, then supply is not meeting demand.
Far more often, supply exceeds demand and the cheapest place to buy that watch will be on the secondary market.
Authorised dealers face this issue every day, with customers asking for discounts that they can find online. Since brands do not allow them to discount, all they can do is make the experience of shopping as enjoyable as possible and hope this is enough to secure a sale at the higher price.
Authorised dealers of the biggest brands are right to expand their ecommerce offer but, as they do, they will increasingly run into the same issue, but on steroids because customers are not in their sumptuous stores supping champagne, they are on their sofas and just a click away from finding bargain prices.
The solution is in the hands of the brands. They have to make watches people want to buy, generate demand for those watches (in conjunction with their retail partners) and price them competitively.
Instead, they hoard their most desirable watches for their own boutiques, force less popular pieces on their partners and price them in such a way that the only way to shift them is out of the back door on the grey market.
It’s a complete mess, and the Covid quarter’s rush to online has only made it worse.
The grey market is like an outlet mall. In the Polo store you can find a usually outrageously overpriced made in Asia sweater significantly discounted to a bargain, while still being an outrageously overpriced made in Asia sweater. This outrageously overpriced made in Asia sweater you will buy, despite the fact that it might be more cheaply made than the one you saw in the Polo boutique. For my part, I think watch companies do e-commerce very poorly, and won’t change as long as they don’t need to. I’m shocked that companies would ask for thousands for their products which they display only as digital renderings. And price rationality and quality/durability are opaque as always. If they find themselves in. Rush to the bottom then they deserve it.
Well written article and all perfectly accurate and well said.