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CORDER’S COLUMN: Scarcity is the most valuable characteristic of luxury right now

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Swatch Group may have seen sales to Chinese customers, which makes up over half of its world-wide turnover, drop by over 80% during the worst days of the current pandemic.

Richemont, LVMH, Patek Philippe, Rolex and Audemars Piguet will not have been far behind when it comes to loss of business due to Coronavirus.

Only time will tell how much pain the biggest retail groups in the world, such as Bucherer, The Watches of Switzerland Group and The Hour Glass — with their eye-waveringly expensive showroom spaces in global retail hot spots — will endure.

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The largest independents, which in the UK include Boodles, Laings, Berry’s, Prestons and Pragnell, are next in the pecking order. These companies have the privilege of working with the most desirable watch brands, but they also have huge overheads on their properties. Plus some, such as Berry’s, have committed to retaining all of their full time staff.

Then come the thousands of smaller independents that do not stock the most powerful brands and have under-developed ecommerce. Overheads may be lower, but the path to survival through this crisis is terrifyingly narrow.

Virtually all major watch retailers have sophisticated ecommerce operations, but the anecdotal evidence coming to me over the past week is that activity has not picked up online as many would have hoped.

This leaves businesses with the decision of whether to persevere and hope ecommerce picks-up, or suspend the operation entirely until this is over. Beaverbrooks chose the latter option because the balance between the health and safety of its team outweighed any upside from sales.

One of the great problems with retailers relying entirely on ecommerce is that they cannot offer anything like the differentiation online in comparison to the full 360 degrees luxury experience that they can deliver in their sumptuous boutiques.

There is some loyalty to the retail brands in local markets, but the web is a place where consumers routinely shop around for the best prices they can find and — particularly in the current situation — they want to know about availability.

If somebody wants to find a hot Rolex professional watch, the only places they can find availability, price and the ‘add to basket’ button are secondary market platforms like Chrono24 or pre-owned specialists such as Watchfinder, Watchbox or Bob’s Watches. There are also pure grey market operators dealing entirely in discounted brand new watches, and here customers will find astonishing deals on brands ranging from Oris to Omega, Lange to Longines and Breitling to Blancpain.

Shawn of the exquisite service the world’s best authorised dealers give to their clients, these retailers are carrying all of the cost that comes with maintaining that standard and are hamstrung by brand rules that make their ecommerce offerings un-competitive.

In the online battle for business during the Coronavirus outbreak, authorised dealers are turning up with a knife to a gunfight.

Only brands can solve this problem because only brands can manage their supply so that it does not exceed demand and feed the grey market. The more unsold inventory that hits the grey market, the faster prices are likely to fall.

The shut down of manufacturing across Switzerland will take a little pressure out of the system. Brands are also pretty much at a standstill when it comes to distribution, so retailers are not being forced to commit to allocations that may not sell, and this is also helpful.

Patek Philippe has gone as far as to postpone its entire launch programme for 2020. This should allow it to focus more on best sellers that retailers are desperate to receive rather than niche or abundant pieces that sell more slowly and tie up cash.

Scarcity has always been one of the key hallmarks of luxury from Hermes handbags to Ferrari super cars. It has never been more important than right now and only the watch brands can manage it by making only what its retailers can sell, and not a unit more.

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Rob Corder

The author Rob Corder