Watch brands hoping to sideline the most successful retailers in the United States and Britain are provoking a backlash from highly respected jewellers on both sides of the Atlantic that have been instrumental in establishing them over many decades.
Charlie Pragnell, managing director of Pragnell, which has stores in London, Leicester and its home town of Stratford-Upon-Avon, says his decisions on which brands to back is influenced by their direct to consumer sales strategy.
During an eight year project to extend his flagship store in Stratford-Upon-Avon, Mr Pragnell looked at his portfolio of brands and took the decision not to continue with A. Lange & Söhne or Audemars Piguet. A. Lange & Söhne opened its own boutique in London earlier this year. Audemars Piguet has said in recent years that it wants all of its watches to be sold from AP boutiques moving forward. It will open its first AP House in London this year.
As an authorised dealer for both Rolex and Patek Philippe, Mr Pragnell — while diplomatically choosing not to specifically name the brands — points to the success of watchmakers that do not bypass their partners and sell direct.
“The decisions that brands make with their strategies inevitably affect our choices when it comes to working out which we want to work with. The brands that do not have a direct distribution strategy seem to be the most successful across the industry. So QED,” he tells WatchPro in an interview to be published in full in the July edition of the magazine.
“There is increasing recognition of which is the more effective path. It does depend on where you are in the world, the quality of the retailers and the nature of the brand. Many brands are realising that direct distribution is rarely the most effective,” he adds.
Michael Pollak, chief executive of Hyde Park Jewelers, which operates multibrand watch and jewellery stores in Denver, Phoenix and Newport Beach, California, along with franchised single brand boutiques in partnership with Rolex, IWC, Breitling and Hublot, says that brands are discovering that buildings their own direct to consumer retail is expensive, complicated, and rarely as successful as executives in Switzerland hope.
“We have already seen some brands that have had very aggressive bricks and mortar retail roll-out strategies begin to re-evaluate. They are either closing stores or slowing down their rate of growth. They have realised that it is not quite as easy as they thought. The investment is significant and it takes a while to grow sales. It does not happen overnight,” Mr Pollak says.
The red hot state of the luxury watch industry in the United States in the past two years has encouraged watchmakers to withdraw from some retail partners and set up in competition with those that remain. This gives the brands control of customer transactions, which means they retain higher margins on each watch sold, and accumulate more data from people browsing and buying in stores and online.
That strategy, Mr Pollak suggests, is high risk, and ignores the enormous cost and complexity of building and maintaining physical and digital stores. It also overlooks the benefits of working with local retailers that are experts in their own communities and have built customer relationships dating back generations.
“Most brands, if they had to depend solely on their own distribution, they would quickly fail. A couple of companies that have gone that way have found that it may work in the very robust market we are in, but will not survive a more challenging time,” Mr Pollak describes.
The current economic high tides are keeping all boats afloat, but the cycle will turn, Mr Pollak warns, exposing low margin business models.
“We are experiencing a market that is unique in the history of America. There will be a time when business slows down and that will be the test for brands that sell direct,” he suggests.