Downsizing - Change Is Inevitable

Now it is not news at this point, SWATCH Group has made the difficult decision to permanently shutter several of its retail stores, and 2,400 jobs are now forfeit. More detail on this can be found in this Bloomberg article -
Swatch Cuts 2,400 Jobs as Watchmaker Trims Store Network

SWATCH Group is many things, and more than anything else, at this moment in time they are the canary in the coal mine of the watch industry as a whole. To put it simply, if SWATCH is hurting, how is everyone else doing? Well, the simple answer is that some brands are (at least by most accounts) doing okay - i.e. Rolex and Patek. But other brands (and sorry SWATCH, some of your babies are in this group) are suffering now from a lack of vision. 

And what do I mean by that? 
Back at the turn of the century, everyone was convinced that Hayek the Elder was the smartest man in Watch Town and (for the most part) incapable of error. And there were some very sharp ideas, and let's be honest, some that could have been better handled. And as it applies to the actions now being taken to close company owned stores, it underscores what had been a long simmering concern with the push to not only "control the means of production" but also to try and control the means of consumption. The amount of grey market products sloshing around doesn't exactly help. The move to exclusive boutiques was maybe (maybe) not the best advised. Here in Boston-Metro we have two pretty glaring errors, the Omega boutique in that (insert sarcasm here) highly visited Boston neighborhood - Natick! For those of you unfamiliar, Natick is actually a different town (yes, designated a town, not a city), in a completely different county, more than 20 miles away from Boston (depending on which route you drive, because... no convenient form of public transit goes from there to Boston unless taking two buses and walking just under a mile is convenient). Ironically, there was, and still is a lot of good retail opportunity in downtown Boston. 

And then there was the SWATCH boutique at Boston's Logan airport. Now logic would tell you that airports are natural choices. But... it was in the International Terminal, and another little factoid about flights in and out of Logan for the uninitiated?  A lot of international flights DO NOT leave from the International Terminal. Strange but true!

Curious to relate? There is a thriving (albeit, pre-COVID) retail neighborhood on Newbury Street, and a boatload of space in the Prudential Center as well as the adjoining Copley Place shopping center. My best sense of these two decisions is that they were taken by people who really did not understand Boston, and really did not put in much effort to do so.

And let's now connect the dots - the majority of watch retail is (for the foreseeable future) going to be online. Now also curious to relate - I can buy an Omega watch online from Omega, and I can buy a SWATCH directly from them. Come to think of it, I can buy a:
Tissot
Hamilton
RADO
but not a Mido, not a Longines... and both of those brands are priced more affordably than Omega. Why not join the 21st century?

SWATCH Group, it is time to pivot. 

The Pen is Mightier

Courtesy of Timothy John Fine Arts

Timothy John is something of a legend among watch and pen enthusiasts, many of us discovering his artwork through his collaborations with watch and pen manufacturers.  The Australian artist has been active since 1979, and is known around the world for his fine art, notably that of his landscape works.

He has collaborated with Montegrappa, the Italian pen maker through some previous designs, but it is his latest effort that has caught the attention of many beyond the pen enthusiast, and as this is a very special and important piece, I am going to let Mr. John and Montegrappa tell you in their own words -

TULIP FOR TEAM FOX

Pens against Parkinson’s

By Timothy John. For Parkinson’s research. 

The global symbol of Parkinson’s awareness is the centrepiece of a design championed and created by fine artist, Timothy John. Recently diagnosed with the debilitating disease, Timothy inspired us to seek out the collaboration of an organisation that Bloomberg cited as “the fulcrum on which Parkinson’s research pivots.” Proceeds from every purchase will help fund the Michael J. Fox Foundation and its efforts to accelerate the search for a cure.

Courtesy of Monntegrappa

Per Timothy John -

"TULIP FOR TEAM FOX"~MONTEGRAPPA

After I received my Parkinson's Disease diagnosis, I discussed with MONTEGRAPPA C.E.O. Giuseppe Aquila the possibility of creating a Montegrappa pen for global release, with part proceeds of all sales donated to a Parkinson's Disease Research Charity / Foundation.

Giuseppe was very enthusiastic about the idea and very supportive of my involvement as designer, encouraging me even though he knew I had doubts that my capabilities were somewhat limited due to tremors and bouts of depression because of my condition.

Courtesy of Montegrappa and Timothy John

While we were confident of producing a beautiful pen, we were unsure of where the money raised from sales would be directed.

After much research and due diligence, the Michael.J.Fox Foundation (MJFF) & TEAMFOXwere selected as our preferred partners.

MJFF is described by Bloomberg as “the fulcrum on which Parkinson’s research pivots”.

It is with great pride that I can now reveal the fruits of our efforts with the Montegrappa "TULIP FOR TEAM FOX" a selection of strikingly beautiful pens inspired by TEAMFOX colours, with the distinctive sculptural Tulip shaped clip designed by me.

The Tulip is the international symbol for Parkinson's Disease.

Courtesy of Montegrappa

Proceeds from every pen purchase will help fund the Michael J. Fox Foundation and its efforts to accelerate the search for a cure.

Available in 3 variations, of fountain pen, rollerball and ballpoint, designed stand out and to exclaim loud and proud , support for medical research into Parkinson's Disease.

You can order the pen direct from Montegrappa here -

Order Tulip for Team Fox

Vulcain...Can it be Saved?

Courtesy of Tempus Fugit

As I am a known and confirmed fan of the Vulcain Cricket and am a proud owner of one from the "between time" when the Paajanen family kept the flame burning for Vulcain.  They did this by working with the folks at Revue Thommen who had the rights to the Vulcain name at the time -
http://www.tempusfugit.watch/2014/02/a-presidents-day-reminder-what-hodinkee.html

Several readers reached out to me following the release of this story from Bloomberg about Vulcain and the planned presentation of a Cricket to the President Elect -
https://www.bloomberg.com/news/articles/2016-12-08/trump-to-get-inaugural-timepiece-from-ailing-swiss-watchmaker

Sorry to disappoint, we will not be getting into political territory, no matter how tempting it might be ; )

What is of very real interest, however, is what seems to be a systematic failure at the most basic level of Vulcain.  Now to hear the current boss put it, the overall downturn in business is hard on the little guys and that is why they have had to chop a bunch of jobs.  Well, maybe yes but really more no.  Because for reasons we will slowly get into, Vulcain has had more chances to correct itself than most cats have lives.  So before you shed too many tears of the little guy getting beat up on by Goliath, let me inform you that Vulcain is owned by Centrum Prata.  

Centrum Prata owns Vulcain, and that other under performing brand Jaermann & Stübi. 
It is safe to say, without sounding mean, that both of these brands are not exactly high-fliers in terms of sales figures.  

But it gets even more interesting, Centrum Prata also owns one retail outlet called Watches of Switzerland that has two locations (Lucerne and Palma de Mallorca Spain).  These two retail outlets sell a fair number of watches.  But wait, there's still more - Les Ambassadeurs!  With retail locations in Geneva, Zurich, Lucerne, Lugano and St. Moritz.    Jaermann & Stübi. and Vulcain are, as you can imagine, available for purchase at Watches of Switzerland and Les Ambassadeurs.  So essentially, you have the watches, you have the retail locations sufficient to push the very small number of watches that you need to sell, and I would assume you have a motivated sales staff.  

And then let's have a look at who else might have a finger in this particular horological pie -
The Centum Prata Group is owned by the Al-Rayes family of Riyadh, Kingdom of Saudi Arabia.  Now like the President Elect, they have not provided us with a tax return, but I am willing to bet that they are sitting on enough money to survive.  But clearly someone within the organization is getting itchy - whether that is the Saudis, or Renato A. Vanotti who I am led to understand is (at least on paper) one of the principal owners of Vulcain. 

Now back to the main point - how to fix Vulcain?  So easy it might shock you!

1.  Price - Vulcain was NEVER a high end, luxury brand in the past.  And it was unrealistic to think that it would magically morph into one.  By today's standards, the Vulcain of then would be realistically at a price point of $2,500 today for a stainless steel alarm watch.  So step one - price realistically.

2.  Positioning - The President's watch was the Vulcain Cricket.  It WAS NOT a time only Vulcain, it was not anything other than that.  And the whole idea of a "First Ladies" watch is frankly grasping at straws.

3.  Knowledge of the actual tradition you are actually trying to harness to actually promote the watches you are actually trying to sell!  Dig a little deeper and maybe reach out to the Paajanen family.  They are possibly one of your best sources for a lot of the Vulcain presidential history that you have seemed to gloss over or simply ignore. 

4.  Take your current watches out of the grey market - Overstock.com, Joma Shop and other dubious outlets.  You are only hurting yourself, damaging the reputation of your brand and making it hard on the retail stores that you own when they have to try and justify why your watch costs more in a store owned by your holding company than if they go online and buy it from the grey market.

5.  Don't ask what flavor - Anyone who has kids or worked with them as a teacher can tell you this one golden rule of sales.  YOU NEVER ASK a child what flavor of ice cream they want.  You will be there all day, and in the end they will decide that they'd rather have a frozen yogurt and why are we at Baskin Robbins?  The question is:  Would you like ice cream?  Yes or no? 
Simply translated?  You have far too many SKUs.  Try this for a wild and crazy idea - 3 collections, limited options, get rid of the limited editions.  And again - PRICE REALISTICALLY.
Every brand owner and brand manager wants to think that they are Patek Philippe, but they are not.
You can put a cat in the oven, but that does not make it a biscuit.


Now, in order to save Vulcain, they will to some extent have to kill the part of it that is not working as referenced above.  And that would mean admitting that they had been making some pretty expensive mistakes for the past several years. 

But, if the decision makers at Vulcain are ready, willing and able to embrace the changes needed?  Well then they just might have something.

Or they can continue to do what they are doing.

The Canary in the Coal Mine - Maurice Lacroix

Let's start with the facts:

Maurice Lacroix "shared" the news with Bloomberg that they were looking for someone to buy them.  Or more specifically the holding company DKSH has made the decision to exit the watch business.  Essentially, one way or another, DKSH wants to see the back of Maurice Lacroix as well as Glycine.  But the emphasis is clearly on MLC.

Those are the basics.  But I also think it's safe to say that MLC did not get here overnight.  The signs were there for those looking for them.  And perhaps the saddest part about this is that the people who really lose in this deal (or the other deals like this that will be revealing themselves shortly), are the people who bought into the elaborate vision painted for them.  From the customer who paid full price, to the retail partner who bought in, to the regional brand manager who trusted in the company.  Certain others have (or will) un-couple from the mother ship unscathed.  Smiling.  Happy.  On to the next brand or brands.  Others will have this following them, not unlike a stain on their favorite tie that no amount of dry cleaning will remove.  And while that isn't fair, fairness is a pretty malleable notion.

That is the way of business.  Some guys get the golden handshake, some get the fuzzy end of the lollipop.

And if you think this is the ONLY situation like this, the only brand that is in peril, you need to put down the crack pipe.  Others are treading water, sucking wind, hoping for another million or two to be injected.  And this is where the rubber finally hit the road for Maurice Lacroix and DKSH.  Consider this - in less than four years they have gone from the birth of a "super luxury group" buying Maurice Lacroix, adding Glycine, a stake in Bovet, to essentially engendering a yard sale to extricate themselves from the watch business.

I could be wrong, but I suspect that maybe this is one of the events that is going to mark a shift in the way that the watch world operates.   It was coming regardless of Maurice Lacroix's "news" this AM.  It just so happens that Maurice Lacroix rolled on it's back and showed its tummy first.  More brands will follow suit.  It is inevitable.  You will only throw money at a problem for so many years if you have a healthy detachment from you ego.

The DKSH folks enthused that there was "interest"... whether that is fact or hope remains to be seen. Safe to assume that SWATCH and Richmont will pass. Kering is getting ready to lay off people at UN, and JEANRICHARD is on life support. The other Asian players currently owning Corum and Eterna have their hands full. Corum is showing signs of life. With a truly gifted person like Samir
Merdanovic I have no doubt that Eterna movements just might supplant ETA. Eterna watches are another matter, but let's stick to one crisis at a time ; )

If anyone might be able to fix this I would put my money on the Stas family.  But they might not be interested.  Beyond that there is always LVMH, but the lion in winter might give both of these a pass as they are working on fixing Tag Heuer which is not exactly a small task.

So as ever, we will watch, we will wait and we will see.

I would like to leave you with this -

In many vineyards, roses are planted amongst the vines.  Why?  The roses are a bit more "temperate" than the vines.  If there is something "alien" that might infect the vines, the roses will get it first and the vigneron will have time to address it before the entire vineyard follows suit.  In times even further removed, miners kept canaries in a cage to ensure that the air was still breathable.  If the canary died, it would be your signal to head to the surface.  

So while this is regrettable, while it was avoidable, let us hope that it is not something that everyone in the industry will feel compelled to ignore because their hubris and arrogance has whispered seductive words of invincibility in their ears.  

So to "crib" from one of my favorite movies - Patton:

Patton: [voiceover] For over a thousand years, Roman conquerors returning from the wars enjoyed the honor of a triumph - a tumultuous parade. In the procession came trumpeters and musicians and strange animals from the conquered territories, together with carts laden with treasure and captured armaments. The conqueror rode in a triumphal chariot, the dazed prisoners walking in chains before him. Sometimes his children, robed in white, stood with him in the chariot, or rode the trace horses. A slave stood behind the conqueror, holding a golden crown, and whispering in his ear a warning: that all glory is fleeting.


  

Is it SWISS enough?

This just in from Bloomberg -


http://www.bloomberg.com/news/2011-04-10/swiss-watchmakers-may-not-all-be-swiss-enough-to-scale-barriers.html

Interesting article from Bloomberg

Chinese Watches to Challenge Cheaper Swiss Brands, Parmigiani's Jacot Says - this is from Bloomberg.com

http://www.bloomberg.com/news/2011-01-20/chinese-watches-to-challenge-cheaper-swiss-brands-parmigiani-s-jacot-says.html