The Big Payback - ETA

So it seems the words binding and final probably mean something slightly different in French and German ; )

I refer you, gentle reader, to today's news from ARCINFO:
https://www.arcinfo.ch/articles/horlogerie/le-gardien-de-la-concurrence-libere-swatch-group-de-l-obligation-de-livrer-ses-concurrents-956627

For those of you non-French readers, Google Translate gave a pretty fair English version.

ETA has essentially been given carte blanche to sell whatever they want to whoever they want for whatever amount they want.  COMCO essentially reversed their decision and now (if I have understood the translation correctly) ETA is free to sell, or not sell to whoever they see fit.

For those of you unfamiliar as to what carte blanche means, I refer you to that other great commentator on the watch business, Carroll Shelby as played by Matt Damon in Ford vs. Ferrari:
They said I had a carte blanche this time. I looked it up, it’s French for horseshit.  

Yes, I am well aware that is not a literal translation ; ). 
But just as in the movie, what is carte blanche one moment can shift depending on the intestinal fortitude of the regulators. Whether or not it turns out to be horseshit remains to be seen, but the message it sends to the competition right now is that they better get ready for the Big Payback. Payback not from ETA, but from their customers. Because sooner or later it's about sex appeal. And when it comes to buying movements for your watch brand, be it small or be it mighty? The letters ETA on your spec sheet give you the confidence of Popeye after a can of spinach. While other brands are going through their rebuttal books trying to explain that the movement they are using is just as good, or nearly as good as ETA, they are still not ETA. 

If you have positioned yourself as an available, viable solution, while pretty much sticking it to your customers as you fell down in terms of quality, late deliveries, etc., essentially telling them if they didn't like it, they could lump it? SWATCH is likely to open the floodgates. Get ready to say goodbye to a lot of your customers, and your dignity.

If you recently hosed a strategic partner on a newly developed movement, get ready to experience the irony as the karmic whirlwind is about to rock your world in a way that is probably best not discussed in a family outlet.

If you're ETA?  Get ready to start drinking from a fire hose, because your customers have you on speed-dial.

But then again, we need to consider some other factors - we are now in a different world than we were just 6 months ago. COVID-19 has knocked the watch industry's collective dicks in the dirt. So what this is all really going to look like in a few years' time is hard to know. 

COMCO is also drinking from a firehose.  The Swiss government at large has a lot of balls in the air, seeing as we're in the middle of both a global health and global financial crisis. And when you think about it, ETA represents a shit-ton of potentially out of work people that could be, well, working. Making more than a few people redundant is probably not so attractive a proposition.

But as mentioned previously - what is carte blanche today could be horseshit a bit further down the dusty trail. ETA is still being viewed as "dominant", so we shall watch, and we shall wait and see.

What David Epstein Could Teach the Watch Industry

I first heard of David Epstein on Dave Chang's 
podcast - The Dave Chang Show.  And the fact that I first got dialed into Mr. Epstein's thoughts on the value of generalization over specialization.  I have dipped into his book - Range:  Why Generalists Triumph in a Specialized World.

Courtesy of Macmillan

And I feel it was particularly appropriate to learn about Mr. Epstein's work on a podcast that is, ostensibly, about about food and food culture.

My main takeaway from the podcast and the bits I've been able to digest directly is that not unlike Bob Dylan's message that the "the loser nowWill be later to win", the times are indeed A- Changin'.

Now for my part, I probably really got my start on the periphery, as a fan, participating on a limited basis in discussion forums.  I then stumbled into a job at Tourneau in San Francisco, and later with DOXA. A blog led to a media business which led to a consulting concern that touches on sales, marketing, media, production, and on and on.  So it's fair to say, this speaks to me.  

So gentle readers, allow me to share with you what the watch industry could learn from David Epstein -

“Overspecialization can lead to collective tragedy even when every individual separately takes the most reasonable course of action.”
David Epstein

I see this a lot in the watch business and saw it painfully so with two former darlings of the business who collapsed less than three years from their first products were delivered to the public. But it goes deeper than this and in fairness to the former Kronaby and Klokers, both of these brands were led by people with experience in consumer products. And in fact, you can see it in the brands that have been through some particularly rough waters.  GP, UN, Eterna are wonderful brands that in the past have suffered from "Silo Syndrome".  Essentially that they were staffed with a bunch of specialists who were discouraged from collaborating.  While it is tempting to tell people to "stick to their lane" when you feel the sole of a foot on your toes, it might, in fact, be worth a listen.


“We learn who we are in practice, not in theory.” 
David Epstein

What I'm about to say is going to sound mean, and it is not meant to.  It is easy to say that a leopard can't change its spots, and I think that is a gross misunderstanding that people, particularly in the watch business have.  Some of the sharpest operators in the industry also keep the lowest profile. As mentioned here before, it's inevitable to fail. The trick is not to make a habit of it.  And failure offers a wealth of lessons. Some of these lessons can be highly personal, where we need to examine how we handled various situations and how we might have done things differently. 

Put another way, words are great, mottos are great, and a good looking CV is just that.    Now, how then do we explain the serial recycling of executives, sales reps, PR firms from one brand to the next and back again?  It actually goes back to overspecialization.  What Moneyball referred to as the "look test".  In essence, only "baseball people" could understand the game and how to work within it.  And what Bill James, Billy Beane and others proved is that just wasn't so.  

And the watch business is unique in the short memories it instills in many of its gatekeepers.  People who entered the industry from others quickly forget that fact when they start running a brand.  Suddenly, only "watch people" (i.e. industry veterans) can possibly understand what it takes.  And as history will show, these folks were then cycled through and spit out of the formal industry, and those who managed to remain had to create their own opportunities.  Which either proves their own misguided theories, or shows that they were, perhaps, victims of over specialization.


“You have people walking around with all the knowledge of humanity on their phone, but they have no idea how to integrate it. We don’t train people in thinking or reasoning.”
David Epstein


I am actually pretty grateful for this, because otherwise I would not have 

clients ; )

This actually comes back to the "Silo Syndrome". Being an expert is great, but unless you can see the bigger picture, it is increasingly harder to adapt to it. As brands continue to contract in size and need to become more nimble, the ability to think outside of your cubicle becomes more and more essential.

“Almost none of the students in any major showed a consistent understanding of how to apply methods of evaluating truth they had learned in their own discipline to other areas.” 
David Epstein


See above.

“The challenge we all face is how to maintain the benefits of breadth, diverse experience, interdisciplinary thinking, and delayed concentration in a world that increasingly incentivizes, even demands, hyperspecialization” 
David Epstein


So let's talk about brand management. Typically, brand managers are promoted through the ranks of the sales department. It makes sense on a lot of levels, no sales means not brand. But even at a regional level, let's say North America, you need to have the flexibility to weigh in on all aspects of the operation. I can't tell you how many meetings I have been to where the brand manager will pass the buck by saying things like -

"Oh, that's marketing. You'll have to talk to...".

This is not to say that you should not have department heads, and people with responsibilities. But really that conversation should go more like this -

"Oh, let's (collaboratively) talk about this with the marketing team..."

What currently happens in a lot of brands is a fundamental disconnect from certain functions that they either feel uncomfortable with or are disinterested with. Say what you want about him, but Jean-Claude Biver was perhaps the first (and still one of the only) brand manager/brand leader/CEOs who made a point of involving himself beyond just sales. Towards the end of his tenure that trailed off, but there was a time where I suspect Hublot was an extension of his central nervous system.

“As each man amassed more information for his own view, each became more dogmatic, and the inadequacies in their models of the world more stark.” 
David Epstein


Too many examples to site.  


“In a wicked world, relying upon experience from a single domain is not only limiting, it can be disastrous.” 
David Epstein


It is important to have a centralized plan for a global brand.  But there needs to be an understanding of locality/reality.  Simple example - F1 is, by and large, not a thing in the US, no matter how much a brand would like it to be, it just isn't.  Neither is rugby.  If we're very honest, neither is sailing, neither is Chinese language cinema.  And yet, I keep getting press releases about partnerships like this.  

And an even starker example could be found at the SWATCH group and the ETA/COMCO fiasco. When you do not consider the possibility that things just might not go your way?  It can be fatal.

Rest assured, ETA is not going out of business, and I have no doubt that some agreement/accommodation will eventually be reached. But in the here and now, several of ETA's more well-heeled customers are having to lump it, and if the word around the campfires in the Jura are to be believed, some loyalists might be looking for a new camp to call home.

Mido on Monday - Commander Shade

Courtesy of Mido

This is one that I have gone back and forth on.  It is a pretty large departure for the "traditional" Commander.  In this iteration, the big change is a  black PVD stainless steel case and bracelet.  

I like the fact that for this version, Mido reverted back to a solid (i.e. non-display) case back.  

Add caption

And in all honest?  I personally feel that is a better choice.  The Commander was designed and "built" on the notion that it was solid, durable, water and dust and other "cooties" were not going to get into it.  It would (and did) run pretty much forever.  

While it might not be for everyone, I personally dig it.

Here are the pertinents for those of you so 
inclined -

CASE:

• Material:

   

  Stainless steel with black PVD coating
• Diameter:

   

  37.00 mm
• Between lugs:

   

  20.00 mm
• Water-resistance:

   

  5 bar (50 m / 165 ft)
• Crystal:

   

  Acrylic glass
• Case height:

   

  10.45 mm

MOVEMENT:

• Movement type:

   

  Automatic
• Automatic Mido Caliber 80 (base ETA C07.621)

  • Date

DIAL:

• Dial colour:

   

  Blue
• Hour Markers:

   

  Applied indexes

BRACELET:

• Milanese mesh in stainless steel with black PVD coating
  
  
  
  
  
  
  
  
  And once again - competitively priced at $810 US
  
  
  
  

Watch Assemblers - Some Inside Baseball

This is a topic that has been touched on here before, but it seemed worth airing out again in light of an article I just read on a popular retail-cum media outlet regarding the ongoing ETA saga. The article pointed to statements that Hayek the Elder made prior to the launch of ETA's one-way express trip to crazy town. His statement was, essentially, that any asshole could go to a white label company and create their own watch, and by golly, that was WRONG! He referenced a conversation he had with a fashion house who approached him to make a watch for them, and he pulled an Enzo Ferrari on him, essentially telling him to stick to making tractors (or, in this case, suits). Now history will note that the Zegna watch was realized with the assistance of Girard-Perregaux/Sowind, and it fared about as well as could be expected - not very. But I would also remind you, gentle reader, that this bluster came from the fellow who brought us the SWATCH phone, sunglasses, and...

Who could forget that unforgettable fragrance -


                                                                     Courtesy of Omega

Yes, you too can smell just like a Co-Axial escapement! So it would seem that a call is overdue from the kettle to the pot regarding its hue.

While it's easy to look down your nose at someone and tell them to "stick to their lane", it is a bit ironic coming from the man who had his finger in so many pies ; )

It bears mentioning that A LOT of the brands you see out there are using white label companies to assemble their watches. Some quite old and literally dripping in hyperbolic watchmaking lore. So, does this mean that those are no longer real brands?

Now for me looking back? Hayek the senior's hyperbolic characterization about the gall that some brands had in calling themselves, well, brands was a little disingenuous. When we talk about the world of modern (meaning in the last 20 years) watch production, marketing and sales, private label assemblers are responsible for a much larger percentage of the Swiss watch industry than you might think. And I will pick my childhood favorite (and red-headed stepchild of the SWATCH group) Mido as a case in point.

A little over four years ago I found myself in Switzerland on other business and I managed to arrange a visit to Mido HQ in Le Locle. Now curious to relate, the HQ occupied less than a full floor of an administration building that was (at least at that time) shared with Tissot. I had asked if it was possible to visit the factory to see Mido assembly in action, and I received a fairly evasive response that essentially made it clear that for whatever reason, this would not be possible. When I asked where the assembly took place, this again was not anything that anyone was anxious or willing to share with me. Ever wonder why the factory pictures you see for some of the SWATCH brands are all "old timey"? Ever wonder why you don't see other heroic journalists visiting brand production sites other than Omega, Blancpain, and Breguet? Ever see leading horological luminaries of the Fourth and Fifth Estate visiting and reporting on the production facilities of some of the smaller, more affordable, less sexy brands in the SWATCH stable?

Yeah, not so much.

A reasonable assumption would be that the SWATCH group relies on a large internal facility or facilities to assemble these more mass market watches for several of the group's brands. In essence, a private label - private label.  We would all agree that these are real brands, would we not? And for the record, if I am way off base and there is a shiny (or even not-so-shiny) Mido or Certina factory churning out watches in the Alpine hinterlands? Well, I will sit in the corner and wear a funny hat.

But taken with Hayek Senior's hardline stance on what made a brand legitimate?

Well...

Be Careful What You Wish For...

So the folks at COMCO finally released their (apparently initial) finding for ETA and their future in the watch movement supply business (at least for the first six months of 2020).

Shamelessly Borrowed from the World-Wide Info-web

Well, let's ask the Magic 8 Ball and see what the forecast is...

Shamelessly Borrowed from the World-Wide Info-web

So here is the (somewhat) straight skinny -

COMCO has said, essentially, that yes, ETA can sell movements...
And they can only sell those movements to brands that employ fewer than 250 people.
Or perhaps, more succinctly, if ETA's intention is to only sell to big brands, then ETA can suck it.

A very interesting thing happened after my last post about the COMCO/ETA fracas. Several folks gave me an ear-full. How could I be so unfeeling towards small, family owned, independent brands?

 

If I gave anyone that impression, then I apologize as that was clearly not the intended tone. I think that ETA and the big dogs have been in lock-step for years and it is hardly surprising. It's not personal, it's just business. But what many people don't freely discuss or admit is that movements, more often than not, are not made readily available for smaller brands. And no, I'm not saying that small brands never buy direct, and I am not saying that it is impossible. I am saying it is atypical to say the least. If it weren't, there wouldn't be such a booming business for brokers who have been known to get their movements from, you guessed it, bigger brands.

Small, family owned, independent brands that make and sell a thousand or so watches a year are likely not on ETA's Christmas card list. These folks typically work through assemblers or through brokers. And again - not a dig at anyone, just an attempt to keep things real.

In the real "big time" world of watch making, the majority of brand names that you see on your watch dials do not belong to the company that actually assembled your watch. And for those smaller brands that do assemble their own watches (and bravo and please keep it up!), if the numbers are smaller? Let's just say they don't typically have the opportunity to purchase "factory direct". Doesn't mean that these smaller brands don't want to buy directly from ETA, does not even mean that some of them can't. But the word around the campfire is that ETA's sales team has not been, historically at least, let's say... active in returning sales calls from brands they feel might not be worth the time. And in fairness? It is not much of a different story with Sellita, Soprod or others. Eterna, for a brief moment, tried to step into the breach and become a resource for small and micro brands. But again, if we're being real here, Eterna was soon overwhelmed by internal dysfunction. Needless to say, you don't hear so much about the micro brands using Eterna movements these days, and if the word around the streets of Grenchen is to be believed, that beautiful Eterna factory is now not unlike Wonka's Chocolate factory. Nobody goes in, and nobody comes out. And that's a shame. Eterna is a beautiful brand and some wonderful people have worked there through the years, many I am proud to call my friends.

So SWATCH Group got served up a big cup of irony flavored coffee - ETA has been told by the very organization that they went into a blood pact with to avoid having to deal with brands outside of the SWATCH group that, in fact, they can either sell to mom and pop, or they can suck it.

So we will see how this develops, as a final, Final, FINAL ruling is apparently coming out later this spring/summer.

ETA, COMCO and the Return of SWATCH Group's Chickens

Okay, the news that everyone is talking about is that of COMCO finally holding SWATCH Group's feet to the fire and ensuring that they keep to the terms of the deal that they (SWATCH Group) pushed for.  In essence that they would no longer be required to sell to brands outside of the group.  Now the reality is that COMCO is now saying not only do you not need to sell outside of the group, but you can't.

Of course this is big news, and the blogosphere and Forum land are both abuzz. Yes, COMCO is basically reintroducing their proverbial foot to the proverbial floor and stating that SWATCH will not be allowed to sell outside of the group.  Now what is interesting in all of this is just who is crying foul.  Richemont and the certain son of a certain German/Swiss jeweler/watchmaker are aghast.  In fairness, Richemont is probably keeping their own counsel on this one, but you get the idea.  Because despite all of the crowing and marketing dollars pumped into their respective gas machines, it would seem that certain brands boasting manufacturing capability are still dependent on SWATCH Group's ETA as a base. 

The Sky is Falling!

Well, actually, the sky fell a few years ago.  I have read with (I'm not going to lie, a wee bit of amusement) that some brands will be "crippled" by this new restriction.  And honestly?  I'm calling "Bullshit/Light" on this one.  Will brand X be able to make as many new watches as they want from brand new ETA movements? Well, no.  But it begs the bigger question -
How many watches does brand X currently have in inventory or did they pump into the grey market?  Put another way?  So many brands continue to run on the same belief that, somehow, watches are perishable like milk or eggs.  And they are not. It does require a certain commitment to their brands and the products that they put out. 

Moreover, to use the golf analogy? They could have "pulled up" and spent some time, money and effort to identify other alternatives for movements.
Remember when the shit hit the fan back in 08?  Remember how a few brands, you know, the ones that didn't insist on having completely new collections EVERY YEAR seemed to weather the storm?  

Also, when we talk about small brands, believe it or don't but they typically had to go to outside brokers to get movements in the first place.  You think ETA was going to sell directly to them?  Think again.  And with a smaller brand, there is greater flexibility and ability to pivot.  

I can make a very personal parallel example -
Watch brands will state that there is only enough marketing money to go around and therefore, sorry smaller outlet, no marketing (read ad/advertorial) money for you.  Does that mean that it's "end of days" for watch media?  Of course not. Because like any industry, there is always contraction and expansion.  And it is often the smaller, pluckier company that can surprise the experts.

Some brands saw this coming and made alternative arrangements.  Some ordered well in advance.  Some cut back on their production and re-forecast what they would actually build and sell and they are going to be okay in the immediate future.  I realize that is clearly NOT how every brand thinks.  

But again, it begs the bigger question for the bigger brands-
When you continually OVER ESTIMATE how many watches you are actually going to sell through regular channels and continually dump through the grey market, you not only dilute your brand in the NOW, you further dilute the demand in the future.  Moreover, when you claim to have manufacturing capabilities, but in truth you are dependent upon ETA for the basic platform what is that really saying?  It's great to have flashy, sexy complications.  But none of that matters if you don't have the base to mount them on.

Now I suppose that is an easy comment to make, particularly if you are brand X and you felt that you had a solid agreement with SWATCH Group to get your movements.  

But the irony in all of this is possibility that SWATCH is now is sitting on more movements than they know what to do with for the foreseeable future. Remember, they assumed that what COMCO would say is, go ahead and sell to whoever YOU want.  And they probably accumulated sufficient movements to re-assert their control of the market once 2020 arrived.

Lastly, think about this - When certain grey and light grey outlets are listing brand-new watches on their sites MONTHS before they arrive at authorized retailers, it tells you something.  And what it tells you is that the brands have not really learned any discipline and are still over-producing.  It also tells you that there is a willing avoidance at every level of a brand to really understand and accept what the RETAIL reality is.   By continually over producing and selling to any outlet necessary in order to ensure that it appears that they are meeting sales goals, they continue to cheapen and degrade their brands.  

It has been a non-stop merry-go-round for the past 10 years, and it would appear that at pretty much every level, the buffet has been closed and it is time to pay the check.  Let's see who's got room on their credit card.

Or put it even more simply than that - remember when you were in school and mom or dad would constantly ride you to get your homework done before Sunday at 11:00 PM?