The Deadweight Loss of Christmas

I promise you that I am neither Scrooge or Krampus -

Shamelessly borrowed from the world-wide infoweb

But yet another year is rapidly coming to a close, and the emphatic requests from watch pr folks urging me to include their latest offerings in my "Gift Guide".  This told me first and foremost that they really had no idea about me, and likely had never read Tempus Fugit.  Well, fair enough.  

But then it got me thinking on the angst and economic necessity of the holiday gift giving season for the watch industry.  It goes without saying that it truly does largely determine how well (and not well) a brand is going to do that year.  And I can understand how for a lower end brand that could and maybe even should be the case.  A SWATCH, a Fossil, even a G-Shock is not an unreasonable amount to spend on a Holiday gift to stick under the tree or give on the eighth night, or whatever else your winter holiday gift giving might entail.  But where I feel we have lost the plot as watch fans is that the big events that are meant to really be meaningful (Graduations, Marriages, Anniversaries, REALLY BIG PROMOTIONS at work) all seem to drift by the wayside with the sensory overload that the holidays can bring.  

I heard a very interesting bit on NPR today and found this via Google -

The economics of wasteful spending: The deadweight loss of Christmas

And it really made me think about trying to understand how much do we really value that one or two "special" watches, and do they really even exist for some of us any more?  Now I realize that is a bit of a holiday downer, and I don't mean to piss in anyone's eggnog, but if you are reading this and your feeling down because you haven't (and likely will not) receive that much wanted Patek Philippe, Rolex or other beyond extravagantly priced holiday present, don't feel bad about it.  

I realize that this is just my own personal opinion, and may well be part of the reason why I don't work full-time for a watch brand any longer, but what I love (particularly) about the two watches my wife Wendy has given me for Christmas presents is that they really meant something on that particular holiday (and still do).  So any Christmas, you will see me wearing my Junghans Max Bill (circa 2000, gold plate and manual winding) which she gave me the Christmas after I had lost my high-flying career and been brought back down to earth managing a Starbucks in San Francisco.  It was in some ways the very worst and the very best thing that ever happened to me professionally.  And in the process I rediscovered myself and what made me happy.  And on Christmas, you are just as likely to see me channeling my "inner-Hayek" by wearing a watch on my right wrist as well - a burgundy SWATCH which was one of the first larger "Gent's" size models that SWATCH came out with.  And as I recall, this was the Christmas after my father died, and for the first time I didn't have a parent to call or get a call from on Christmas.  It was something that reminded me that while life has a time limit on it, it is something that should be enjoyed.

Now I realize, again, that this is all a matter of personal opinion, and no judgements from me if you disagree and feel that a holiday isn't a holiday without a new $3,000 to $5,000 watch on your wrist.  All that I would say is that it should not be the price tag on the watch that moves you or the person who buys it for you.  It should be the thought that goes into it.  Now if that person has the disposable income to make such a grand gesture?  Make sure you appreciate and treasure it, and don't go looking to re-sell it to fund your next "dream watch, and the one after that, and the one after that ; )

Happy Holidays!  And enjoy your watches!

The Island of Misfit Toys

Shamelessly Borrowed from the worldwide info-web

Interesting to relate, I can now buy a brand new, but apparently discontinued watch model from a third party vendor for nearly half off the suggested retail price, AND I can even get the assurance of the manufacturer's warranty!  I have to wonder just how warm and fuzzy that makes the regular retail partners feel.  They have, after all, purchased stock from brand X in good faith, and then have the pleasure of their customers calling to ask about purchasing a particular item that they found online through a site that is not only offering the watch at a deep, deep discount, but in some instances indicating that the watch is going to be covered by the brand's two year warranty.  I can also imagine that a few uncomfortable conversations take place, with first the retail partner realizing that their formerly loyal customer will be shopping elsewhere, and then the retail partner picking up the phone to "share their feelings" with the brand manager or sales rep. 

And forget about "hugging it out" at the SIHH or BaselWorld, more and more retail partners are giving the big shows a pass as they are more concerned with keeping their stores afloat.  And this becomes more and more tenuous when the independent retailers are struggling to compete with sites that are not necessarily authorized retail partners of a brand, but are offering all of the same benefits that a customer usually only enjoys from shopping at an authorized retail partner.  If you were the customer, would you pay twice as much to have the same assurance?  

Remember all of the good news about all of those watches being exported over the past several months?  Remember how several people felt ABSOLUTELY POSITIVE that this meant the crisis was over?  Well, like an island of misfit toys, all of those watches have to go somewhere.  Because remember, the export of a watch does not necessarily mean the export of the latest model.  What we will be seeing in the coming months is more and more "dead stock" flushing through the system, and the brands need to liquidate it as quickly as possible between now and this time next year.

Now in the good old days of the grey market, there was more of a wild-west feeling.  Grey market outlets could not offer a manufacturer's warranty because, clearly, they were not an authorized retail partner.  And you almost never saw prices slashed to the levels that they are now.  Simply put, even grey market outlets have to make money ; )

So clearly a few things are at work here -

1.  Despite what some would have you believe about the health of the industry, the truth remains that there is still way too much product out there, and that dynamic hasn't really changed.

2.  It seems very likely that the brands are partnering fairly directly with these outlets to not only provide them with significant amounts of product, but to offer it at (I would assume) 20% below what a regular retailer would purchase it for (usually between 50 - 60% of the suggested retail price).  Which is how this third-party outlet can afford to sell the watch at such a drastically low price and still make money.

3.  At least a few of these brands are also providing full warranty coverage even though these outlets are not recognized as authorized retail outlets.  Which then begs the question - why should I buy from an authorized retail partner?  The warranty coverage has always been one of the strongest arguments put forward by a brand to buy authorized.  To offer this to a third-party discount site is a curious way to try and build a customer base.


Whether it be brick & mortar or online, a watch group could have its own outlet store.  This would allow a brand or group of brands to control the way their watches are sold, and to sell them in a way that is understandable to the customer.  It would also enable the brand to develop a deep amount of data on their customers, better understand their price sensitivities (as clearly the majority of them do not), and create a true relationship with them.  If Giorgio Armani can have outlet stores in places like Camarillo (California), then surely a watch group other than Fossil and Movado can do the same.

If the brand is going to work with a third-party outlet directly, then the brand should be open and forthcoming about it.  Declare that the outlet is an authorized retailer for their discontinued collections.  That would be fair, and that would be honest.  And guess what?  It might even drive more traffic to those sites, and increase the brand's overall sales as consumers might feel a bit more secure about the transaction. 

Or, the brands can continue to dance between the raindrops and state that they had NO IDEA how a discount site got hold of their watches.  Considering that many of the brands selling on these sites have vertical marketing set ups all in house (every element is owned and controlled by the same company), this is highly unlikely. 

But it should make for some interesting store visits for the reps and brand managers in the new year ; )

The Executive Moonstruck Worldtimer

From Ulysse Nardin -

Courtesy of Ulysse Nardin

Limited to 100 pieces, the case measures 46 mm in diameter and is constructed of either platinum or rose gold.  The movement is the UN-106, enabling these function:

Astronomical timepiece
Indication of position of Sun and Moon in relation to Earth
Indication of Moon phases
Indication of tides
Worldtimer function for 24 cities
Hours, minutes, date
Instant time zone adjuster with patented quick setting device

Something Cool

form Mondaine

Courtesy of Mondaine

These are the two new Mondaine Helvetica No1 Regular 2nd Time Zone watches.  Available with a silver/white dial (above), and a black dial (below).

Courtesy of Mondaine

This model measures 40 mm in diameter, and offers two time zones.

The movement is Ronda's quartz 6203.B BIG DUAL.

Courtesy of Mondaine

The US retail is $425.  The perfect watch to help you keep time on your summer travels.



 

Evolution and Survival of the Fittest

So a guy I tend to listen to shared with me a slice of reality that I suspect a lot of independent reps and reps looking for new gigs probably are not sharing with their "employers to be".  And that is that per the Jewelers Board of Trade, 1,669 business in the jewelry segment closed in 2016.  Oh, and that is just here in the States.

Let's take a moment and let that sink in.

If we divide that number by 12 months, that means that 139 per month.

If we divide by 52 weeks?  Slightly more than 32 per week.

If we divide by 365 days?  4.57 per day.

If it hasn't become clear yet, it should be starting to.  The old way of buying and selling jewelry and watches has changed.  Moreover, the number of potential outlets in the traditional channels (watch and jewelry stores) is continuing to contract as stores close up and disappear like available seats in a game of musical chairs.

For brands thinking about coming in and fighting it out in this gladiator's ring, keep in mind that you will be going toe to toe with some very strong, very wealthy companies who have far more money to burn than you to get their product into the dwindling number of watch and jewelry stores.  And even if you do get in, it does not guarantee that you will sell through.

Maybe, just maybe it is time to seriously consider a different approach?

You know where to reach me -

Better, but not Good Enough

The results are in, and if we look at the graph we can see is that the needle moved just a tiny little bit north.  And that is good.  But when looked at holistically, it is clear that a massive turn around is not in foreseeable future.   The US posted an increase of 4.5%.  Now again, that is a good bit of news.

Courtesy of the FH

But, as always, we have to look at the entire picture.  And while the US clawed back some sales, Hong Kong dropped even further into the mire posting a loss of - 39.6%.

Now the other curious number is the incredibly fast paced growth of the UK market.  It is now up  +32.4%.  I'm a reasonable guy, but this type of growth is a little curious.  While it is entirely possible that such a large number of watches are heading to the UK from Switzerland, it does beg the question as to whether or not all of those watches are going out the front door of your friendly neighborhood retailer, or has the UK begun to emerge as the next grey market / trans shipping?  

Sales are good, they are important.  But in the mad dash to move units one way or another, a lot got pushed aside or brushed under the carpet.  And that is what led us to where we are now - an oversaturated marketplace with too many watches washing around and not enough people ready to buy them at the full price.

We shall wait, and we shall see.