Weird Wild Stuff...

Okay, in fairness, I don't claim to be the smartest guy in the room. And no, it's not like LVMH, Swatch Group, or Richemont have me shortlisted for a leadership role. But with that said I nearly spit out my coffee onto the screen of my not-so-new laptop. I don't claim to have intimate knowledge of the worth of things in Watch Town, but I do know a little bit. And although my high school geometry teacher was convinced that academically I represented the scholastic equivalent of the sunk cost trap, I can add and subtract.

So that is why it was more than a bit of a head scratcher to read the crowing coming from parts Swiss about the eminent triumphant, phoenix- from-the-flames turnaround, love-story triumph of Ebel version 3.0

As we say in Salem, MA - "Witch, please..."

As we're close to Thanksgiving (at least north of the lower 48), let's talk turkey! Ebel has gone through more than a few iterations:

• 1994 the original found family sold to Investcorp.
• 1999 LVMH buys Ebel
• 2003 Movado buys Ebel from LVMH for, I believe, $62.2 million yankee greenbacks - this also included Le Courbusier's  La Villa Turque, a house I have walked past more times than I have fingers and toes.
• 2026 Movado goes on the block again and this time is picked up by a consortium which includes Chanel and F.P. Journe (among others) who will control 95%, with the price being $66.5 million, meaning that the part retained by Movado is valued at $3.325 million, meaning a total value of just south of $70 million ($69 and some change) if my math is right. The big question is - who gets to live in the house ; )

But all of this begs a bigger question. And I will call upon that other great commentator on the watch business, The Queen of Soul, Miss Aretha Franklin: "Who's Zoomin' Who?"

If we compare the two most recent sales prices, the value of the brand has only risen $7.3 million or a little over 10%. But when we adjust for inflation, that original sale was worth a little south of $113,000 today (thank you CPI Inflation Calculator). And yet it is being sold for dramatically less when you factor in that inflation.

So while the folks at Movado are, in principal, taking a hit on this, when you take into account exactly how much they have going on globally, and you factor in how much Ebel has struggled - let's be honest about this, this is actually a very good deal for Movado group. They offload what can only be described as under performing, and get to hang onto 5% for auld lang syne.

And what of the three musketeers who are now riding in to save Ebel? Chanel has the dollars, F.P. Journe certainly has the horological bona fides, and Pierre Jacques has certainly spent time at the helm with De Bethune. But Ebel is a different animal. The scale and scope are completely different, and it is a brand that sits at a very awkward intersection in terms of pricing & product.

As with anything that happens in Watch Town, there is what the protagonists will tell us, and a lot that is unknown. So as is always the case, we will wait and we will see.

Re-heated Leftovers - What David Epstein Could Teach the Watch Industry

This first ran around this time last year. And given the comings and goings in Watch Town it seems pretty valid today.  So pour yourself a coffee and get comfy -

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 they feel the sole of a foot on their toes, it might, in fact, be worth a listen to those colleagues with a different perspective.


“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 short-term history shows, some of these serial staffers are cycled through and spit out of the formal (read big brand) industry, and those who managed to remain in Watch Town had to create their own opportunities. Because what they forgot was that they were the exception, and now that they have had their wings clipped, they are officially no longer "true" citizens of Watch Town. This either proves their own misguided theories (and short-term personal memories), 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.

April Showers Bring...

Shamelessly Borrowed from the Worldwide Info-Web

The April results (as such) are in -

Courtesy of the FH

Globally?  It was better than an 80% drop.  But what I find curious is the response from some of my better heeled colleagues in the 4th and 5th Estate now gasping, flabbergasted that now, suddenly, the shit is real!  I guess when you aren't jetting off here, there and everywhere and enjoying luxury junkets, you have a few moments to actually focus on something that isn't shiny.  

Now what my erstwhile BaselWorld "chums" are failing to take into account is that, in fact, the trend was already, well, trending downward before COVID-19.  Nothing like negative 80%, but not exactly rosy either.

Now let's unpack this a little bit further.  Once again for the folks in the cheap seats -
EXPORTS DO NOT EQUAL SALES. And believe it or don't, for once that is actually GOOD NEWS for the Swiss brands. That means that there will be (hopefully) less product bobbing around in the Grey Market with the rest of the flotsam.

Will some retailers be "done" for good?  Well, those who had not already embraced an e-commerce strategy might not be able to come back, at least not in the same manner that they had been.

Some smaller brands will possibly not be able to recover, and in fairness?  They might have been heading that way already.  The process just got sped up.

And for those of us in the press? Well, those of us not dependent upon the largesse of the brands will continue to roll so long as we remain interested. But here is the interesting part - advertising budgets had already been slashed pre COVID-19, and brands will likely hold onto as much cash (or credit) as they can for the rest of the year.  

One other curious thing I've been reading from some of the other outlets -
China is (already) showing signs of coming back! (i.e. people are out shopping). Which is swell, but not really a true metric of anything without 90 days of data. But more to the point?  Didn't we learn anything from the last 5 and half months about depending too much on any one market?  

Tempus Fugit

Created for Macy's!

Okay, grab a cup of coffee, we're going to hop in the Way-Back Machine.

Back at the turn of the century, Wendy and I moved back to the US after several years abroad - just shy of a decade in fact, and in fairness it was almost like moving to a foreign country.  I spoke the language and I understood the currency, but things in the US had moved and evolved so quickly that I was frequently left scratching my head, not unlike Rip Van Winkle after a long nap.

We lived in the heart of San Francisco, right downtown, within walking distance of one of the largest Macy's I had ever seen.  And in the basement of the main store was a fairly sprawling jewelry department.  Now just as today, lots of necklaces, rings and earrings.  And there were Invictas, Seikos, Raymond Weil and Movado.  And in fairness, those are brands that even today you would reasonably expect to find there.  Now that is not merely due to the price.  At that time, Macy's had a fair amount of high end, luxury brands in pretty much every department.  You could also buy Tissot, Omega, and if I am not mistaken, Longines.  Not to mention that "all American" brand - Hamilton...

And then?  Well, things changed.  SWATCH group essentially made it clear that most of their watches were clearly of a higher level and would not be sold in locations such as, you guessed it, Macy's!  It wasn't a sudden change, but it was something noticeable if you were paying attention.
Now in fairness to the current shot-callers throughout the fleet at SWATCH Group, this was never said explicitly.  It was, however, made known to many of us in conversations with sales reps and others within the inner sanctums.

And in fairness?  This made sense.  I mean, after all, Elegance is an attitude, right?  It's hard to be elegant when your "timepieces" are jammed in a cabinet next to some off-brand watch, with the overwhelming presence of the latest Coco Channel spin-off fragrance wafting through the air mingled with the piquant aroma's emanating from Wolfgang Puck's cafe down the hall in the food court ; )

Long story short, it was a marked sea-change and it was consistent with SWATCH group's belief that the idea of containing every element of the watch buying (and selling) process was the answer.  Remember Hour Passion?  Yeah, most of the US doesn't either.  But I you are shopping for discontinued fashions at the Richmond Outlet Mall in Vancouver, BC Canada? You're in luck!  Needless to say, here in the lower 48 it became clear pretty quickly that we prefer peanut butter to Nutella.  The higher end group boutique, Tourbillon, appears to be soldiering on in Miami, Las Vegas, San Francisco and wait for it... Seattle.  No don't get me wrong, I love Seattle.  But I don't know if this is where you're going to catch the number of customers needed to move the needle.

So, following the departure?  Well, then the retail bubble burst, grey market sales soared (and don't show many signs of slowing down), and the jewelers who used to proudly sell many of these brands (in fairness, I don't think we can really count Mido in this group as it still does not seem to be taking off here in the US), either went out of business, got their doors closed, or got so tired of getting the fuzzy end of the lollipop that they decided to cut-bait rather than fish.

And then, suddenly, Macy's (and no doubt there will be other brands out there to jump on this, and also other department stores to partner with them) is proudly heralding, wait for it, EXCLUSIVE LIMITED EDITIONS!

Tissot, Longines, Rado, Tag Heuer and yes, MIGHTY MIDO!  Each brand, unless I have read the announcement from Macy's, offers at least one model that is "Created for Macy's".

Okay, but let's get down to brass tacks - essentially this means that there is a clear strategy shift.  Macy's has a large reach, and I say this with no disrespect, but I don't think you're going to be able to have an informed conversation with the person at the jewelry counter to discuss your frustration that your COSC timepiece is not keeping chronometer-level time.

When you have to walk halfway across the men's department to buy a pair of Ralph Lauren trousers, how likely do you think the person trying to sell you this "super-limited-made for Macy's" watch is going to be readily available to help you with your purchase?

What this tells us is simple, sales are down and not showing much sign of getting better.  And the brands are getting nervous, and rolling the dice on just about anything that will staunch the flow of red ink.  

Or to once again quote that other authority on the luxury business:

"Things are going to get a lot worse before they get worse".

Every Party Needs a Pooper

The books have closed for June, and let's just say the results are not exactly rosy.  

Courtesy of the FH

What had been a rather gentle, steady drop essentially bottomed out this past month.  And in fairness, it would be easy to say that this is not worth panicking about, because the numbers are still in the plus range (i.e. above zero), but like a frog put into a pot that slowly comes to a boil, it is perhaps once again too late for some brand bosses to make the adjustments necessary to salvage what might turn out to be a shitty year overall.  

Now how is it possible that things were going so great, and one bad month has Mr. Grumpy being so negative?  Well, I would simply refer you, gentle reader, to the graph provided by the FH summarizing the last year.  

Notice a trend?  

So what happened?  The same thing that some of us have been talking about for awhile, and that other people have either ignored or failed to notice.  There was a reason why export numbers climbed impressively towards the end of last year and the start of this year - the new Swissness regulations.  Simply put, there was a very real impetus to shift as much product outside of the borders of the Cantons prior to the implementation of the regulations.  Although that was meant to happen when the meter flipped in January, several brands were, let's just say, using "alternative facts" to justify continuing to flush the tubes of not 100% Swissness product during the first half of this year.

And now?  Well now we are starting to see where things really are.  It is worth noting that yes, we are still in the black and have not slipped back into the red.  BUT, it is also worth noting that if we are talking about trends, the numbers are trending in a Southerly direction, and like that frog slowly coming to the realization that his warm bath has now become soup, brands are going to have to start making some tough decisions that will inevitably cause some pain.  Ad budgets will contract, panicky gambits will be employed, and unfortunately, the transfer window will open for a lot of people who thought for sure that they had outrun the reaper during this current downturn.

In fairness, this latest shake out has been on the books for several years, the product has been piling up, and the the transshipping destination countries have been saturated in overstock product.  The majority of the big dogs have now also discovered the soft grey market of online super stores that are selling their overstock watches as "gently used", and while that can "clean" some of the glut, it is really a drop in the bucket overall.

As many of the brands have finally adjusted their production numbers to the real world, it remains to be seen what the real demand is.  July and August are likely to be bumpy as we are in the Swiss Watchmaker Holidays.

Let's hope things will pick up.

We Sail Tonight For Singapore - Part the Third

From Singapore, by Tom Waits - 

We sail tonight for Singapore
Take your blankets from the floor
Wash your mouth out by the door
The whole town is made of iron ore
Every witness turns to steam
They all become Italian dreams
Fill your pockets up with earth
Get yourself a dollar’s worth
Away boys, away boys, heave away

So the November numbers are in, and because it appears to be my lot in life to be (if not the lone) one of the few contrarians out there in the watch world, here goes -

Courtesy of the FH

Again, the image is sort of fuzzy, and I do apologize for that.  But truth be told, the results are more than just a wee-bit fuzzy themselves.

The first thing to notice is that the numbers are going rather retro.  Now in fairness, they are much better than this time last year.  But if we are looking at them objectively, it is safe to say that they have been slipping the last 3 months.  And it is also safe to say that the only reason that they are as good as they are, is the push to shove as much product across the borders of the various cantons before the new regulations go into force.  

But then it gets more interesting when you factor in the countries that are "up" versus "not-so-up".

Curious to relate?

Mighty Singapore is once again back with one of their semi-annual market surges this time of (wait for it) +9.5%.

Now in the interest of total transparency, the closest I have ever come to Singapore was when my girlfriend (at the time) left Japan to return home to the UK and spent a week in Singapore and sent me postcards and letters from the Raffles Hotel in, you guessed it, Singapore.  Well, needless to say that relationship did not stand the test of time, nor do I suspect that the recent (again, semi-annual surge) of watch exports to Singapore, truly signals their emergence as a world hub for buying watches.  Now as a source to "source" grey market watches for global "discharge"?  Sure!

Even stranger, the US is apparently the darling of the industry with a mighty surge of + 17.6%.  Curious to relate (again) this export figure does not nearly match the (granted anecdotal) evidence provided by several US retailers that I have spoken with.  Of those I have spoken with?  Sales are pretty flat.  

Once again, at the risk of being, well, honest?  If the export numbers don't correlate with the "on the ground" feedback about actual sales, it tells you one clear thing that further informs other points -

1.  Watches are being exported to subsidiary offices to get them off the books at Swiss HQ.

2.  Watch sales are flat in North America.

3.  The grey market has PLENTY of product to sell.

The industry has not recovered.  Sorry, but it hasn't.  On the positive side?  Several brands have reduced their production to match real world demand.  The problem?  There was way too much product sloshing around that had to be flushed through the system.  And short of crushing watches?  That means our old friend the grey market.  The good news?  Lot's of affordable (let's call them price adjusted to reality) watches will now be available!  And hey, don't worry about the warranty!  You'll get some chicken-shit after market warranty for your pennies on the dollar purchase.  

It is a tired, skipped record from this d-jay, but simply put.  If you buy a grey market watch at a bargain price?  Don't lose your shit when that watch is worth even less than you paid for it when you are hoping to re-sell it.  Along with the grey market?  The Sunk Cost Trap is alive an well!

Enjoy your watches, and spend your money carefully!

And the Shit Get's Realer

By now everyone knows that Audemars Piguet and Richard Mille are going to leave the SIHH in 2020.  It is also well documented that both brands feel that participation in shows like the SIHH is no longer really needed for them as they are focused more on mono-brand retail, etc.  The other more subtle message is that "Hey, the media we want to communicate with, we do.  deal with it!"  

And if I am honest, after receiving a seemingly endless stream of announcements about golf ambassadors and only getting watch info. from AP's duly appointed North American press agent days after other outlets have had their duly mandated head start, I won't really be missing anything.  I have even less flattering feedback about Richard Mille's attempts at press engagement, but in fairness, that is not really what I am driving at today.  Both brands spend goofy amounts of money on the types to events and ideas that seem more the by-product of heavy drinking than actual sober rational thought.  Hitting golf balls off of a building and hoping that they will somehow be caught by a drone hovering over the water with a net comes to mind.  It does, however, offer an opportunity for people in the fishing industry to add a second stream of income as golf balls hit by famous pros might be found like Easter Eggs when they are gutting their catch...

Whether or not this is an issue of a belief that participation in the SIHH is a waste of time, or if it is economic reality rearing its ugly head would require a deeper dive.  Some say both brands are on fire - i.e. doing really well.  While I suspect that both brands are doing okay, in truth we can't really know as they are privately held.   To the best of my knowledge, AP has done right by their employees and if I am honest, that to me is a key measure of corporate citizenship.  

I am not fully convinced that either brand firmly believes that the SIHH is a waste of time.  I think both brands are extremely image conscious and they love the opportunity to have a bright light shone on them.  I do think economics, on some level, are playing a part.  No offense to either brand, but despite their catchy marketing language, they operate in many ways like the other big dogs, and do not really display what I would call "alpha" behavior.  

And as I find the folks running the SIHH to be some of the snottiest folks on earth - yes, I said it - I am not going to shed too many tears for them.

The other news that I think is even more important that got buried under the SIHH hand-wringing was the announcement that Raymond Weil will not be back for BaselWorld 2019.  Unlike the two aforementioned houses, Raymond Weil does not have a wealth of mono-brand boutiques.  They are extremely dependent on the type of retail stores that attend shows like BaselWorld.  My hunch is that this is more of an economic decision.  When Movado pulled out prior to this past year's shindig I said (and still say) it made sense.  Movado and it's brands are everywhere.  They have a deep team of reps who cover the territories and make sure that stores have product.  They also have their own outlet stores.  So it made sense.  For Raymond Weil?  Not so much.  

Whether people want to believe it or not, I think what we are really seeing is a reality check for both the (seemingly) mighty and small alike that the good old days are not coming back, and they now need to exercise fiscal responsibility.  Or in the words of that other great commentator on the watch industry, Slim Charles -

Courtesy of the Wire

 

Et Tu, Movado?

Yes, BaselWorld is shrinking.  And just like a certain orange-hued bloviator would insist that the polar ice caps aren't melting and we could all use a little "global warming" during the recent cold snap in the US, many in the industry would insist that everything is fine and the recovery is well underway.

And then you see news reports letting you know just who will be skipping this year's BaselWorld.  Yesterday news dropped in Switzerland that MGI is sitting this year's edition out.  And for those of you not acquainted, MGI is a small little operation out of Parasmus, New Jersey.  The M stands for Movado, the G for Group...  well, you get the picture.  Movado, Ebel and Concord are the shiny gems in the company crown, along with several licensed brands.  

Now interesting to relate, this is not actually new news as it was announced by the Movado Group CEO himself back in November during the company's third quarter call.  But sometimes, news isn't real until you read it in your hometown newspaper ; )

For those of you handy in French, you can read the article that I was referred to in the Tribune deGeneve here:

https://www.tdg.ch/economie/groupe-mgi-viendra-baselworld/story/11563841

But I think this is important news to revisit (or for some to visit the fist time) because it underscores some pretty hardcore realities.  

1.  Traditional watch retail as we once knew it is gone.  And it shows no real signs of coming back.

2.  Very few people in the industry really seem to know exactly how to react.  And the export numbers are NOT the bright, shiny recovery that some would have you believe.  They represent the shipping manifests of doomed models that were over-produced and did not sell and will be washing up on the shores of Grey, Light Grey and Parallel market places for the foreseeable future.  In fairness, at least according to retail outlets who should know, there are a few bright spots.  So let's hope those bright spots multiply, collect and shine.  But the good old days are gone.  It is time to adapt, those who can't will join a long list of formerly successful brands, executives, distributors and retailers.

3.  But a few folks seem to be catching on.  And I give very, very high marks to Mr. Grinberg because it is clear that he called an audible that not everyone was ready to react to.  And ultimately, as the steward of a brand, you are responsible to your brand and your shareholders.  Not your ego. This is a lesson that many of Mr. Griberg's less successful peers could benefit from.

Now it bears mentioning, BaselWorld was, is, and for the foreseeable future will be a barometer for just how good or bad things are in the industry.  When times are good?  You'll spend the money and participate.  When times are bad but you're afraid of losing face, and not being able to piss in the tall weeds with the other big dogs if you're not there?  Well, you'll convince the board that you have to be there, because you don't want to look like some loser wandering around the Ramada with with some samples in your briefcase ; )

The business IS changing.  And I think it is changing for the better.  Don't get me wrong, I love free dinners, wine, endless espresso and swag bags.  C'mon, who doesn't?  But it is clear that very few people in the industry have made the necessary adjustments to understand what the new reality is, and where their place in this brave new frontier will be.

With SIHH kicking off in the next 48 hours, many of my colleagues and other bloviators will be winging their way to Geneva and will wax lyrical at a collective cost of mere millions.  And in the end, I don't know if the event will be any more of a success than last year.  To quote that other great commentator on watches, Gordon Gekko:

"It's all about bucks kid, the rest is conversation." 
 

Repeat - The Home Team

I first ran this about two years ago.  In seeing the comings and goings over the recent months, it seems that the problem still exists, so it seemed a good time to reheat this one -

The Home Team

Another season has passed, managers and players have come and gone and the deck continues to be reshuffled.  And once again as the dust has settled, even more work permits have been applied for to help Swiss nationals come to New York and Miami and head up US offices.  This is a cycle that has remained consistent.  That unshakable belief that the reason why things aren't working out in a particular market is because there isn't a reassuring Swiss hand at the wheel.
So every two to three years, more freshly minted country managers are dispatched, arrive at JFK and are expected to be able to lead and manage a group of "foreigners".  And I say this in all fairness to both sides - this is a program that continues to not work out too well for the majority of brands trying it.  A recent example:
Country Manager A - dispatched to the US at great expense. Working papers processed at great expense, housing arranged - Manhattan baby!  at great expense.  Country manager promptly terminates half of the "home team".  Now interestingly enough, sales were not exactly bad for Country Manager A's brand.  In fact, sales were quite good.  But changes had to be made so that people would know that Country Manager A was a serious dude, wearing his "Big Boy Pants".  This had an immediate impact!  But not the one that Country Manager A was hoping for.  Retailers started to express concern with the sudden changes.  They had good, solid relationships with the previous representatives, and now felt somewhat abandoned.  So Country Manager A  then promptly terminated most of the new hires that he had made.  This carried on at such a pace that within six months some retailers had been contacted by as many as three (3) different sales reps.  Within a year, Country Manager A was out, and an emergency replacement was shipped out, at great expense... and the cycle renewed itself.
It is a time honored process with MANY Swiss brands.  Aspiring future senior level executives and would-be CEOs are sent to the US as a sort of "finishing school" to prepare them to take the helm of the Mother Ship after a successful tour.  More often than not it does not pan out this way with two notable exceptions at AP and UN (which now we see was not the end of the rainbow that many thought with the "departure" of the CEO a few months back).  It inevitably leaves the US without solid management that really understands the retailers, the actual demand for the product, the language, and the culture.  A top-down management style is then replicated and enforced.  And then communication jams because nobody can make a decision, and nobody can reach the Country Manager because the communication is not flowing through the "proper channels".  It is doomed from the start.
So I would like to propose a different approach.  Reverse the travel and send "native" aspiring country managers to Switzerland for a more serious training and grounding on how things are done at HQ. And I am not talking about the 1 week "fun trip" where everyone comes to HQ, has a few sales meetings and the rest of the time is spent on river cruises, helicopter rides and lord knows what else.
If the concern is that the US based staff don't understand how things are done at the brand HQ and does not understand what the brand HQ wants, needs and expects, then bring them to HQ and SHOW THEM.  Invest the same type of time and money in the training of these people that you spend on your Swiss staff.  It's a hell of a lot cheaper to invest a month in the future market of the US than it is to constantly change and replace senior management with yet another "pet project" with a Swiss passport.
And who knows - that smaller investment might lead to a more dedicated US team that can see a future where they might have a hope in Hell of actually getting an opportunity to lead the brand that they've dedicated themselves to.  Otherwise, what's in it for them?  Limited possibilities without the hope of promotion beyond a certain level.
I'd quit too.

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 ; )

Exports Are Up! So Sales...

Are not necessarily.

Confused?  Fair enough, many have given up trying to make any sense of how the Swiss export numbers actually match up to real sales. 

Courtesy of the FH

On the one hand, the numbers continue to show improvement.  And that would seem to be good news.  But the fact that larger numbers of watches are departing the country does not correlate with greater sales.  So while some might think that happy days are here again, it might be useful to ask the question that continues to be pretty uncomfortable - just where are all of those watches really going?

Most of us can only really rely on anecdotal evidence as to the reality of the market place.  I visit a lot of retailers, and I talk to A LOT of brand managers.  And without putting too fine a point on it, I am not hearing the same level of optimism.  Now granted, this is by no means an exhaustive analysis.  But long story short?  The majority are still not seeing the kinds of sales that they did in the good old days.

Another measure of the industry's health can be taken by the brands participating actively in the grey and the light grey market.  Even the mighty Swatch group is seeing some of its shinier lower priced brands (Tissot and Hamilton) being dumped at more more than 40% off of retail on a few of the "group shop" sites.  Whether this product is coming directly from the brands or from disgruntled retailers remains to be seen.  And this is not one or two pieces, but fairly large amounts of inventory.  So on the one hand, it's definitely a buyer's market.  But on the other?  It underscores the reality that there are still too many watches sloshing around the market place.  Which means that space has to be made for the new flood of watches steaming their way towards the US (and other ports).  And that still has not done enough to create the same type of uptick in the export figures for the US, which is reporting -0.4% for November.

Curious again are the numbers for Japan +22.5%.  

So, let's wait and see.  If the particularly goofy pr initiatives of some of the brands are anything to go by, in addition to the increasing number of job departures in mid-level industry positions, I suspect that the actual sales are not matching up to the number of watches departing the Swiss borders.

 

Black Friday Repeat

This originally came out nearly a year ago.  And I probably would have let it sit in the closet like an ugly Christmas sweater had I not gotten a promotional email from a "light grey" market site that offered me the rare and wonderful opportunity to purchase "BRAND X's" rare and wonderful price, at the rare and wonderful discount of 65% off!  It also bears mentioning that this "group source e-tailer" also has a section titled:

Sex & Lingerie!

Good to know that after I save a boatload of cash on a grey market watch, I can then purchase some "adult toys", lube, and God knows what else that has fallen off the back of the "cyber truck".

Despite assurances to the contrary, I am still not convinced that the shot callers have really gotten their heads around what is going on right now, and so I am going to air this one out again -

The Myth of Black Friday

So I got the question from more than a few friends and colleagues in Switzerland and Germany -
"What are you doing working, why aren't you out shopping?  Isn't it what you call Black Friday?"

So before going any further I want to be clear that in some retail segments, the carrot of "low, low prices" is a strong motivator.  And as the chaos done to a Nike store will attest, too much food and alcohol, combined a four day weekend and perhaps too much time forcibly spent with family members otherwise only seen at weddings and funerals can drive even the sanest, most rational person to lose their shit.

But what has started to creep into the luxury industry is a growing sense of uncertainty, and this has begun to manifest itself into more random short-term solutions that may (or may not) have the desired impact.  And when we are talking about watches, at least those of a certain price point, we are not talking about the types of things that typically wind up under the average American Christmas tree.  A discounted cashmere sweater?  Sure!  A G-Shock?  Absolutely!  And I have no doubt that there may well be people out there who awake December 25th to find that Santa has left a timekeeper with a retail value of over $5,000 in their stocking.  But I think it's safe to say that in virtually every economy, that is an atypical household.

For those of you unfamiliar with the concept of Black Friday, allow me to inform you that this is a phenomenon that began in the US.  The idea being that the majority of Americans had a day off from work on the day after Thanksgiving (Thursday) and therefore it might be the perfect way to kick off the holiday shopping season.  So that's the Friday part, but the Black aspect was in reference to the ledger books.  As anyone who has suffered through accounting will share, black is good, red is bad.  Black means that you are not losing money.  And the operating theory being that good year or bad, the amount of sales going on would push you firmly into the black for the remainder of the year and that everything after that would be profit.  And from this, we then moved to Cyber Monday.  And in fact, hell, let's just make it Black December because truth be told, nobody can tell the difference any more.

Now in the high end watch business (and let's lower the bar a little and say that is anything over $1,000), there might have been the 10% or 15% deal.  Or retailers would park all of the "pre-owned" or discontinued models in a "Holiday Special" show case.  But it was understood that this display case was the watch equivalent of the Island of Misfit Toys.  If you wanted something desirable you were maybe going to get a small discount, but nothing of the magnitude of what we are seeing this year.  And this discounting mania has moved beyond just the retailer to brands offering 25% off on their own websites.  They are essentially working to move product under the guise of a holiday promotion.  This, in turn, succeeds at then driving the grey market, Mass Drop and Touch of Modern prices to dip even lower than they already are.  I received nearly hourly email promotions on the most recent price discount on Touch of Modern and Mass Drop over the holiday weekend.

Now whether or not these deep-discount sales promotions will succeed in saving the brand's bacon remains to be seen.  But what this really all comes back to is what I've been saying for YEARS - over production.  If your product is scarce, it will be desired.  You can then demand a premium price.  When your product is everywhere, it becomes less exclusive.  Moreover, it manages to lower the desirability of other brands at the same level or price point.  The only exceptions that readily come to mind are Patek Philippe and Rolex.

Put another way, just as a high tide will raise all the boats in the harbor, a low tide will bring them all down.  Supply and Demand is a pretty simple concept, and when you continue to ignore it for years?  Well let's just say it will take years to undo the damage.  And maybe those brand CEOs who refused to forgo the high life for the sake of their brands and their employees should be getting coal in their stockings, and maybe a visit from Krampus ; )

Happy Holidays from Krampus

Happy Holidays, and enjoy your watches!

The 2 Year Review - Wrapping up the BR126 GT

One of the great joys of having and writing for your own outlet?  You get to do what you want ; )

As a watch enthusiast, the one constant conversation that I and my fellow-watch heads have about "the next thing", the "new thing" and more often than not, about love that has dried up.  No, were not talking about divorce or separation.  But that feeling that comes over you when you realize that the thrill is gone.  When that watch that got you so excited no longer does so.  

But I have noticed an interesting trend at the past few BaselWorld fairs.  More and more of my colleagues are not wearing the latest offering.  In ever growing numbers, they are wearing a favorite watch that has been in their collection for two or more years.  And that got me thinking...

So for the past week or so, I have been wearing and enjoying a 2 year old BR126 GT from Bell & Ross.  It was a simple idea - does love endure once the "new watch smell" has worn off?

YES, it does!

The BR126 GT will have a familiar look to several of its fellow Bell & Ross chronographs.  The dial layout is clear and easy to read.  But with a little twist as Bell & Ross utilized a contrasting silver tone to outline the two smaller registers at 3 o'clock and 9 o'clock.  The silver rings that highlight the minute counter (9 o'clock) and the constant second (3 o'clock) provides a wonderfully understated bit of pop to the black dial.  The hour and main minute hand are coated with Superluminova.

The outer bezel is fixed and engraved with a graduated tachymeter. This adds a bit of sporty feeling to the overall look of the watch.  For a two year old watch, the engraving has held up quite well, and adds a lot to the watch as a whole.  One thing that I might have changed in the original design would have been to use a flatter crystal, as the slightly domed crystal used on the 126 GT shields the bezel's engraving just a touch.  It is nothing drastic, mind you, but when your eyes are approaching the half-century mark, you tend to notice these things more and more.  The only other suggestion would be to enhance the date window somewhat, perhaps using an "inverted" cyclops window for the date.  But again, this is really a little thing and in no way really takes away from the overall performance of the watch.

Bell & Ross opted for a solid case back for the BR126 GT and this is something that I wish more and more watch brands would revert to.  The original idea of a display back was to admire the fine inner workings of a watch, but more and more brands are using it as a less-expensive way to case up their watches.  In many instances, the exposed movement is nothing special to look at.  So this design choice of using a solid case back really spoke to me.
 

The watch sits on the wrist very well, at 42 mm (but with a more refined case), it is truly from the Goldilocks school of design - not too big, not too small, but just right!

The movement is listed as BR 126 GT : automatic mechanical. Calibre BR-CAL.301.  It is self-winding, offering hours, minutes, seconds (at 3 o'clock) and date as well as what is becoming a "Bell & Ross" bi-compax chronograph (minute, central seconds).

All functions worked without a hitch, with counter hands running smoothly and returning precisely to their starting positions.

The crown and pushers are still in fantastic shape after more than 2 years of use and are tactile and easy to use.

The time keeping was very, very good with the greatest deviation I experienced being a +12 seconds while running the chronograph over an extended period of time.

 

 And last (and all too often thought of least), the strap and buckle.

The clasp is a butterfly deployment and confirms what I have always thought - Bell & Ross makes one of the very best deployment buckles out there!  Easy to use, secure, and pretty good looking!

And the strap was an interesting - and very positive - choice.  It is described as black Alcantara which is suede-like on top, smooth underneath, and perforated to not only add to the sporty aesthetic, but also allows for ventilation.  Very good looking and supremely comfortable!

All in all, it is a great watch for the person out there looking for that one special piece.  It is elegant enough for the office or an evening out, but also sporty (sorry, I know that word has now officially been overused, but it is appropriate) enough for the weekend, or any bouts of daring-do you might have planned.

For many a collector and enthusiast, watches come and go.  But this one might just be that special one you see on the wrist of a writer or collector, the one that they have hung onto because it has stood up to their personal test of time.


Enjoy your watches! 

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