A Real Jellyfish - Or Why You Can Get Stung By A Retail Partner

Yes, you read that correctly, "A Real Jellyfish" - as it applies to the watch business. 

I have to give full credit to a show I've been watching on Prime - The Patriot. A jellyfish is, a euphemism for a particularly thorny situation that is not easily navigated or solved.

Shamelessly borrowed from the world-wide infoweb

A jellyfish is a very, very difficult animal to kill. Imagine that you, gentle reader, were to get cut in half, not unlike the famous magician's trick (only this time it's no trick!). Chances are pretty good that it's curtains for you. Sorry lovely & willing volunteer from the audience. Now I'm pretty certain that you've never seen a magician try to saw a jellyfish in half. And if you have, I am a bit concerned about where you are spending your free time... but let's get back to the matter at hand. Long story short, if you cut a jellyfish in half? It can regenerate the missing half. So where you once had one stingy, floating thing, you now have two. You've just doubled your problems.

I want to share a story with you that is, in fact, true. A brand manager was very, very keen to get his bonus. As you can probably imagine, brand managers don't really have a whole bunch of metrics to measure performance against beyond sales. So brand manager X was compelled to get as many doors open as possible, because the way the folks back at HQ, thousands of miles and an ocean away saw it, a watch in a store was as good as a sale. I mean, c'mon! 

And in time, one of the independent doors that was opened was doing very, very well - constantly. Funny thing about the owner - he paid his bills on time. And he promoted the brand, and everything seemed rosy. But then events overtook the brand manager, and a new brand head was brought in and things started to change. The new top dog in the US was, in fact, not from the US. And this fellow decided it made more sense to put all of his brand's eggs in a single, bigger basket - one of the larger chains, and decided to close other accounts in the area, even the account of one of the original stores that had done very well. 

But a funny thing happened. That store that was part of the larger, impressive group, pulled a jellyfish, and now where there was one, now there are many. And the cache has now somewhat tarnished and what used to be viewed as exclusive is now being bought and sold en masse through various grey market and "legit" sources. And sooner or later, this small group of jellyfish will lose patience with competing with the other remaining independent retailers - or worse, they will confront another group of jellyfish that might, in fact, have a stronger sting as far as the brand manager is concerned. Long story short - it's a real jellyfish!

Now where this will all end remains to be seen. And in truth, it is not unique in the world watch distribution and retail, but it is also certainly not the way things used to be. It used to be that there was, I am sorry to be old-fashioned, a code. You have a relationship with a retail partner - particularly one that by their efforts alone was responsible for your brand's success in the US, and you drop them for no reason other than avarice? Let's just hope you don't get stung by that group of jellyfish you've now created.

Summer Repeat - I could Do It Better Myself - The Sales/Brand Manager

I wrote this back in February, before COVID-19. 

In reviewing it now, it seems like a million years ago.  But I thought it was worth looking at again as the entire nature of watch retail has now been turned upside down.

I Could Do It Better Myself - The Sales/Brand Manager

5:30 AM - The alarm goes off, and tempting though it may be to hit the snooze, you pull yourself out of bed, jump on your Peleton and commit yourself to another 30 minutes of fitness.

6:50 AM - Showered, you make yourself presentable, grab a coffee and fire up your laptop for the weekly video conference with HQ.

8:15 AM - your daughter calls to remind you that as it is your weekend, she will be waiting for you outside of school following STEM club at 4:00 PM.  You make a note in your phone and set the alarm for 3:45 to remind yourself.

9:05 AM - safely settled at your desk, you scroll through the "Butcher's Bill" to try and figure out why you got blindsided a few hours ago when HQ informed you that:

1.  You need to close Retail Partner A.  No real detail given.

2.  You need to continue to extend credit to retail partner Z, even though they have not paid their invoices for the past 5 months, hit you with $26,333 of "co-op" advertising expenses, and requiring a "junket" for the owner, the owner's current (not his wife) girlfriend, their assistant manager and 2 of their "loyal" customers to visit the HQ, factory, and maybe, you know if there's time, ski a little...

While reviewing all of the internal and external communication, you happen to glance up at a map of Los Angeles and it all becomes clear.  Retail Partner Z is opening up a new "fuck you" store literally across the hall from Retail Partner A, and demanding (literally) that your boss in Switzerland cut off Retail Partner A.  You then remember one of the pictures on the wall at HQ in New York with your boss, the girlfriend (not wife) of your boss, Retail Partner Z and half of the Los Angeles Lakers, courtside at the Staple's Center.

And of course, it just so happens that you are based in (or at least near) Los Angeles...

10:00 AM - Retail Partner A's store has opened.  You meet the owner and the two of you head out of the mall to a nearby restaurant so that you can speak in private.  Retail Partner A was the first store you ever opened an account for your first brand, some 20 years ago.  To his credit, Retail Partner A says he totally understands, he has seen this coming.  You personally really like Retail Partner A.  He and his wife have always sent your daughter both birthday and Christmas presents.  They insist on picking up the check even when they are your guests, they are old-school, shook Sinatra's hand type of retailers.  You excuse yourself for a few minutes, go out to the street and call your boss.  You explain that as a sign of good will, you need authorization to buy back the product.  Considering that most of it is still untouched (as it was just delivered 3 weeks ago), in the wrapping, you can simply walk it across the hallway to Retail Partner Z when they open.  Your boss is in agreement so long as 90% of the pieces are re-sellable.  You do the mental math (you looked at the safe count while you were speaking with Retailer A, and there are 13 pieces that have some wear, which tips it to 15% of the inventory.

You go back in, tell them exactly what your boss told you, but suggest that they take 6 of the slightly worn pieces that are the most likely to sell, and blow them out at 40% off, ensuring that the store can make 10% profit off of them, and be in compliance for the buy-back.

You suggest an early lunch (it is now 11:45) and once again, Retail Partner A grabs the check and will not let you pay.

12:50 PM - You walk Retail Partner A back to their store, and take a moment to make some calls before your next appointment - 175 feet across the mall's "hallway" to visit the soon to be opened 5th location of Retail Partner Z.

Retail Partner Z makes you wait a good 20 minutes in the construction area.  Once done, Retail Partner Z excuses himself, and Junior (second born son) takes over the meeting.  In a very short timeframe (less than a year) Junior has managed to piss off every brand rep he has come in contact with, and driven out more than half of the sales staff at their flagship store in Beverly Hills.  You have resigned yourself to simply nodding and smiling.  But Junior wants to flex his muscles and decides to get pissy with you anyway.  He demands to know why Retail Partner A still is carrying your brand.  You explain that they (Retail Partner Z) will have the exclusive rights the day that they open - which is still 45 days out.

2:00 PM - Junior says - "Hey, I'm hungry.  Buy me lunch and we can talk about our order".  So off you go to lunch #2.  Junior, although he drove to work, decides that a few bourbons would be a good idea on a hot Los Angeles afternoon.  You pay the check (a little over $200 with tip), and Junior says that next time you need to go somewhere nicer - "You guys need to stop being so cheap!".

You walk Junior back to his car, send your best regards to his dad, and hope like hell he does not get stopped by the cops.  3:00 PM is a bit early in the day, but he insisted.

You walk back through the mall to pick up the book your daughter asked you to order on Amazon, and as you're walking to the garage, you hear someone calling to you.  You turn to see your fried Julia, who is the district manager for Unobtainium, one of the hottest watch brands that is finally going into independent retail.  She has just finished meeting with Retail Partner A, and is happy with the outcome.  She thanks you for the referral, and comments on how much people must love them as flowers and two gourmet baskets arrived along with 2 bottles of champagne during her pitch.  You make plans to see each other at the Las Vegas shows in June, and hop in your car.  You make a mental note that you will not be able to submit the gift baskets and flowers on your expense account as they are not part of your approved expenses.

3:45 - The alarm on your iPhone goes off, just as you are rounding the corner to pick up your daughter.  Yes, you are early, but you savor the moment, listen to the last 10 minutes of your podcast, and think about the weekend.

The Straight Skinny

So I wanted to take a moment to try and offer a counter opinion on some of the soothsaying and rather goofy prognostication going on out there about the state of the retail watch industry.

The watch customer has changed -
No, not in any real way other than how they buy and sell watches. There are just as many of them, but they are opting to either buy used, grey market, or in some instances go straight to the brand to get the best possible price. Sorry Mr. and Ms. Retailer, loyalty it seems is only as strong as a given retail economy.

For better or (I think) worse, the perceived customer in North America (at least if print and digital advertising is anything to go on) is predominately white, upwardly mobile, and apparently (and this one kills me) a fan of F1 racing.  I have no doubt that the marketing shot callers in Biel, Le Locle and Glashütte are also convinced that these "unicorn' customers also keep a kitchen cabinet filled with jars of Nutella.  Spoiler alert - they don't.

The reasons why people are buying expensive watches have changed -

John Goodman as Charlie Meadows in Barton Fink:
“You might say that I sell peace of mind”.

Yeah, not so much.  More often than not, the customer is coming in looking for a specific watch that they have seen, read about, or heard about... somewhere else.  And the guys out there are, more often than not, buying an expensive watch for the same reason that they bought it five years ago.  Work bonus, anniversary, birthday.  Or they are simply watch hounds.  Those realities have not changed.

The reasons why people buy expensive watches are complex and mysterious!

Trust me, it is nowhere near as difficult to understand as some folks would like you to believe.  It is a fun, shiny object.  You see it, you attach whatever psychological tie you wish, and that motivates your desire to own it.  We all latch onto brands for a variety of reasons.  I was, for quite some time, deeply impressed and obsessed with NOMOS.  And all it took was one cancelled press trip to turn me off completely ; )

This is not some super-secret society with a Kaballah-like complexity of esoterica. It's pretty simple. Make your product, promote your product, sell your product, support your customers and supporters.

The watch industry is littered with poorly conceived, over-thought ideas that bring the same outcomes that everything previously has.  

Ultimately, change is painful and scary.  And inevitably, the uncertainty that walks hand in hand with change will cause us to search for, and often create, theories that will explain the sudden disruption.  So I will close with another paraphrased reference from chef, restaurant owner and media personality David Change.  If you've ever worked in a commercial kitchen, you understand stress.  You might be familiar with the expression - "to be in the weeds".  Essentially when you are up to your neck with a million and one smaller tasks making it (seemingly) impossible for you to focus and complete any of it.  The natural, very human reaction?  Try to go faster.  

Per Mr. Chang -

Stop, take a breath, assess the situation.  Then start again.

An Open Letter to the Watch Industry and Media

With their announcement today, Hodinkee officially declared that they were, in fact, in the watch retail business.  And this brings full circle what many retailers, journalists, writers and brand managers had felt was in the works since Hodinkee began its limited edition partnerships with certain brands.