Pantone has declared that its color of the year is, in fact, two colors: gray and yellow. Watch manufacturers, I can assure you, will stick to launching commercial bankers such as steel sports watches with safe blue, black and white dials.
In other words, a prudent approach after a year of carnage will see very little innovation or jarring changes of style.
That does not mean the watch industry will not be moving forwards. It changed more dramatically from a business perspective in 2020 than in any year since the 1970s.
It is these enforced trends we focus on here in an effort to analyse which will be one-year wonders and which are here to stay in the opinion of WatchPro co-founder Rob Corder.
I am in two minds here. Publicly traded The Watches of Switzerland Group and Signet Jewelers have both reported steep rises in online sales. Signet ecommerce was up 71.4% during the quarter ending October 31, 2020, and WOSG rose by 65% for the same period.
This looks like an open and shut case for the shift in sales from physical to digital stores that will be consolidated in 2021, or even accelerate.
I am not so sure. The top end of the market is supplier-driven, with Rolex accounting for more than half of turnover at WoSG, followed by Patek Philippe and Audemars Piguet.
These brands do not yet allow their authorized dealers to sell online so any increase in ecommerce revenue has been secured without their assistance unless policies change.
Challengers to these brands from the major groups, notably Omega, Cartier, Longines, Tissot, TAG Heuer, IWC and Jaeger-LeCoultre do sell watches online and are more likely to see a surge in ecommerce sales last year continue into this.
At the volume end of the market, ecommerce will increasingly dominate sales because they need more shelf space, and that space is unlimited online. However, retailers need to carefully curate their online offerings because watches that do not sell-through fast will quickly be discounted. Focusing on bestsellers will be vital.
The first lock down in spring caused every watch retailer to close. But that did not mean customers did not still want to buy watches. Many were sitting on interminable waiting lists for unicorn watches, which meant that every one of these pieces could be sold several times over. Supply was disrupted by factory closures, but people on waiting lists could be contacted either when the watch of their dreams became available or if a brilliant idea for an alternative sprung to the mind of an eager sales consultant.
Clienteling is the process of matching watches in stock to customers that might want them. They might be holding out for a Daytona, but it would be worth a phone call or WhatsApp to see whether an Omega Speedmaster or Breitling Chronomat might appeal. Close relationships between retailers and their customers is crucial and every piece of data the sales consultant has on customers’ tastes and circumstances gives them an edge.
2020 gave retail teams time to improve their data gathering and analysis, and this was time well spent so that clienteling becomes more and more productive. Once businesses understand and exploit the power of this data, they only want more, so a virtuous circle develops that makes clienteling evermore effective.
Many retailers set their consultants entirely free from physical stores; pushing them to make all of their sales by phone, messaging or face-to-face in homes and offices.
To borrow from an old Avon cosmetics advertising, 2021 will be the year of “ding dong, Rolex calling”.
There has been a dramatic swing towards opening monobrand boutiques in the past three years. This was part of a process where watch manufacturers wanted their prized timepieces sold from an immersive branded environment. Authorized dealers were pushed by the strongest brands to install branded walls, corners and counters, and this increased sales, but the greatest jumps in turnover have been seen when branded showrooms open.
Watch manufacturers might feel the need to own and operate their own flagships in ultra-premium locations like London’s Bond Street, Place Vendome in Paris or New York’s 5th Avenue, but away from these hot spots, it is more likely to be retail partners adding monobrands in shopping malls and key city centers.
Expect more of the same this year. Manufacturers will not want to add to the eye-watering losses that their own stores racked up in 2020, but they do want branded stores. Retailers are in a strong position to negotiate terms on how the cost of opening monobrands is split, and whether those stores get access to precious “boutique-only” limited edition watches.
Frustration is boiling up over shortages of the most desirable watches and customers are beginning to appreciate there are alternatives out there that are, arguably, better than Submariners, Royal Oaks and Nautiluses.
Pietro Tomajer, owner of The Limited Edition, a specialist online watch shop for independent luxury watch brands, suggests that customers are drawn towards low volume boutique manufacturers once they have festered on waiting lists for other watches for years, or when they become disillusioned with watches that they see on the wrists of all their friends or colleagues.
Having failed to score a steel Hulk at its retail price with an authorized dealer, a customer might look to the secondary market where a brand new piece can be bought. The problem is that tight supply and soar-away demand has pushed the price up to double its initial retail value.
What should cost £7,650 is being offered for £17,000.
The customer is wealthy, so a £17,000 price tag is not the only problem. It simply feels like a rip-off to buy a mass-produced steel watch for that price.
What else could you buy for £17,000? Czapek’s Antarctique Passage De Drake Roaring Forties is £15,400. Cyrus offers its Klepcys GMT Retrograde for £16,250. Armin Strom has a price tag of £15,750 on its Gravity Equal Force Chrono. Bovet, Arnold & Son, Louis Moinet and many, many more are all in range.
However, by working on pop-up events and short term placements, they can introduce independent brands to their best customers. This keeps things fresh and interesting for everybody.
Independents are often fronted by entrepreneurs and/or creative geniuses who are only too keen to travel (covid-allowing) to do star turns at retailers’ pop-up events, so customers get to meet the people who design and make the watches.
Pop-ups have also been used by larger brands like Grand Seiko and Ulysse Nardin to break into larger retailers.
If the brand does not have the clout to become a permanent fixture within a store, it can pay or share the cost with the retailer to make a short term splash.
If the pop-up succeeds, the brand is one step slower to a full time residency. Nobody, not even Rolex and Patek Philippe, want the market to narrow down to a tiny number of brands, so pop-ups are a great way to keep stores interesting and fresh.
Nobody needs reminding that travel ground to a halt in 2020, leaving retailers in tourism hot spots scrambling to find home grown customers. This has been extremely difficult in global cities where retailers have grown fat and lazy feeding on the largess of Russian, Chinese or Middle Eastern punters.
2021 is unlikely to see tourism return in any meaningful way, so every retailer needs to grow their base of domestic customers.
I hope these customers are forgiving or forgetful, otherwise they have every reason to laugh at retailers now desperate for their business after years of telling them they cannot buy the watches they want because they are all allocated to oligarchs.
Influencers lose influence
Twitter would be dead by now if Donald Trump had not given it one last shot in the arm, argues Ben Clymer, founder and executive chairman of HODINKEE in this month’s Big Interview. It has become a cesspit of vile abuse by trolls and propaganda pumped out by Russian bots.
Instagram is heading the same way as feeds are overwhelmed with adverts disguised as advice. Influencers being paid to dispense these marketing messages are getting increasingly desperate as their influence wains, so they pump out more content at lower prices, making the problem worse and worse.
Youtube is starting to suffer from the same problem, and it is exasperated by the programmatic adverts that bookend even quality content.
There will be always be the likes of Kendall Jenner and her millions of followers used for promotions, just as super models and sports stars used to be clothes horses for brands, but they need to be famous for something else first these days (Christiano Ronaldo still makes more money from football than his 250 million Instagram followers), and social media is becoming too much pain for too little gain for these multi-millionaires.
Let’s be honest, watchmaking has always been a comparatively sustainable industry. A fine Swiss watch selling for five figures might have precious metals and gemstones that should be sourced ethically, but there is no great power consumption or river of waste from your typical manufacturing facility.
That has not stopped a number of brands making sustainability central to their storytelling, and this is certain to grow as a trend since it is a topic dear to the younger customers watchmakers need to attract.
Mondaine has made its entire operation carbon neutral thanks to solar panels and energy saving. It is also making straps and even watch cases from recycled and renewable materials. Breitling is rolling out recycled packaging to replace the chunky boxes most Swiss manufacturers favour.
Oris, Christopher Ward, Ulysse Nardin, Certina and others support multiple marine conservation causes with genuine passion.
Luxury is often synonymous with waste, and the watch industry needs to become as kind to the planet as possible without succumbing to putting marketing priorities ahead of real change.
Part of the watch industry’s strong sustainability story is that its product lasts for decades without any serious care, and can be brought back to near mint condition by qualified engineers and polishers. I have seen 50-year old gold mechanical watches without a mark on their case, bracelet or dial, and which keep perfect time using the same mechanical movement with which they were sold.
This is the foundation on which the entire pre-owned and vintage market, estimated to be worth up to $20 billion per year, is built. However, the older a watch gets, the less likely it is to have its box or papers matched to a unique serial number that proves its authenticity and provenance, both of which are critical to resale value.
Manufacturers are motivated to overcome this challenge, because the more value watches hold over time, the more desirable they are when new. In addition, many brands want to get into the certified pre-owned space, so that they can directly benefit when their watches are traded several times over decades.
Blockchain, an incorruptible and permanent ledger that keeps track of crypto-currencies like Bitcoin, is being adopted by some brands, and I expect this to become ubiquitous in the coming years.
LVMH experimented with adding product tracking and authentication at scale for Louis Vuitton and Dior products back in 2019 and Hublot took up the cause last year.
Richemont is arguably ahead of its rivals, having expanded an early pilot with Vacheron Constantin in 2020. Breitling is also rolling out indelibly chipped watches.
Mergers, acquisitions and bankruptcies
It pains me to forecast it, but I think 2021 will be the year when we see watch businesses run out of road.
The pattern of highs and lows for businesses in 2020, a year entirely shaped by cases and deaths from covid-19, was strangely survivable for most.
A strong 2019 and first quarter of 2020 meant balance sheets where strong. The first lock down quarter across Europe and the Americas was a time of peak support from governments and, as the world opened up over summer there was pent-up demand that caused a rapid upturn in sales.
The holiday season has been disrupted, but not as badly as Q2, and restrictions have been lighter and shorter. Any customer wanting to buy a watch will have found a way to get it.
2021 will be different. Governments and banks will not bail out floundering businesses, so many that might otherwise have failed last year will be at extreme risk this year. Many will simply disappear, but some will be saved through mergers or acquisitions.
The same is true for retailers, and there are added reasons to think we will see consolidation in the sector. The biggest brands want fewer accounts, and they want to shed their weakest performers. Again, this will drive some to the wall after a difficult 2020, but others — particularly those with the most desirable brands, will be take-over targets for groups wanting to scale.
Mergers and acquisitions between retailers are difficult because the watch brands have the ability to withdraw their support for any deal they do not like. Take the acquisition of Mayors in Florida by The Watches of Switzerland Group or The Watch Gallery in the UK by Bucherer. Neither of these deals would have happened without the blessing of Rolex.
Consolidation of retailers will not be straightforward, but I think there will be more opportunities, particularly when owners look to retire after one of the most bruising years they will have ever endured.