Earlier this year I would have said that the tide was beginning to turn against major watch brands opening their own boutiques. Today, I would go further and say that the tide has turned, and brands are watchmakers are urgently rekindling their relationships with their best retail partners.
That is not to say that the world’s most successful brands like Rolex, Patek Philippe, TAG Heuer, Audemars Piguet, Omega and Cartier are opening more doors with retail partners. They are still closing accounts because their products are scarce and they want to funnel them through their very best accounts.
A reshuffle in Las Vegas that will see fewer but larger Rolex stores in the main resorts is an example of a much wider rationalization across the country.
I have sympathy for any retailer that loses one of these key brands, which are rainmakers for any store. I have sympathy for the fact that the watchmakers are demanding investment in the very best on-brand presentation of their products, and this is too expensive for some. They might have been successful for years, but not successful enough to find the money at the moment the investment is demanded by the brands. There is brutal Darwinism going on, with only the strongest surviving.
However, a seemingly unstoppable march towards direct to consumer sales by Swiss watchmakers has stalled, and for good reasons.
The mathematical logic that the brands would keep a higher percentage of every watch sold directly to a customer might be true, but the cost of owning their own stores, hiring and training their own staff, paying bills and business rates at some of the most expensive locations on the planet have wiped out those profit margins.
The brands will not admit it publicly, but many, if not most, of their stores lose money when all their costs are correctly attributed.
It is also increasingly accepted that watchmakers are not the best retailers. Retail is an intimate business build on myriad personal relationships. Massive centralized groups cannot replicate this, no matter how hard they try. They compensate for a lack of intimacy by paying for blockbuster locations on the world’s most expensive streets, and this often tips them into losses.
It seems ludicrous to have to say it, but independent retailers and the major retail chains can only make profit from retailing. They cannot fall back on profits from manufacturing watches, movements or components.
Business owners use their experience to make hundreds of decisions every day that add up to success or failure at profiting from retail. They work their relationships with customers, brands, landlords, suppliers and — most importantly — their staff, to make profits that can be banked or re-invested.
Bulgari’s new managing director for watches, Antoine Pin, makes an additional case for working with multi-brand retailers with physical stores (click here for the full feature).
Despite the jewelry side of Bulgari narrowing its focus on directly-owned boutiques, the watch division is going the other way.
Mr Pin wants his watches to be compared with other watch brands. If they are good enough, they will sell. If not, they will not. He wants to pass that test, which means making highly desirable watches and persuading the world’s best retailers to stock them.
If he fails, watches will fester in vitrines and authorized dealers will be tempted to dump them on the grey market. Mr Pin accepts that this would be a failure of Bulgari, not of the dealers or platforms like eBay and Chrono24 that find customers for unloved watches, but only once a mutually accepted price for them has been found.