You’ve surely seen the movie trope of the reluctant first-time paratrooper, right? Shaking out of their boots, the crewman had to jump up to the struts on the airplane, swing like a gymnast, and kick the terrified trooper, launching them flailing into a vast cloudy expanse.
In these early days of the Great Recession of 2020, brand teams from luxury watch companies are clenching the sides of the airplane, looking far down but unable to see the ground through the thickening clouds. Unless you’re Warren Buffet, it’s nearly as terrifying as the first-time jumper. But, like absolutely everything that’s ever happened to you–think about this for a brief moment—this is transitory, and will surely pass. Where will we land? What can we get started now, so as to land gently, or maybe even where we were supposed to?
You and your team are probably brainstorming over Skype or Zoom, in a kind of haze, productive only in the way that groups support each other through a tough time. But we’re fast approaching a need to get our collective shit together and in times like these, “the way we’ve always done it” can thankfully be challenged with little risk. And yet the ideas are everywhere and nowhere; here’s our goal: what can we do in the next 18-24 months to ensure the brand is relevant and lively going into 2022 as well as the next several decades?
Let’s focus on one link of the luxury watch market’s distribution chain: the AD – the authorized dealer network, which, absent a Plan, will surely be gasping for breath when we emerge from the recession. Most importantly, what can we do to not only revive the channel to its past glory, but also leverage it to expand our market to excite future buyers, all while keeping the unofficial markets at bay?
Lessons Learned from 2008
Online industries, established but nascent prior to 2008, gained a decades-long foothold in the midst of the recession. Netflix, offering a variety of convenient, price-sensitive options, methodically hammered the nails in the coffins of brick and mortar video stores. Online travel agencies decimated the personal travel agent network, reducing their numbers by 13,000 in just one year. The watch industry fared no smarter. With bulging supply, watch distributors and brands “destocked” to online resellers like Watchfinder. This was like fueling a rocket with which to escape the gravity of the-way-it’s-always-been-done. Then with scant energy needed to nudge online retailers into the vacuum of the retail space, this parallel market actually saw growth of 10% from 2008 to 2009 while Swiss exports of watches fell by 24%. This shiny group of online competitors ended up comprising 25% of the overall market that year.
This emergent unofficial reseller market is fragmented, however, with a small group of large vendors (like Watchfinder) succeeded by hundreds or thousands of people selling watches on eBay or Instagram from their living rooms. These small resellers buy stock at a discount from dealers primarily in APAC, then sell it online. But the number of these resellers will almost surely diminish dramatically, given the supply problem (travel to the Far East) and the demand problem (recession). This will shake a nagging pebble from the watch companies shoes but just for the time being; luxury markets have a unique characteristic: they recover quickly from downturns. But this reversal may be different from the last.
No Help This Time Around
Lore has it that the rich barons of the depression era deliberately dented their expensive cars to appear more relatable to the poor. The wealthiest of consumers are never really bothered by trifling events like a global recession, of course. But they are less conspicuous with their spending; it wouldn’t do to lay off thousands of workers and have the CEO pull into their reserved parking space with a new Maybach. This small, but fickle consumer class will always be around to keep the luxury industry afloat, if only just barely.
The 2008 global recession dented the luxury markets for only two years, with little thanks to those discreet CEOs. In 2010 the rescue of the luxury industry was largely impacted by the emergence of a new wealth class in China. Between September 2009 and September 2010, the Asian-Pacific market (excluding Japan) saw sales grow from €771 million to €1.2 million compared to sales in North America that increased from €325 million to €489 million. Will a new cohort of conspicuously wealthy Asian-Pacific buyers appear in 2021? Not likely.
But with some managerial courage and a plan, brand teams can, however, accelerate the recovery with an unlikely hero–you guessed it–the authorized dealer.
A watch, especially a new model, needs to be seen and tried on to know if you’ll like it. You see, case sizes and shapes don’t work for every wrist. A watch that’s 14mm in height might actually slip under your cuff more easily than one that’s 12mm. Or a watch with a 42mm diameter might look smaller than one that’s 38mm. And buying the right watch can be confusing; which Speedmaster limited edition would be right for you? Today, sadly, the primary benefit to the AD is finding the right watch then buying it online that evening. But it’s not just price that keeps buyers from pulling out their credit cards at the AD.
ADs have a couple perception problems. I went into a local Rolex dealer to have my 1971 Submariner pressure tested, which I do annually. The only clerk in the watch section had no idea what it was, which was only slightly surprising – it is an unremarkable watch. But more telling was a gent perusing the Omega counter, wearing a Patek Philippe Nautilus. While the clerk, tongue between teeth, was focused on writing my service ticket, she had not even acknowledged the potential Omega buyer wearing the €65k watch. Finally, feeling a wave of compassion, I whispered to her that “that guy over there is wearing a €65k watch. You need to go over there, now.” She casually slithered away towards him.
Some people also perceive condescension at authorized dealers. YouTuber Adrian Barker is not the only legitimate buyer who feels like they need to dress up when going into an AD. And Adrian is a good looking man, albeit a couple decades younger than the luxury watch age demographic. Even if the reality is that the clerks at ADs feel no superiority whatsoever over a guy in a t-shirt and jeans, this widespread perception is reality: in order to get respect at an AD you’ll need to look and act “wealthy”.
So here’s the good news and bad news. The good news is that the very apparatus which is systematically dismantling the travertine stones of the AD can revive their relevance. The bad news? Watch companies will have to undergo a substantial marketing mindset makeover – one that will transcend the gravity of doing things, “the way they’ve always been done”.
Stripping Wallpaper Is So Rewarding
Authorized dealers need to get smart, shed the perception of looking down on casually dressed patrons, and offer enough value so the client is overjoyed at paying full retail. The education of clerks is completely do-able, even if remembering every obscure reference number is not necessary. With passion comes a desire to learn, and brands can do a lot to stoke appreciation for a brand and its mechanical watches. There is a model to follow to get this done in 12-18 months worldwide.
Approachability will be the tougher nut to crack. How do you strip off all those layers of dated, exquisite wallpaper to see the plaster of a kindly, grand old manor? Every company has a few Brad Leones – the goofy, fun, but seriously experienced food editor fermenting everything from egg yolks to kombucha at Bon Appetit. He may be more of an entertainer than chef, to be sure, but his passion has teenagers preparing roasted tomato flatbread instead of ramen. I’m not advocating that brands or their ADs post goofy content, but to put a point on it, your brand story needs to be…younger. In fact, major brands need to own a narrative that’s grounded in “Swiss Made since…”, but built on with compelling, updated elements.
Watch brands need to start stripping away the layers of dated, exquisite wallpaper. And if you’ve ever actually stripped wallpaper, you know it takes a plan, the right tools, and lots of patience. But, if done methodically with the full support of the brand owners, the image and perception problems of the big brands can be overcome more quickly than the education deficit.
More good news for the brave leaders is that, judging by the Instagram accounts of every established luxury brand, there’s nowhere to go but up for an early mover to stand out. I’m reminded of an Instagrammer who loves to post pictures of his Grand Seiko from the North Pole – garnering only about 30 Likes and no acknowledgment or amplification from the brand. Meanwhile, followers see wallpaper on their Instagram feed.
Discarding the stuffy perception of a luxury watch dealer will do more than open its doors to the watch enthusiasts – it will open new markets. Young women are just as inclined to be fascinated by the permanence, craftsmanship, and workings of a mechanical timepiece as men; they’re just not marketed to. Would a couple of fun-loving young women with southern US accents be taken as seriously at an AD (or boutique) in Geneva as a well dressed man in his fifties? Let that question linger a bit as you wind your Calatrava, because that answer could be, “yes”.
Combining the more approachable demeanor with a genuine passion and compelling narrative for the brand will go a long way to justifying the full retail experience and cost for customers.
The New Business as Usual
Luxury brands have quite narrow consumer segments. Unfortunately for watch brands, that segment is older, and younger buyers will need some formative marketing. But unlike the younger consumer in the 1980s, Millennials are no longer constrained by a suit in the office (or even an office). If you think they’re being marketed to effectively by the big luxury brands, take a look at some content from a few established independent brands like Bremont, Farer, or Autodromo. They are selling an experience with a product. They each have a defined narrative–whether it’s racing vintage Porsches at the Mille Miglia or going Mach 2 in an F-15 fighter jet. They celebrate and repost user generated content from enthusiastic buyers. Big luxury brands shouldn’t copy what the independents are doing, of course. But sponsoring golf championships and celebrities worked for the last generation.
Will watch brand teams use this moment in history to fuel a marketing strategy that sterilizes the online market before it has a chance to re-multiply? Will they become more relatable to younger and more diverse buyers? Or will they return to business as usual once the fog of this health and financial crisis lifts? Unless the answers are “yes”, watch brands and their authorized dealers will continue to be marginalized in both perception and profits.
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