The SIHH was abuzz with rumors, which is actually a “normal” state of being during an industry-wide fair. News gets spread, gossip gets disseminated, and – of course – the whisper post tends to fabricate facts. In fact, the first day at GTE, the watch world was already abuzz with the fact that Richemont had “sold” Roger Dubuis to the PPR group. Confirming with higher-ups of both PPR and Richemont on Sunday night, I learned there was no fire to this smoke. (At least not yet.)
However, one “rumor” circulating was more than just hearsay. It is now very obvious that Richemont is openly following a new retail strategy that heavily relies on boutiques for its brands, which will also most likely encompass e-tailing in some form in the future. It is now known that first steps toward making these goals concrete have been put into effect.
Cutting doors
In 2011, watch executives already proudly told the press that brands were consolidating business and decreasing the number of “doors,” meaning points of sale. Press presentations at the SIHH 2012 allowed us to see that this weeding process has continued over the past year. In fact, it has continued so much that some key retailers have been entirely cut altogether starting in the new Richemont fiscal year beginning on April 1. Some of the retailers affected by the new policy include world-renowned jewelers such as Westime in Beverly Hills, California, Cellini in New York City and Hour Glass in southeast Asia.
It is not hard to see that these retailers are all positioned in prominent, tourist-heavy locations – locations, in fact, where they will compete with Richemont's own boutiques for both local and tourist business.
Michael Tay of Hour Glass was very Zen about the new strategy and explained to me that he actually sees the move positively. “I saw this coming months ago and made provisions,” he said. “Anyone with half an eye saw this coming.”
Turnabout is fair play
This strategy is not new, and the Swatch Group has already been following it, more or less quietly, for the last couple of years. At first, the group explained that placing company-owned or franchised boutiques in the same city – and in some cases even the same street – as jewelers already carrying their brands would increase sales for the jewelers in question. Whether this was the case is hard to measure. A controversial interview with Swatch Group CEO Nick Hayek Jr. published last year in American special interest magazine “Watch Time” explained the group's dissatisfaction with behaviors retailers exhibited during the recent financial crisis – a sentiment I have heard echoed by other heads of sales within the group.
It is no secret that during the crisis, jewelers created a serious cash-flow problem for manufacturers, but that could well have been a reaction to behaviors exhibited by manufacturers in the boom times. Word has it that groups and other powerful manufacturers were in the habit of pushing unwanted wares onto retailers and even making certain demands about window positioning and competing brands. Naturally, it is hard for an outsider to say what is true or untrue and right or wrong with all of this. However, it seems to this writer that possibly more understanding is needed by both sides in a world increasingly ruled by the greenback.
The upshot
The upshot of what I have been able to discern seems to be that classic retail structures are disintegrating. In the last few months, I have often heard industry people talking about the gradual disappearance of the retailer as such. While I'm not sure that this will happen entirely, I do think that the current situation presents quite an opportunity for non-group brands, small and mid-level brands and independents, who might become the next darlings of brick-and-mortar retail. Consumers may also profit from this as they would now have the opportunity to get to know brands they had not yet had access to, many of which are of equally good quality as those belonging to groups.
At any rate, Baselworld – which opens its doors next Thursday – will certainly shed more light on what the current situation is. It will be interesting to see how things have progressed at retail in the last six weeks.
