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The Luxury Watch Show The World Needs: An Annual Mega Closeout Sale Directly From Brands

The Luxury Watch Show The World Needs: An Annual Mega Closeout Sale Directly From Brands Featured Articles

As far as I know, there has never been a show like this in the watch world, and there may never be one. Nevertheless, it is interesting to consider the outcome of a luxury watch event dedicated to selling new watches directly from the brands to consumers at appreciably large, once-a-year-only discounts. Let me paint the picture of how this might work and the problems it might solve.

The Luxury Watch Show The World Needs: An Annual Mega Closeout Sale Directly From Brands Featured Articles

Most high-end watch makers today follow a rather traditional business model that involves selling timepieces in wholesale bulk to retailers and distribution partners around the world. That means watch brands are incentivized to sell large volumes of watches before they ever get into the hands of consumers.

The Luxury Watch Show The World Needs: An Annual Mega Closeout Sale Directly From Brands Featured Articles

The natural outcome of selling watches in wholesale bulk is that there is no real plan for what to do with unsold watches. Some brands actually offer to buy back unsold inventory from retailers, but for the most part, there is a large problem of what to do with watches that were sold into the marketplace and never purchased by end consumers.

In other industries, these unsold goods enter various “clearance” channels. The most popular forms of “luxury clearance” sales (also known as closeouts) are in the form of “outlet” stores or other specialized discounters that attempt to preserve the integrity of new product sales by offering special places and sometimes sales seasons to offload unsold inventory.

The Luxury Watch Show The World Needs: An Annual Mega Closeout Sale Directly From Brands Featured Articles

The watch industry does things a bit differently, and “official” sales offered directly from brands to consumers are extremely rare – if not totally unheard of. While it is possible to get a discounted brand new luxury watch easily, that sale is not offered directly form the brand. The problem is that the watch industry does not like to officially advertise discounts of any kind, but that doesn’t hinder the proliferation of unsold goods that can only be moved via discounting. This interesting situation results in a prolific (but underground) closeout watch sales industry online and via the gray market. That same gray market that the watch industry warns consumers to avoid, is a market that they themselves feed. At various periods during the year, known gray market dealers purchase unsold stock either directly from brands or from their retailers at pennies on the dollar.

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The Luxury Watch Show The World Needs: An Annual Mega Closeout Sale Directly From Brands Featured Articles

The traditional deal with gray marketers is that the watches would “disappear” via back-channel sales and not be “visible” to the public. That may have been the case for a number of years, but over the last decade, the information power of the internet has made the very popular closeout luxury watch industry more popular than ever. If the watch industry has any interest in preserving the façade of a retail pricing model and convincing consumers to more regularly pay retail prices, they must take some proactive action again the gray market that they themselves perpetuate.

The Luxury Watch Show The World Needs: An Annual Mega Closeout Sale Directly From Brands Featured Articles

One interesting solution is a watch show dedicated to private sales directly from a brand to consumers. Imagine an annual event where watch brands beautifully display 2-5 year old watches that have not sold at retail in the first-hand marketplace – ready for immediate (private) discount to an interested buyer.

The Luxury Watch Show The World Needs: An Annual Mega Closeout Sale Directly From Brands Featured Articles

I am not talking about insultingly low 5-10% discounts over retail prices. This modest level of discounting just isn’t enough to move consumers who have been holding back over the years. Such a sales event should be designed to move watches either via very attractive prices or deals brands are willing to make in order to move watches. Again, this would all occur in private at events controlled by the brands.

So imagine waiting in line to attend a several-day event where you come armed with spending money ready to buy new watches – with warranties – directly from the brands. Watch brands could even begin to develop their own private databases of consumers so that such closeout sales are even more discreet.

The Luxury Watch Show The World Needs: An Annual Mega Closeout Sale Directly From Brands Featured Articles

I do think that watch brands will be able to make such sales both classy and attractive, but also done in ways that do not remove the excitement of buying brand new watches. The sale of brand new watches is often hampered by the reasonable belief from consumers that those same watches will be available at discounts in the near future. If those same consumers know that, outside of select peer-to-peer pre-owned sales, those watches will remain at full retail prices for at least a few years – when they may go on sale if they haven’t all sold out.

The Luxury Watch Show The World Needs: An Annual Mega Closeout Sale Directly From Brands Featured Articles

There are, of course, issues with having luxury watch sales shows ranging from marketing to security. With that said, I think if at least a few brands put their heads together and were willing to participate, they could have once-a-year events (perhaps even around the world) were consumers need to travel directly to the show and all purchases are private and remain offline. It might even be part of the fun to keep the precise watches available for sale secret until people attend the shows.

Such a luxury watch clearance sale event – if designed properly and done with the intention of eliminating or slowing down the gray market – could enormously improve the retail market both in reality and online, as well as give consumers a needed discount event where otherwise unsold watches could be acquired directly from the brands.

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  • Boogur T. Wang

    Should the number of watches allowed for purchase be limited to…say…3 per client?
    3 per client per event? 3 per invitation ticket per event?

    • spiceballs

      Agreed, as there are always those (slick) grey market operators who might otherwise scoop up many offerings for resale?

      • Boogur T. Wang

        That was what occurred to me.

  • I wonder what the Authorized Dealers for the subject brands would think of the idea (since it does not allow them to “play” directly). I suppose the private sale suggested is based on brands buying back all old stock that authorized dealers want to unload (for credit on new stock I guess). But if the private sale prices are above the wholesale buy-back prices, I still think the ADs will feel somewhat left out. Hard to make everyone one happy, but still an interesting concept.

    And you know the prices and which references were available/sold will show up publicly on forums within hours. So it makes you wonder if people will pass on buying an older watch from a dealer’s showcase if they think that they can get it for a lot less a few months later in one of these private sale. Sort of like knowing that car dealers like to move last year’s models at a discount once the new model year cars show up on the showroom floor.

    • egznyc

      Of course, many – though not all – buyers will sit and wait. I love the idea, as I tend to be a patient buyer in search of a good deal. Most consumers are in search of a good deal, but fewer are patient, I think. The risk is not getting something at all, but that just adds to the thrill.

    • Chaz

      We have an AD here on the island that sells a LOT of brand new, unworn watches as “pre owned” with a slight markdown from the current retail sticker, sometimes even while showing said watch in the current lineup section. Not offering boxes or papers and instead offering their own company’s warranty.

  • Raymond Wilkie

    ” Usually sir this timepiece retails for $180,000, for you on this black watch day , its your for the low low price of $165,000 “

    • Twinbarrel

      No that’s your regular AD/retailer offer. At these events I imagine they’d offer it for $100,000 or even better. You would figure that if a watch like this has been sitting idle in your shop, your paid AD-merchant price hasn’t been making you any interest/dividents. Quite the opposite, so moving it quick elsewhere helps you out as a merchant too rather than being stuck with it. Oftentimes an AD gets a piece like this with one of their clients in mind that has indicated intrest in it… and gambles to add it to their inventory.

      • Raymond Wilkie

        I kinda just meant it as a wee joke 🙂

  • iamcalledryan

    Really like the idea, but if it requires a flight and hotel and you are in the sub $10k range it might still not be enough to beat duty free on a flight you already paid for to take you somewhere awesome!

    I agree with Mark’s point and think the ideal would be to let the AD’s do it, but with the brands pulling the trigger and telling you (perhaps individually via “invitation”) what and how much. That would also solve the travel point.

    Great Sunday read, I couldn’t agree more with your point about the Internet and the grey market. There was an elephant in the room, and now that elephant is dressed in neon.

    • somethingnottaken

      And travel becomes even more problematic at lower price points. Consider a $2000 watch at half price – adding international flight and hotel room are going to wipe out the $1000 savings. And that’s before considering the time and inconvenience of travel.

      • spiceballs

        Agreed, but if the destination warranted it, one might (as a previous commenter alluded to) kill two (or more?) birds – – -?

  • Steve Bowden

    Thanks very much for this interesting article! There is a concept in publishing called ‘Remainder in Place’. Where, when an important book has failed to sell, the bookstore receives a credit on all their stock and can savagely discount a book. But this again creates a problem in that you would have an upscale store with a ‘clearance’ or 50% off sign…which sends the wrong sort of message. Perhaps though, this can be done discreetly in that a store could contact their customers on their mailing list…and perhaps the regulars could be convinced to buy an ‘extra’ watch for themselves or someone else. But it requires a lot of trust between retailer and manufacturer to accomplish this.

    • iamcalledryan

      Agreed. And it works in niche fashion too. I remember way back in the days when I used to wear remotely fashionable clothes, I got on a list for a particular brand and they did 3-day pop-ups in random galleries or warehouses and they would clear things for 70% off. It was low-key enough that only the hardcore fans of the brand were aware of it, so it didn’t turn off the new customers who were just discovering the brand through the front door.

  • Julian Guitron

    Sounds like an outstanding idea! It shows your excellent knowledge of the industry. This would be a tremendous hit with the larger group of costumers that appreciates the watches but can’t afford the retail prices. I agree with the comment that there would be pushback from the ADs unless they benefited from offloading their unsold pieces back to the brands for the events. Even then, if they organize it, I would have less of an incentive to go to the ADs holding off to the yearly event.

    Bottom line is that I hope it happens because one of my bucket list goals is to visit Basel one of these years just for the experience! If the event offered a deep discount it could kill 2 birds with one stone (really 3 because my wife would kill me upon returning!).

    Great writing! Happy 2016!

    • Death Certificate; Cause of death – new watch

      • spiceballs

        perp – wife or suicide?

        • Bad judgement (at least according to my wife if it was me, ha ha).

    • egznyc

      Would she kill you because she had missed you dearly (now that would be illogical), because you had acted selfishly in going off to Europe on your own, because you had spent family funds, or some other reason(s)? (Mine would for each of #2 and #3.)

  • Twinbarrel

    I have combined traveling to purchasing a timepiece. Even intercontinental destinations could more than cover the difference in price of your local market and add a nice weekend to remember. In terms of this concept it could definitely be worth it and I’m guessing other retailers would be standing in line with their cheque books also.

    Interesting read and fascinating concept that might actually provide the industry with an automatic movement.

  • iamcalledryan

    Another problem is that this requires the brands to work together in solving a problem that they struggle to openly admit. They all know that they all have bulk aged stock, but they will still deny it to the death when asked by a competitor!

    • egznyc

      Anyone ever gone to an AD and said, “all these watches being displayed are very nice, but show me what you have in the back of some drawer, which you didn’t have any success selling. Make me a good deal and we will both be happy”?

  • Marius

    In my opinion, this is a great idea, yet, I don`t think it will ever materialize.
    Firstly, most major brands are starting to open their own boutiques everywhere, so the AD gets pushed out. Secondly, even ADs don`t offer very large discounts anymore. Moreover, in Europe, for instance, getting a discount is next to impossible, and, if it is offered, its usually for super expensive watches. Lastly, as George Kern, CEO of IWC explained, the watch industry is mostly focusing on perception and lifestyle marketing, so the idea of a annual closeout would go against it.

    • Chaz

      “…seriously question the real value of watches.” Now we’re *really* getting philosophical! 😉

      • funkright

        Value is based on perception, the perception that others place on what we may find valuable. If others didn’t place value on what we perceive as having worth where would that leave us?

      • Marius

        What I mean by that is that brands, such as Patek, for instance, will tell you that their watches are expensive due to the amount of hand finishing, materials, bla bla bla. Now, if the customer sees that his $26,000 Nautilus can, suddently, be bought at a closeout for $12,000, even if he has no idea about watches, he will start to question the brand`s pricing and quality policy. So, for his next watch, he might completely avoid retail and focus only on the annual closeouts.

  • Mark Baran

    To respond to Mark, as an AD for a number of brands, I would offer the following thoughts. First, let me say that I like Ariel’s idea. As a part of evolving sales channels to meet the needs of 21st century customers, it is a step in the right direction. But only one of a series of steps that would benefit the entire industry chain. Secondly, I do not believe it would have any adverse impact on traditional brick and mortar retailers. That impact has already been felt and is a matter of history and record, given the growth of the gray/aftermarket channels on the internet. This is one of those topics on which I could pontificate for many more words. Better to let it just stop here.

    • No, by all means do share your insights and suggestions.

  • somethingnottaken

    Many buyers live far from the luxury boutiques. Grey market dealers selling (and publishing their discount prices) via the internet make watches conveniently available to these buyers. An in person sale event would undoubtably be held in major city and thus would only be accessible to those who already have access to existing boutiques. Making the event invitation only further reduces it’s reach – grey market discounters make a brand accessible to buyers who otherwise couldn’t afford it and are likely to only buy one or few watches from the brand. These buyers aren’t known friends of the brand and thus would be excluded from an invitation only event.

    For the top priced brands these factors would matter less – anyone who could afford their watches could afford to travel. However, some would still be unwilling or unable to do so for non finacial reasons (everything from being ill, disabled or busy with work, to abhoring the inconveniences and indignities of international travel).

    For an official closeout channel to rival the reach of existing grey market dealers, it would have to include online sales. Otherwise, why not just allow existing dealers and distributors to publicly advertise discount prices during the specified sale period?

    • Mark Baran

      Your last two sentences are very interesting.

    • Or an simultaneous live & on-line dutch auction? Just spit balling here.

      • somethingnottaken

        Also, the optimal solution could be different for different brands and different price points.

  • IVA the LT

    I don’t think this will ever happen due to one simple fact: beyond simple quartz pieces, watches are now considered a “luxury” item.

    This will always make it challenging for watch lovers who don’t care about lifestyle marketing or perpetuating an image of wealth to participate in their hobby to the fullest. I have two dozen watches, and until I buy one with the “crown” on the dial, no one I meet day to day is going to give them a second look (including my Luminor and it’s giant crown guard). Yet the retail value is approaching $25k on them, with an actual price paid of closer to $12k. That is a serious disconnect between perceived and actual value. I’m quite confident that the companies who sold me these “grey market” pieces profited at the prices I paid, otherwise, there would be no point in being in business.

    I would love to purchase all of my watches at an AD, but for the most part it just doesn’t make sense. When I wanted to see the Oris Diver Sixty-Five prior to purchase at the AD, the rep was quick to point out it was “only” $1,850 and that he had other people interested, before even taking my info. Needless to say, he never called me when the piece came in, and I ended up purchasing at Jomashop for $1,050 out the door. I’m pretty sure the piece at the AD is sitting in the case collecting dust. Giving the AD who blew me off $800 (plus tax) just for the purchase to be “official” and to secure my (whopping) 2-year factory warranty would be an absurd proposition. Not only is it highly unlikely that this SW200-1 powered watch will have any flaws in the next 10 years, let alone 2 years, but if there was an issue, there is no chance the repairs would cost $800.

    • egznyc

      While there is always a chance the repair bill would be outrageous, I have to agree with you – I like my odds and think your approach makes a heck of a lot more sense than paying top dollar. Sure, some folks might like the customer service they get at an AD, but if you know what you like and what you want, how beneficial is that individualized attention?

  • A local jeweller offered a Seiko GPS Watch with an RRP of $2700 (AUD) for $1300 after it had been in his window for about four months. I noticed recently it has gone. The markup on watches must be incredibly high which means that decent discounts should be available. If you do a search for watch prices, you find a range of prices between ADs, Ebay, and Amazon. Your idea is a good one and would be worth a trial if nothing else.

    • Larry Holmack

      Well…just from my experience in a Sporting Goods store that sold the Swiss Army line of watches…I know the margins on them was rather substantial. I purchased two of them…over a couple of years….for 10% over our cost…and yeah…margins are pretty high on watches. My sister-in-law was a store manager at a jewelry store in a local mall, and she confirmed the same to me….margins were quite large.

      Would I like to see that kind of event…oh yeah!!! Bring it on!!!

    • Beefalope

      I agree — the margins must be astronomical. The luxury watch market, compared to other luxury markets and certainly compared to non-luxury goods, is relatively limited. There simply are relatively few people willing to spend thousands on a watch. So the only way all of these stores can exist and provide a living to the numerous people in the industry is with a massive markup. I choose not to play the game and refuse to pay AD prices.

  • WmOrt

    I don’t understand just what $$ are in this scheme for the Brands. Just how are they better off than the current “system”.
    You imply that the Brands are holding sizable inventory that is >2-3 years old.
    I don’t believe that this is the case – I believe that it is the Dealers who are stuck with the inventory.
    In any case, Brand/Manufacturer cost (when fairly calculated) may be only 10%-20%-30% of the selling price. This is the Luxury Goods Business – direct cost-of-manufacture has nearly nothing to do with selling price.

  • Krystoph Roric

    This is a really fantastic idea.

  • Bert Kanne

    In the long run, it’s going to the Internet for manufactures/brands, ADs, gray market resellers, etc. Brick and mortar business is too expensive to operate and remain competitive for the watch business.

    • Beefalope

      I would love to see this happen, but I don’t think it will. If anything, at least in the short term, retail stores are expanding. In this day and age, with at least theoretically better informed consumers due to the Internet, I cannot figure out why this is. I will simply never understand why someone would pay, let’s say, $8k for a watch that they could get for roughly half that amount on the Internet. The only possible explanations I have for this are the power of impulse purchasing and the possible belief by many buyers that any watch sold on the Internet at a steep discount surely must be a fake.

  • Beefalope

    Only three things are without limit: space, human stupidity and watch company greed.

  • Richard Baptist

    Great idea. I’m not sure where the watch manufacturers head is at around this proposition. There would have to be buy in from a big boy manufacturer and this would hopefully inspire other brands to act? It would be a way to get their wares into more people’s hands and that can’t be a bad thing to generate repeat sales.

  • spiceballs

    This I assume in contrast to the “pre-owned” auctions that are regularly held here in HK that have silly reserve prices.

  • Thaiwatchdog

    Love the idea! I think it has to be done a bit differently for watch industry though since they’re very particular about “image”. And with the luxury watch industry, image is everything.

    1. I would get an trusted official marketplace perhaps in auction type system like Philippe does for Only Watch

    2. Not available to public at large as this could have adverse effect in the whole image that drives luxury watch industry

    3. Instead only registered owners are invited. You can even make it less than 3-5 years ownership. This way, it rewards existing owner who don’t feel cheated by paying full price and allow them to make additional purchase (where they can choose to re-sell via back channel not officially sanctioned by the industry…

  • Rexy

    What a fantastic idea. The reason it has taken me so long to buy a top tier brand is the lack of discounts. Over the years I have bought what are often termed “mid tier” brands (rightly or wrongly) because I could get reasonable discounts at retail. I could walk in to one reasonable quality watch shop that might sell 5-10 brands, and get a fair and reasonable discount because they were competing with other brands internally and other watch shops close by. Case in point. I have purchased Oris, Tag, and most recently Longines because I got very reasonable discounts on them. I ignored the shops that gave pitiful discounts, and actually walked away from the sale multiple times (and across multiple days) because I didn’t feel the discount was reasonable. And by reasonable, I don’t mean cheap or throw away sales, I mean a fair discount from retail pricing. Something in the 20-25% range – enough to be saving you a significant amount (let’s say $1k) and make you feel like you are getting value for money. This is I believe one of the most powerful motivators for a sale – the belief of a true and reasonable discount. The biggest problem with the top tier brands, especially lately, is they are trying to remove competition from the market. The are trying to actively reduce competition and limit sales to their own shops/channels. The discounts are woeful or non existent. It’s not about the price of the watch – it’s the principle. I don’t feel comfortable giving my money to organisations engaging in competition-limiting or cartel like behaviour. It’s also not just about watches either – for most purchases I like the thrill of the purchase. The research, the learning, the discussion about reasonable and fair pricing. And trying to get a reasonable deal. So it’s not behaviour that is specific to luxury watches – for many people getting a good and reasonable deal is just common sense. So brands that try to discourage that, and use cartel like behaviour to limit competition do more to turn me off than anything else. If this idea of having reasonable sales helps “drive the deal” in the watch market I am all for it. I hope some of the watch brands take note. We have money to spend, but we instinctively don’t like being taken for a ride. I know there is a (small and wealthy) segment of the market that like to pay full retail and consider it crude to ask for a discount, but I would guess they are but a small fraction of the people hanging out for realistic, decent discounts that would purchase in their droves if reasonable and real discount cycles were used by the big brands. I certainly know I would, and my collection would grow quickly if this tactic were adopted by the top tier brands occasionally.

  • Brad

    Not entirely on topic but related: Manufacturers should sell their watches directly through their websites. I am in the market for a Rolex Explorer I and since it will be my first high end watch I want to buy it new and in an official capacity – I want to be 100% sure it is real and I want the manufacturer’s warranty – even if that means paying full retail. I should be able to go to rolex.com, add it to a shopping cart, instantly send Rolex the MSRP via paypal, and receive it in the mail 2-5 days later. That’s how I buy essentially everything else in the world at this point, including electronics which can cost just as much as a Rolex. Instead all rolex.com can offer me is a list of brick and mortar ADs, none of which are within a 3 hour roundtrip drive of my house – and if I want to skip the long drive and the awkward jewelry store experience, I am forced to buy on the gray market. I realize there is some irony in expecting a non-anachronistic way to buy a mechanical wristwatch, but come on it’s 2016.

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