December 27, 2015
by Ariel Adams
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.
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 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 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.
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.
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.
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.
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.
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.