Watch market news

2021 Predictions: UK Watch Retailing Is Heading For Disruption

For decades, the UK mainstream £50-£1500 watch retail sector has been domimated by big jewellery chain stores; H Samuel/Ernest Jones, Goldsmiths, Chisholm Hunter, Fraser Hart and Beaverbrooks. But that old fashioned retailing via bricks and mortar stores, often located inside shopping malls, is facing a Covid reality check. It doesn’t work very well in a pandemic and when the hysteria about Covid-19 finally subsides and people realise you can never defeat a virus, you just live with it, then all those stores will have to be ruthlessly audited in terms of operating profit margin against the online sales portals that big chains have rapidly expanded during lockdowns.

The results will highlight how much it costs to keep shops open, pay staff, security, insurance, rates, rents etc. and contrast those overheads to an online sale of a Michael Kors, Raymond Weil or TAG despatched from a warehouse somewhere near the M42.

More importantly, all brands – not just the Swiss – have realised during Covid that they can sell their watches direct to the public, they don’t need retailers. In fact, many brands have seen huge increases of over 60% in terms of sales volumes.

Do you really care if you buy your Carrera direct from TAG, or a Goldsmiths branch?

This is the real reson why major disruption is going to take place in 2021. I’ve heard on the retail grapevine that Seiko are no longer accepting any requests from shops, independent or chain stores, to stock their watches. Fact is, Seiko don’t need retailers, the brand name and its values are well established. Seiko, like other brands, already has its own boutique, single make stores. The Swiss are also well advanced with this strategy of course and it can only be a matter of time before Rolex decide to ring-fence their brand by pulling all franchises and setting up their own dedicated network of flagship stores in London, Edinburgh, Manchester, Birmingham and perhaps another three or four locations. Once they have that empire in place, then Watches of Switzerland should start getting nervous, twitchy even. Maybe that’s one reason why Watches of Switzerland has recenly launched an online store with Vee24, see the press release here.

In truth, for many prestige brands you only need between one and three UK service centres to deal with warranty and servicing, and then sell most of your stock online. People who want a Submariner or Daytona know exactly what they want; the case size, colour, model year, bracelet type etc. They don’t need a guy – or a girl -in a waistcoat and embrodered shirt telling them that the new movement now has a 70 hour reserve and improved superlume. They don’t care! They just want to own a Rolex.

But that’s top end of watch retail you say, the 10K-20K stuff, surely you can’t sell £100 Timex watches online and say `go bollocks’ to all the watch shops. Of course you can, and many of those mid-market brands will have no choice than to embrace online only and end their dealer network.

Let me give you one example; Sekonda/Accurist/Limit are distributed by one company, who have a team of sales reps on the road, all earning circa 30K, plus company car to maintain, stock to insure etc. The watches sell wholesale for about 50% of the retail price, so a £100 Accurist is 50 quid to the dealer – so long as they buy at least 25 watches, or 50 examples of the Manager’s Specials, which are half price. So the UK distributor of a Sekonda Seksy that retails for £100 may actually get about £30 for that item, once all the costs of distribution are factored in.

The alternative is that you set up a website, hire say 4/5 staff who all live at home with their parents and pay them 22K a year each to run the site, pack the watches and deal with basic warranty problems like replacing a watch crushed by the third party courier company driver. That courier company charge you about £3 per item to deliver within 3 working days, £5 for 24 hour express delivery. Suddenly, you are getting £100 retail for that Sekonda Seksy watch – not the retailer – and your distribution costs have dropped dramatically, plus you no longer have to worry about retailers undercutting each other, because YOU set the UK price, countrywide. You just boosted your profit margin by about 20-30%, trebles all round for the shareholders and directors.

Yes, there will always be independent watch shops that deal in pre-owned Swiss and some entry level watch enthusiast brands like say Hamilton, Tissot or Zodiac. You can make a living in a wealthy town like Brighton, Hale in Cheshire, Keswick, Stirling, Penzance, St Helier etc. Or a brand could sell mainstream sub £300 watches at retail outlet villages like Bicester or Cheshire Oaks, where people go for a leisure day out and so are open to being marketed to, and sold to, by people who know and love their product. But all those mall based watch/jewellery shops at Intu Trafford Centre, Westfields, Merry Hill Dudley etc. are doomed because our whole way of life is changing. Governments are determined to isolate us, control and mask us, restrict our movements with cycle lanes, suburban roadblocks, ULEZ charges in city centres etc. all in the name of climate change.

What do you think that will do to shopping habits? It will destroy them. It will will force us to buy more online.

If Rolex buyers can deal direct with a wholly owned Uk subsidiary, they may well buy more products in the long run. Great opportunity to build yet more brand loyalty.

Prediction: The chain store closures will begin in February, and continue throughout 2021. Swiss brands will announce more branded boutiques, launch slicker websites, loyalty/rewards clubs, their own apps complete with insurance partners, QR coded, private courier tracking of packages etc. By late 2022 one – maybe two – of the big jewellery store chains is bound to go bust once Richemont Group, Swatch, Breitling, Rolex and the other big brands all pull their products. That decision is inevitable, in fact the Swiss are gearing up for it as their launch of blockchain backed, coded watch ID shows – you only need that strict customer ID process if online is going to be your preferred retail channel.

Without those high margin watches the big jewellers will not be able to afford to keep their shops open, even with rent reductions offerd by cash-strapped Mall owners. Fact is, the staff, business rates, insurance, CT/VAT, security costs etc are so immense that High Street retailing can only work if you’re selling £15-25K worth of stock per day on average. When you remove a brand like Tudor or Rolex from the window, you also remove one of the primary reasons for customers to visit the store in-person.

 

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