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How to Handle High-End Watch Discounting

Retail Therapy
By JCK Staff
This story appears in the October 2010 issue of JCK magazine
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How to Handle High-End Watch Discounting
Donnie Thompson

Q: What’s the best way to deal with the high-end watch industry’s growing concern about discounting?
—Donnie Thompson, CEO, Windsor Jewelers, Augusta, Ga.

A: “Discounting has been a problem over the years, so we’ve done what we can to align ourselves with companies that still allow us to hold margins, like Rolex. Breitling is another watch brand that’s still good on margins. I’ve noticed that the real crazy discounting issues come from the very high-end and esoteric watch brands, and that’s not where we’re at. But we’re not naïve enough to think there isn’t pressure on other sectors of the watch industry. For now, our strategy is working well for us.”
—Sean Dunn, vice president, J.R. Dunn Jewelers, Lighthouse Point, Fla.

“Discounting has always been a tough area for us, especially when you’re dealing with a certain caliber of customer that has become accustomed to not paying retail. That doesn’t matter, as we strictly follow the manufacturer’s retail price and margin guidelines. Some buyer incentives we’re offering customers include gift cards and watch-related gifts like a watch winder. We’re fortunate to have a certified Rolex technician on staff, so another incentive we offer customers is an extra one-year store warranty. Some customers say they’d like the discount, but most of them come around to accepting and liking the gift-with-purchase or extra warranty incentives.”
—Cammie McLeod, manager, Gause and Son Jewelers, Ocala, Fla.

“This issue is twofold: How are retailers being affected, and how legitimate are these guidelines? ­Jewelers know their customers and what considerations/incentives it’ll take to close the deal. But, those incentives/perks/considerations still have a cost to the retailer. The retailer’s days of lazy sales are gone. Know your product, know how to romance, and don’t focus everything on price. Strong salespeople with passion have a huge impact on a brand in any store across the country. The experience the retailer offers impacts the pricing greatly. Meanwhile, some brands aren’t exactly leading the industry by example with steeply discounted watches found online and watches going out the back door to the gray market. The powerful brands, steadfast in their pursuit to create their brand, have proven the demand and pricing of their products are unwavering. Discounting is communication from the retail client that your brand’s value is not commensurate with the retail price. Therein lies the problem. There is only so much a retailer can do without the help and focus of the brand. Creating demand, prestige, and, most important, ‘value’ and ‘worth’ has to start with the brand. When this is done, there is less focus on the price of a piece and more focus on simply ‘having the opportunity to purchase it.’ ”
—Armen Darakjian, owner, Darakjian Jewelers, Southfield, Mich.

“The watch industry put itself in the middle of this issue. They created high-priced, overly complicated watches that older people don’t like or can’t figure out. And, given the global economy, young people can’t afford them. In the middle are the watch companies trying to sell a large supply of watches with demand coming from a small group of collectors. Also, this is a global economy. These high-end watches can be purchased in Asian hubs such as Hong Kong and Sing­apore. And, with the euro in decline, these watches are more affordable in Europe. We can effectively compete with after-sales service, but the manufacturers can take up to a year to fix a watch, which is frustrating for the retailer and the customer. We can service the customer as best we can while offering buying incentives. After speaking to watchmakers overseas, I think that they’ll be returning to a ‘back to the basics’ approach with new watch designs that are less complicated.”
—Solly Refael, owner, Daniele Trissi LTD, Scarsdale, N.Y.

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