In recent years, many watch companies have limited their distribution to preserve their elitist status. Today, though, the once-rarefied luxury market is growing crowded. Watch brands on all levels are upscaling their product and image to gain more “exclusive” distribution, add market share, and raise their brand’s perceived value.
This trend goes beyond limited-edition launches. It’s trading up on a grand scale. “Everybody’s trying to bring up the quality level,” says Michael Pucci of Wheeling, Ill.-based Genender International, a moderately priced watch company that markets an upscale, limited-edition Levi’s pocket watch. “As the world gets smaller, price becomes less of an obstacle. I call it the barber syndrome. The barber only has so many hours in a day. The only way to get more dollars is to raise prices or call himself a salon.”
The logical route is to discover new opportunities for growth instead of duking it out in one’s current competitive niche, where there may be less opportunity. It’s also a conscious effort to attract better independent, department store, or jewelry chain doors.
Stores lure luxury brands. Many retailers are also going upscale to gain access to exclusive brands. They are redesigning their stores and improving the quality of their jewelry in order to carry more exclusive, profitable watch brands. “I’m definitely trading up my price points because it’s easy,” says Jennifer Halter, watch buyer for New York-based Saks Fifth Avenue. “High-end pieces are really salable. We have at least doubled our average retail sale from five years ago. People are more willing to spend, and I’d rather sell one $10,000 watch than a few $1,000 watches.”
Traditionally, U.S. distributors have offered several brands that cover each watch industry segment – like the Movado Group and SMH. Now individual watch brands are repositioning themselves upmarket, and not just on the high end.
Watch brands are moving upscale by zeroing in on their best-selling product and riding it as far as it will take them – which sometimes allows them to cross over into new distribution channels. Casio has done this riding the wave of its red-hot G Shock line, which has become its “exclusive” product. Movado did the same with Vizio. Tag Heuer, Gucci, and Raymond Weil all rode the success of popular models to increase their watch industry and consumer cachet – notably with Tag Heuer’s Kirium and 6000 series, Gucci’s “G Watch,” and Raymond Weil’s Parsifal.
Initial backorders on these watches confirmed their sizzle, and the good word spread from there. The buzz and sales for these three brands gradually broke barriers, giving them opportunities as entry-level timepieces for luxury retailers. Gucci repositioned by moving away from a fashion watch label to a respected Swiss watch. Tag Heuer repositioned itself from just a sports watch to a fashion piece as well.
Ideally, many of these watch brands prefer to move upscale in image, not necessarily price. But by launching higher-quality products, many brands increased their average price, which has led to higher average retail sales, to the delight of retailers nationwide. Thanks to a 70% sell-through on Gucci’s G Watch diamond watches, Saks’ average retail sale for the Gucci brand catapulted from $350 a few years ago to about $800, according to Halter. And its catalog will showcase two Bertolucci watches in its Poeme collection retailing for $36,000 and $16,000.
Like Gucci, Bertolucci is boosting its consumer luxury presence this fall by pushing high-end diamond watches from the top range of its line. To reflect Bertolucci quality, all the diamonds in these watches are full-cut and of VVS1 or VVS2 quality with F and G colors. If more than 1.5 ct. weight, the diamonds are VVS1 and D color.
Making a $4,000 watch an easy sale. “When you think of Bertolucci, you think of a $3,000 to $4,000 steel and gold line,” says Jim Imhoff, president of Bertolucci USA. “Now people will see these diamond pieces and relate to the brand in a different way. And the $3,000 to $4,000 watches will be an easier sale.
“Our best-selling watch in units is a ladies’ 18k gold Vir watch with a diamond bezel and dial. We just have to go up from there. U.S. retailers didn’t really know about this product. The perception of Bertolucci will be different.”
Even watch brands like Anne Klein, with traditionally department-store distribution, are upgrading their watch lines in order to reach jewelry stores. New brands Calvin Klein, Emporio Armani, and Joseph Abboud all launched with product at or above the usual price and quality level of most fashion watches.
Moderately priced brands such as Hamilton and Seiko are leaping into the luxury stratosphere with special, yet limited, models or collections. Watches such as these go beyond limited-edition showpieces. They’re designed to expand each brand’s product range to reach new retailers and consumers. However, these brands are expanding their range without abandoning their core customer.
Upscaling can be a dangerous game if not planned well. Consumers can’t be fooled. They won’t fall for surreptitious price increases for no reason.
Upgrading quality is a safe bet. But a watch brand needn’t increase prices to improve quality. Consumers want sapphire crystals, water resistance, deployant clasps, and generous warranties – not sticker shock.
“I think that Seiko [Kinetic] chronograph with all the different dials is a cool-looking watch,” says one watch-industry source. “But are people going to spend $2,000 on a Seiko? Wouldn’t the average person spend $2,000 on a brand like Omega, which is accepted at those prices? Introducing an expensive watch before you build your image to that point is not a good idea. Once the image is there, then you can go for the status.”
“I don’t think any brand can go upscale just with price points,” says another watch executive. “If so, it will price itself right out of the market. Consumers are savvy nowadays.”
Same brand, different model. For this reason, some say it’s better to move upmarket with a watch line by a completely different name – like Fossil’s Emporio Armani. The same advice is given when brands go down in price for volume business – like Raymond Weil’s W1 or Franck Muller’s Karbon.
These upscaling or limited-edition strategies showcase how capable a brand is, raising its overall image. But this goes deeper for Seiko. Its Kinetic Chronograph is a limited-edition model for now, and it will likely sell out.
Kinetic technology and Arctura are actually the moves that sparked Seiko’s upmarket business.
“Before we had Kinetic, Seiko’s core prices were $125 to $350,” says Takashi Wakuyama, recent past president of Seiko Corp. of America. “We’re still strong there. But with the introduction of Kinetic and Arctura, we were able to break the $700 barrier, which had been perceived as the ceiling for Seiko. We didn’t forget about our volume business. We just focused on our higher-priced timepieces to boost Seiko’s perceived value and image. So we expanded our price range. After Kinetic’s success in these ‘higher-end’ stores, other jewelers jumped on the bandwagon.”
Other watch brands are sticking to their guns, solely concentrating on improving quality within their core price range. Citizen introduced its Elegance Signature Collection with features found in costlier timepieces: solid stainless-steel links, polished deployant buckles, chronographs, lacquered dials, and water resistance – all for less than $500.
Anne Klein jumped into jewelry chain-store distribution by improving the line’s features. The brand dumped gift-with-purchase (GPs) programs while adding Swiss movements, sterling silver, and 18k gold accents, all with the specific intention of differentiating the $110-to-$250 Anne Klein from the $95-and-under Anne Klein II.
“We had to create a new niche and change the consumer’s mind set,” says Marnie McLaughlin, corporate spokeswoman for E. Gluck, distributor of Anne Klein watches. “It was painful to do this because we had to cut back on some things – like GPs – that department stores want from you. We had to create some brand restrictions to market Anne Klein in the direction we thought it should go. We’re seeing it pay off now. We’ve made a segue into jewelry stores.”
Can the trespassing of some brands into the luxury territory eat away at profits of those already there? Maybe, but with growing affluence in the United States, the luxury-watch market is growing quickly. Also, many luxury companies are expanding downward with Generation X-friendly timepieces in the $2,000 range, a popular price point today. So the trespassing is mutual.
This upscale trend mirrors the rise up the corporate ladder of young professionals, who desire these “aspiration timepieces.” Companies want to become the future Rolex, which is as much a status symbol as it is a watch.
There’s still plenty of business to be had in the moderate price range, though, even if it may not be as trendy. After all, the average price for a watch in the United States is $75, vs. $250 in Europe, according to Pucci of Genender International.