BASELWORLD/SIHH 2008

Ah yah..., the sweet smell of spring brings new beginnings. The new beginnings, like every other spring means the start of the 'only' real watch and jewellery show where over 60% of the luxury goods industry congegrates to view and explore new opportunities.

This will be a very interesting year in terms of seeing how my favorite "watch players" tackle the weak North American market while across the ocean foreign markets see exponential growth. As a buyer myself, I can tell you that with inventories at historic highs and the lack of turnaround, dollars will be tight and wholesalers will finally feel the squeeze. The squeeze will be the same one which we have been feeling since late fall 2007 and buyers will finally be able to call the shots rather then our ''partners'' (which are more like enemies since they usually dictate product assortment in some way or form).

I have already obtained leaked product from some of the watch companies but I promised I would wait till the show opens to share them with the public. So far in the low to middle-end segment nothing really hit me. Perhaps, manufacturers should get more feedback from industry insiders like us before hand.

MOVEMENTS AND LABOUR THE LONG-TERM FUTURE OF THE WATCH INDUSTRY

Within the next four years, the watch industry will go through a massive shift. This presents a problem as none of the wholesalers, retailers, and after-sales service centers will be ready for this shift in the immediate future. The “issue” in question is relatively simple, however we as retailers must adapt our long- term strategies now, just like the manufacturers are (or at least the ones which who acknowledges this as an issue). Swatch group’s slow retreat of their movements to other companies is a sign of the times which can be seen as a “BIG ISSUE”.

Just like predicting the next “hot seller” in a showcase or that “must have” timepiece (which clients insist on waiting for on yearly intervals), we as an industry must foresee this issue as the next crisis in the watch world.- In other words, this is a smaller scale version of the “quartz revolution” or as most people refer to as the time as when “quartz” movements overpowered and conquered the market in the 1970’s.

The idea of just being aware of this forthcoming crisis is a simple form of pro-activity even though it is really a micro issue to some whom those who just shrug their shoulders or sigh heavily and do not really see anything but a hindsight price increase. However, it is very hard to ignore especially since the writing is on the wall.

Let me give you a scenario. Let’s say that Swatch group implements an immediate ban of distribution on an ETA 2892 (an automatic/date movement). Think about how many people they contract they’re their movement to outside their “umbrella group”. Let’s say we use Baume & Mercier as an example. Baume & Mercier would suffer as some of their family’s families like Hampton and Capeland along with more popular volume luxury price points of mid-$2,000 to mid-$3,000 range would be greatly hurt. Now some of you might may object and say I’m wrong and tell me that Baume & Mercier has the force within their vertically integrated umbrella of the Richemont group to keep them afloat. Incorrect!, even though Baume & Mercier is the sixth oldest brand in watchmaking; it is one of the Richemonts’ lower end or “volume” brands. Even when we are given factual data, i.e.: LGI (Luxury Goods Index), that state that highest growing segment in the watch business is one which does not belong to a sub-unit like Baume, then why should Richemont invest in sustaining movements in their watches. Richemont’s opportunity cost to manufacture these “lower-end movements” would give them a lower return on investment and would cause their cost of goods manufactured to skyrocket (at least in the short to medium term). Albeit, it would be a disregard to Richemont’s philosophy of would be disregarding they’re philosophy of subcontracting and diminishing variable costs would be and in fact be contradictory to their strategy. Why should Richemont Group be subject to build more common movements at a less skilled and profitable segment when such a group has brands such as Jaeger LeCoulte and Vacheron, who innovatively create their own movements at an even higher end segment

The writing is definitely on the wall,wall; anybody whom is even remotely tied to this business knows that there is a shortage of watchmakers in the world. This is both an internal and external problem which plays a huge part in the future of the business. Even though , most “umbrellas” are slowly and meagerly attracting young apprentices while offering to cover the cost of their education as an incentive, can the shortage kill our business in the long run? The answer is not so black and white. However, it is relevant and ties into my initial topic- if there are no watchmakers whom can work on basic and/or above- average movements available in these brands currently whose is to say that a 3 to 4 week after sales turnover will not only be short but a blessing as to what will be waiting for us in the next few years in the future.

Oh yah, not to mention, cost. If you think companies like Rolex know how to brainwash customers on their high “standards” of after- sales, while knowing how to consistently charge, get ready for the overhauls that will cost a nice percentage of what the watches value is on a regular basis, not only just for a Rolex.

In conclusion, if you’re you are the type of person who just collects without thinking about long-term issues, then happy collecting. ! However, if you’re a more “rounded” collector or conscious lover of fine timepieces, then stop and think the next time you think consider adding a nice, different look to your wrist or watch box. There’s more to timekeeping then what’s on your wrist.

The Canadian Watch & Jewellery Market: 2007 Year in Review

Even though the luxury segment on the whole is one of the least effected sectors within the economy in North America because of the general lack of volatility, however, this year (2007 Fiscals) has been sub-par to the normal trends. If I shift focus to the Canadian luxury segment there are dozens of so called "expert" opinions of why this is happening but never arrive at a consistent conclusion.

Well the reason is simple, our CANADIAN DOLLAR.




The sell-through of watches and jewellery this year has been lower with the end to a what I call a "Dismall" Christmas from the east to the west coast. You see Canadians which shop for the "brand names" of the world like the Cartier's, Patek's, etc... enjoy shopping around. These types of clients do not only shop while on vacation in Florida or while in the Islands, but they shop while away on business all the way in China. I can't begin to tell you how many phone calls I have gotten these past three months between clients to personal acquaintances asking me what I thought of deal 'XYZ'. My answer is consistent, pay the duty and do it!!! We can't compete anymore, which will probably be a hot topic for another blog posting, therefore the responsibility lies with the various suppliers and manufacturers to react accordingly (i.e.: the big brands).

This brings me to the second root of the problem- Travel. According to the basic laws of opportunity cost, when faced with a decision to either stay and buy, or flee and enjoy, most people are taking the latter half. You see with Baby Boomers getting older they want to enjoy there time and gain from an experience, and when the Canadian dollar is at par the opportunity is more enticing. Even if I took another demographic segment this theory holds constant due to the fact that "PAR" means "EVEN" no matter what your age or language.

In conclusion, with the dollar where it is suppliers of watches and brand name jewellery, after being spoiled for many good years, will finally feel the pinch from authorized dealers this coming year and will succumb to their wants and needs otherwise look for these brands to be on the street. This means leaner inventory, and right-sizing, oh and don't forget the under performing lines which some people are breathing life support into- pull the plug their history. However, the one piece of advice I can give you, is buy lots and lots of diamonds and gold that's something to invest in while the dollar continues to hurt the market, you might not thank me today or tomorrow but talk to me in five or ten years.

Welcome

Good day Ladies and Gentlemen,

It is customary to introduce myself to people whom I am unfamiliar with to demonstrate respect and to create relationships. My name is Sam, but I will refer to myself as the Watch and Diamond Guru. After working in the luxury business for some time, an insiders opinion of what makes things "tic" was long overdue. In the luxury goods business, building and fostering relationships is the underpinning which drives our success. Nonetheless, I will not be attempting to sell you anything tangible, rather make you think. The issues which I will discuss are either about diamonds or watches; more specifically brands, trends, events, and even some business management issues such as strategy (or the lack there of) which pertain to major luxury companies and a Canadian hint as well.

Enjoy!

- Watch & Diamond Guru