 reveals that U.S. retail watch sales are dead. What happens now?){kind=link}
I recently suggested that this is the week to ask for a 50 percent discount on a new watch. If you make your way to a bricks and mortar store, look out for tumbleweeds. U.S. retail watch sales are dead. In states where retail is still a thing, high end jewelers who are open are selling zero watches. As in none. And as you know . . .
Coronageddon is set to continue for at least a month, possibly up to six, maybe more. It’s safe to assume that physical dealers will shut their doors within the next couple of weeks, regardless of any government directive. There’s simply no point keeping the lights on.
Now that retail watch sales are dead, new watch inventories are stuck in limbo. Retailers don’t hold masses of stock. The real losers in that regard are manufacturers and distributors.
The big boys – OMEGA. Rolex, Seiko (empty factory above courtesy timezone.com) – don’t practice just-in-time production. They maintain a sizeable inventory of finished goods ready to ship. Distributors also keep inventory on hand (especially in the run-up to Valentine’s Day and Christmas). Both groups now have a large stock of watches with no place to go.
Watches aren’t perishable. They can be stored for a long time without degrading. But no sales means no cash flow and no cash flow means the same thing it means for people who sell NBA T-shirts: financial disaster. No question: there will be casualties.
Meanwhile, if watch manufacturers didn’t stop the assembly line when the Asian market disappeared, when their supply of Chinese-made parts evaporated, they have now. Goldman Sachs reckons it’ll take six months for China restore the supply chain to the West. Yes but – watchmakers will have laid off skilled workers by then, and there’s still the matter of unsold inventory.
At this point, the only sales action is online. A fact that dealer-free watchmakers see – rightly – as a business opportunity. Here’s the pitch from Yema, makers of the most excellent Navygraf:
With our logistics partner DHL, stay safe at home and take advantage of our secure delivery and return service without having to leave home. The safety of our customers is paramount, with DHL we have implemented an operational protocol for simplified delivery for customers who do not wish to sign at reception of their parcel. For your safety and that of the couriers, the minimum distance of 1 meter between individuals will be respected.
Before Coronageddon, there was a fairly gentle tug-of-war for online sales between authorized dealers (ADs) and manufacturers – save Rolex, which leaves sales to dealers. ADs weren’t entirely bothered because a) look and feel b) customer relationships and c) dealers give discounts while manufacturers always charge full price online.
I predict the gloves will come off, as manufacturers try to milk their one remaining market. Could we finally see online discounts from watchmakers? Doubtful, but the full retail policy protected dealer margins. With no dealers to kvetch . . .
Meanwhile, emails from the online pre-owned watch sellers – Tourneau, Govberg, Authentic Watches, etc. – don’t reek of desperation. But there’s definitely a whiff of uh-oh in the air.
Hoping to get ahead of the drought, Bernard Watches has dropped prices on 100 pre-owned watches (for real). WatchBuys brings us news that previously sold out German and Swiss watches (e.g., Sinn, Dornblueth, NOMOS and other models) are now in stock. Here’s Watchbox CEO Justin Reis’ always look on the bright side of life Coronageddon email:
For so many of us, watches represent enjoyment, entertainment, community, a way to escape from the ‘everyday,’ and so much more. With much of the world confined to their homes, we want to virtually come together as a global watch community. During these unprecedented times, we hope that our content and community can provide a welcomed respite from the news of the day.
Mr. Reis is not wrong. There’s a lot of therapy to be had by indulging your horophilia via the Internet. Hopefully, you’ll spend some of that time here. But one thing’s for sure: it’s a buyer’s market for watches. Assuming that anyone wants to buy.
Watching the Mecum car auction from Glendale last week, and I understood why sellers would hold out for their price and not sell. But by Saturday when a number were still walking away I had to question their sanity. Where do they think that market is going to go? The financial crash in 07/08 killed that business for years, and some cars have never sold again for the prices of early 2007. I would think if you are in the used premium watch business you are screwed if you think the prices of January 2020 are going to be seen anytime in the next year.
Even if dealers shut down for the duration (Like has already happened in the Bay Area), you’re going to see some desperation because “Rent’s a b****.” These guys all have high fixed costs – rent, employees (if they don’t just furlough all of them), inventory financing, debt service, etc. There’s going to be a need for cash starting pretty quickly (30-60 days from shutdown is when invoices will become due) and if you can get in contact with them, these people are going to be ready to deal. Look for the 3rd party sites to be innundated with supply as dealers try to offload this stuff without raising the ire of their mfrs.
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