Earlier this year, Patek Philippe announced it wouldn’t be introducing any “novelties” for 2020. No surprise there. Why stimulate demand and spend precious marketing money in a Coronageddon sales void? Watchpro.com reports that the Swiss watchmaker is reversing course. Patek Philippe dealers will get new-for-2020 product. What’s that all about? . . .
The official statement:
From April 27 Patek Philippe has gradually reopened its production facilities and all other departments, strictly following the sanitary measures and directives of the Swiss Federal Office of Public Health.
Following the reopening, Patek Philippe has decided to launch a selection of its 2020 new models that will be released over the year.
On the face of it, Patek’s new product release is a simple matter of singing Happy Days Are Here Again. Are they? Happy days, I mean.
That decision was initially welcomed by dealers wanting to preserve cash rather than invest in new stock, but a retailer that contacted WatchPro last night said it was “great news” that there will be fresh models to excite customers later in the year.
Hang on. Is Patek’s decision to release new products good news or bad news? That depends whom you’re talking to.
Authorized Patek Philippe dealers lost at least two months of full retail. While they off-loaded a number of watches via phone sales, their cash flow disappeared. Poof!
As the world slowly reopens for business, the dark clouds hanging over their heads are hardly gone. The personal luxury goods market is experiencing a 25 percent or greater contraction for the year.
No wonder Patek Philippe dealers were grateful for Patek’s product pause. It gave them breathing room to use their “spare” cash to pay the rent and salaries, rather than forking it over to the corporate mothership for new inventory.
With today’s decision, Patek is forcing dealers to pony-up. That’s right, forcing. Authorized dealers that say “no” to Switzerland risk losing their franchise.
From Patek’s point-of-view, new product going out the door guarantees income – regardless of whether or not the watches sell. Keep that in mind: Patek sells to dealers not customers. You could even say releasing the novelties is a classic example of channel stuffing. A practice GM used before it went belly-up.
There is a wild card here, one our man Adams raised in his post Grail Watch – Availability Increase?
There are customers who want – and can afford – the latest Patek “novelty.” Generally speaking, the new watches are both rare and expensive. The profits are big, the numbers small. Bottom line: Patek Philippe dealers can’t survive on whale meat alone.
In a normal world, Patek novelties’ “halo” effect helps sell bread and butter $40k watches. We are not in a normal world. So Patek could reward dealers stumping-up cash by increasing the supply of watches the dealers know they can sell: steel Nautili and Aquanauts.
I know: Patek jefe Thierry Stern swore on a stack of bibles he wouldn’t increase production of steel watches as a percentage of total sales. “Today, I have to be very tough on the quantity,” Stern told HoDinkee. “I don’t want to see steel taking over the lead in the whole collection in terms of material. So we have to be vigilant.”
Notice the word “today” in Mr. Stern’s quote? If he changes his mind, so what? Patek is a family firm. Dealers will be delighted – they’ll open their wallets for new product with pleasure. Customers will be over-the-moon. Cash will flow. Who’s keeping track of these things anyway? Patek and The Truth About Watches. Big deal.
On the other hand, before Coronageddon, Patek was selling (to dealers) 62k watches a year. One hopes they have enough cash and credit to not give a shit about a short term solution to a problem that may last “only” a couple of years. Or may not be a problem at all next year.
Patek Philippe is in the business of making money. Like any other business, they will do whatever it take to git ‘er done. Come what may, as always, we look forward to seeing what their watchmakers created. Watch this space.
[Product photos courtesy #m.h.uhren]