Who could keep up with all the watches released during Watches and Wonders? HoDinkee! Editorially enabled by an online shop pimping 29 watch brands. Here on the one-man-band side of things, the horological Niagara left me bleary eyed, a bit bored and confused. How is this a good idea? The CEO of Hermès’ watches agrees that it isn’t, and provided bloomberg.com with an explanation for the Swiss watch glut . . .
After Switzerland exported more than 1 billion watches over the past four decades, luxury watchmakers are struggling with the paradox that they need to sell more yet make their products even more exclusive.
Some Swiss watchmakers reward sales managers too much for pushing too many products out into the market, according to Hermes’s watch chief.
“This remains a key illness of that business,” [Hermès watch unit CEO Laurent] Dordet said. “It may be less now, but as long as you have commercial people incentivized by key performance indicators, you will have overstock on the market.”
This is pretty much the same practice that helped GM on its long march to bankruptcy: channel stuffing.
When a watch leaves the factory, the watchmaker’s sales managers get a bonus – before the watch is sold. If the watch isn’t sold or ends up on the gray market, it’s no skin off the sales manager’s nose. There’s no reason for managers to want limited production, and every reason to lobby for increased production.
This is hardly the only factor driving the current Swiss luxury watch glut. The Bloomberg article also flags the COVID-19 pandemic’s obvious demand dampening effect and the rise and rise of the smartwatch. But the over-abundance issue is also a cultural problem; one that’s not so easily solved.
Driven by fear, Swiss watchmakers (and their competitors) are engaged in an endless (literal) arms race. If we don’t produce a constant stream of new watches the media will ignore us! We’ll disappear off the consumers’ radar! Besides, it’s all about choice. The more different models we make, the greater the chances of selling someone a watch. We’re on top of it!
As regular readers know, I don’t buy it. I reckon cutting the number of products and increasing the remaining watches’ profitability, marketing and sales is the best long term play. Avoid overchoice. Keep the brand tight! Of course, that assumes the big Swiss watch conglomerates could convince shareholders to think long-term. LOL. Meanwhile . . .
Swiss watch exports are still bumping along at the bottom, compared to 2020. Which wasn’t the industry’s best year. The industry’s convinced that a post-pandemic worldwide economic recovery will unleash a new “roaring 20’s” consumer spending binge that will restore it to its former glory. Yes, well, Rolex and Patek excepted, Swiss watchmakers are busy producing watches for a market that doesn’t yet exist.
Even if it a reinvigorated market soaks-up the Swiss watch glut, and then some, there’s still the problem of too many brands with too many models chasing a limited pool of consumers – that will continue to shrink as smart watches decimate low-end watch sales.
In short, unless the Swiss watch “bright shiny object” culture subsides, the Swiss watch glut is a systemic problem that will only be “fixed” when brands go belly-up.