Riding on a roller coaster
After a gap in 2002, when the total turnover generated by watch sales decreased to 1,902 billion Euros, in 2003 the amount increased to 2.4 billion Euros. In 2004, 2.3 billion was reported and in 2005 the prognosis is 2.4 billon again. The trend in watch sales was positive on a low level during the last years, while jewellery retail figures have decreased dramatically from 4,221 billion euros in 1997 down to an estimated 2.45 billion for the current year.
The overall demand for watches, therefore varies significantly: the highest rate in pieces sold are watches with prices up to 50 euros and for 50 and 100 euros both with 34 percent. Watches between 100 and 250 euros retail price have 20 percent of the share, five percent are sold in the range up to 500 euros, while a considerable seven percent of the watches sold cost more than 500 Euros.
Focussing on consumers, Zenith Germany organized a customer opinion poll with astonishing results. The brand asked potential buyers of Zenith products which features of luxury watches were important for them: 52 percent voted for a chronograph mechanism, while only 40 percent found a display of date important; 15 percent of the mostly male participants of the poll liked a power reserve indicator, 11 percent found a GMT function useful, seven percent wanted a moon phase indicator. Surprisingly, only five out of a hundred found automatic winding essential.
Cheap fashion watches are easy to sell, high-class timepieces, too. The mid price range is missing, which is most important for stores in ‘B-regions’ or suburban areas of big towns. Generally speaking, retailers dealing with expensive timepieces do not complain. Shopkeepers making their living with sales to people with an average income have suffered from low turnovers during the last year and will continue to do so.
While the real income of average employees has been decreasing since several years, the number of people with above average wages increases constantly.
Looking back at 2005, business progress is reminiscent of a roller coaster: in January turnover decreased compared to the same month in 2004. February business was like February of the previous year. In March, the figures looked better. In April the German jewellery magazine UJS wrote that there was a tendency of a welcome increase, “especially in sales of expensive watches and jewellery.” May also turned out to be quite positive, but in June pessimism was back. UJS commented “ … the economy is weak again, no increase in turnover.” July brought a very different situation: actually, turnovers shifted between a minus 28 and a plus of 16 percent. In August some people recognised “a change in trend”. September and October seems to have been quite satisfying for retailers. The latest available figures dated September spoke of a respectable average increase of some 10 percent.

Changing distribution and sales
Looking for a way to generate satisfying turnovers and profits, the big watch and jewellery groups like Swatch Group, LVMH or Richemont change their business partners, reduce points of sale in Germany and turn to direct retail business more and more. Swatch Group for instance, will reduce the number of retailers dealing with brands like Omega, Longines, Blancpain or other brands held by the group. This is, on one hand, part of a global strategy and follows, on the other hand, an European Union directive. This regulation compels suppliers either to provide everyone who asks for delivery with watches, for example even a supermarket, or to make contracts with selected business partners.
Marco Beltrami, Managing Director of Swatch Group Deutschland GmbH, had to sign some 9,000 contracts to be sent to retail partners of the group. “Until today, we had selective distribution contracts only for a few of our brands like Omega for instance. For our other brands we did not have formal licence agreements. Besides, we had different contracts for each particular country. Now we sign standardized European distribution contracts. This means, that the structure is homogeneous,” Beltrami explained in a UJS interview.
The German wing of the group, based in Eschborn near Frankfurt am Main, had to negotiate new criteria for a cooperation, including the volume of sales, space provided for presentation or service. “But there are a lot of dealers who do not fulfil the criteria now,” says Beltrami. “Obviously, we expect to loose some of our dealers. But that is the expression of a concentration process, which has existed quite a while.”


TO BE CONTINUED...
In the forthcoming days, the rest of this lenghty survey will be added to our europastar website.

Market Focus Germany: Part 1
Market Focus Germany: Part 2
Market Focus Germany: Part 3
Market Focus Germany: Part 4


Source: December - January 2006 Issue

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