Things are not the greatest in the United States right now, however. The mortgage crisis has hurt the economy, gas prices, though not high in relation to the rest of the world, are the highest they have been in a long time, and with the uncertainty regarding the upcoming Presidential election, it seems that consumers are loathe to spend any money, worried about the future and its impact on their personal financial situations. In fact, many people are finally saying the dreaded ‘R’ word - recession.
Having set the stage for an economic slowdown, however, it has not really materialized at the watch retail level. Retailers and brands are still reporting strong sales and increasing interest in the entire middle to high-end watch sector.

How’s business?
Retailers report good sales, with the best category being luxury timepieces, regardless of the storm clouds on the horizon. “Right now, business is very good in all categories,” says Denis Boulle, President, deBoulle (Texas). “We are very close to 50/50 on watches and jewellery, but watches are usually the stronger of the two. The luxury market is getting stronger and stronger every year. Our customer base is growing with new generations ’discovering’ fine timepieces and increasing their appreciation for fine craftsmanship. Additionally, we are seeing many of our customers becoming watch collectors.”
Brands like Girard-Perregaux are experiencing strong growth. “Business is up double digits over last year and the new products of the SIHH 2007 are now reaching the showcases of the North American distribution, well in time for the holidays,” says Ron Jackson, President, Girard-Perregaux and JeanRichard North America. “We have many people who can afford better watches than they have chosen to own. As more of these people understand the non utilitarian pleasure of owning a fine watch the market will grow.”
Luxury has traditionally been relatively immune to economic changes. “There will always be the luxury customer who likes to indulge in fine jewellery and time pieces,” says Robin Levinson, Co-Owner, Levinson Jewelers (Florida). “I feel that the climate out there has been a bit sleepy but everything is cyclical, so I think things will turn upwards eventually.”
Some retailers report that business has grown despite major economic downturns. “Business is fantastic,” says Melissa Oster, Co-Owner, Oster Jewelers. "We have only been in business for four and a half years and we are exceeding our expectations. The United States market is definitely still growing and is stronger than ever.
“We opened Oster Jewelers immediately following 9-11 and during a war and a bad economy,” she continues. “During that time one might say the future looked bleak but we knew it was the best time to open our store. Things could only look up, right? Well, business has exceeded our expectations. We feel passionately about our industry, our store, relationships with our vendors and our customers and the service we offer and we believe that our business will continue to strengthen at a healthy pace. I am very optimistic about our future and the future of our industry.”
Retailers are noticing a shift in consumer attitudes, however. “We are seeing particular retailers with strong comparative sales growth while there are some that are challenged to maintain last year,” says Les Perry, Executive Vice President, Seiko North America. "Many report traffic in the stores is down.
“There is no question in America we have a market for items of entitle-ment,” he continues. “Whether this is cars, motorcycles, electronics or unique watches. This is a population where the desire is not limited by a budget. Look at the proliferation of luxury in the American market and look at its double-digit growth.”
Watch customers are becoming more discerning and appreciate fine timepieces better, which bodes well for the future of the watch industry in the United States. “Consumers are mindful that a watch is no longer just a means to keep time but also seen as a mechanical wonder, a work of art, and a statement of culture and education,” says Steven Holtzman, President, Luxury Watch Distribution. “Timepieces with value and historical significance have become more and more desirable. Watches have moved beyond the obvious status symbol and are increasingly communicating one’s appreciation for the art of watchmaking. Consumers are interested in trying new brands and concepts but the primary attention is in acquiring something special.”

Buying trends
In the United States, whose tastes often drive the world watch market, big watches are still in, diamonds watches continue to sell out and customers, as they become more sophisticated, are looking for something unique.
“Buyers are moving towards individuality and less main stream branding; perhaps wanting to be different than the rest, more exclusive,” says Chris Wardle, President, Bozeman Watch Company. Bozeman has been growing steadily, up 250 percent over last year.
It’s not easy serving American customers, who not only demand great product, good pricing, but want to enjoy the experience as much as their purchase. “For our customers, their shopping experience must exceed their expectations in order for them to feel good about shopping,” says Denis Boulle. "We offer our clients ’The deBoulle Experience’ and they appreciate the attention and service we give them every time they walk through the door. The service we provide is just as important to us as the product we sell. We want to make our customers as comfortable as possible be it through our in-house jewellery and watch service centre or something as simple as offering them a delicious cappuccino while they are walking the floor.
Robin Levinson sees a trend away from black tie events, so she is pushing wearing luxury watches and jewellery every day. “Customers have been looking for more casual watches and jewellery,” she says. “I have been promoting a trend to wear the big diamond necklace with jeans, and some fabulous accessories - a great watch, a great bag, great shoes, a cool jacket. My trend is to wear the fabulous things every day. It is all in the attitude that a person projects.”
Increasingly, people want things that other people cannot have. “A significant trend in the watch industry is toward exclusivity,” confirms Luxury Watch Distribution’s Holtzman. “Manufactures have recognized the magnitude of watch collecting and for this reason are releasing new models in limited numbers. Many young ’boutique brands’ are making unique timepieces in very small numbers. Other companies produce limited numbers of certain models or collections in a series which add to the desirability of their products.”
Most brands and retailers know that the world is shrinking and it’s rare to see a trend in only one country - the trends in the American watch market are those happening worldwide, and vice versa. “Today, Americans are more exposed to the luxurious environment and trends from abroad,” says Benoit de Clerck, President IWC North America. "The world is getting smaller and smaller; therefore the buying trends are more universal and accessible to a greater audience. The watch industry has definitely taken advantage of this increase in buying trends resulting in a huge growth spurt in the United States.

The Internet
The Internet is a huge issue for the American market and needs to be addressed. More than any other country, Americans have embraced the web for buying just about anything - clothing, books, DVDs, electronics, cars and luxury watches. According to a new survey by Burst Media, more than half of consumers (50.7 percent) expect to complete either some or all of their holiday shopping online this year, compared with 37.6 percent in 2006.
“The Internet has introduced fine timepieces to the masses, people who would not have access to them otherwise,” says Denis Boulle. “It also gives a more complete index of a brand’s line, something tra-ditional retail stores cannot do. If brands are serious about cleaning it up, they should locate where the watches are being sourced and close those accounts. If they are not serious, there will be enough stores like deBoulle who will refuse to sell these brands and all those brands will have left is the mall chain stores.”
For many brands and retailers, the Internet is a double-edged sword. “The Internet has had a positive impact on our brand in regard to helping us communicate our activities and our products in more detail then we can achieve through our print campaign,” acknowledges Girard-Perregaux/JeanRichard’s Jackson. “However, the presence of branded watches on unauthorized sites creates confusion with the end consumer as to what if any discount from the manufacturer’s suggested retail price should be expected. The Internet is the most difficult point that we as an industry face at the moment.”
The consumers don’t know who they are dealing with when they buy on the web. “These outlets have a wide variety of business practices,” says Larry Pettinelli, President, Patek Philippe North America. “In some cases watches sold through unauthorized dealers have travelled through many avenues before finally being delivered to the end-consumer. These timepieces are often missing paperwork required for service or have another owner’s name listed on the certificate. Our biggest fear is that if we cannot assure the consumer of quality, then the image of Patek Philippe is, as a result, in jeopardy.”
Brands have to do something about the Internet, or face the erosion of their authorized distribution. “The consumer continues to utilize the Internet to seek information prior to buying as well as establish a bench mark for prices that they are willing to pay in the brick and mortar en-vironment,” says Michael Pollock, CEO, Hyde Park (Colorado). “When the manufactures realize one day that the independent market has shrunk by 33 percent in the last few years and continues to do so, perhaps they will clean up unauthorized channels of distribution.”
Most brands keep things clean by having a zero tolerance policy regarding Internet selling. “At Carl F. Bucherer, we do not authorize or promote any sales of our timepieces on the Internet and our strong stand in this area has kept our brand very clean and free of any challenges that luxury brands are facing when their products are marketed via the Internet,” says Ron Stahl, President, Carl F. Bucherer North America.
Brands are experimenting with different ways of doing things on the Internet, rather than just a blanket ‘No selling’ on the web. “One of my personal goals is to really monitor the Internet in order to prepare to play a leading role when deemed appropriate,” says IWC’s de Clerck. “It is imperative that we continue to analyze its development and accept its important role in everyday life. When it comes to retail and marketing, the Internet is the fastest growing and most influential marketplace in the United States and IWC needs to become a larger part of it. In today’s market, the Internet is unavoidable and we are working to find the best way to get involved.”
Selling on the Internet is a challenge, because it doesn’t match the established distribution model of protected territories and serving the customer, face to face. “I think we need to figure out a way to embrace the Internet so that the consumer is protected,” says Zenith’s Ziff. “We don’t want them buying grey market watches that may not be auth-entic. We also need to preserve the luxury experience that is so much a part of our value and message. So it’s not an easy trick and I don’t pretend to have the complete answer. But the Internet is so much a part of our lives that I think it’s foolish to ignore it in our business models.”
Some brands hope that embracing the Internet will lead to a change in the way watches are sold there. “We have seen more and more of our customers creating websites to promote their stores,” says Jeffery Roth, President, LWR Time Ltd., distributor of Fortis in the United States. “I am comfortable with the Internet as a vehicle to do business. As Internet retailing in general matures it will be much less about bargain hunting and discounting and more about the values we hold traditionally, such as good service, product knowledge, trust, honesty.”
The bottom line is that the Internet is largely responsible for the widespread interest in fine timepieces. Without the communication and information available, watches might still be in their infancy in the United States of America. “Today we find it extremely rare for customers to not have done their homework before walking into one of our stores,” admits Andrew J. Block, Executive Vice President, Tourneau LLC. “The brands will somehow devise a way to allow the retailer to transact on-line. I would imagine that this can be done by having the retailer meet certain inventory and sell-through criteria before they are allowed to sell on-line. Obviously, the brand has to restrict pricing and also protect trading area boundaries.”
Some brands, like Seiko and Citizen, have allowed Internet selling and are no worse for the experience. “We have taken a position of working with the Internet and web based communication,” explains Seiko USA’s President Les Perry. “We have an Internet policy that our author-ized Internet partners have followed for more than a year. It has become a valuable tool. Authorized Internet retailers follow guidelines much like the brick and mortar.”

Service issues
Service is a huge problem for most brands in the United States and it will only get worse: the combination of more mechanical watch sales and the continued lack of quality watchmakers will mean more waiting for consumers to get their watches fixed. Americans are used to instant gratification and it’s difficult for a retailer to tell a customer that it might take weeks or months to get their watch fixed.
Many watch brands are combating this by setting up their own service centres in the United States, to cut down the time needed to transport the watches. That doesn’t solve the volume issue, but can help speed up the turnaround times.
“Service is the biggest problem,” says Denis Boulle. “It does not matter how beautiful the watch is if the service behind it is poor. Almost without exception, factory service is either sloppy or several months long. The amount of resources put into the service department by a brand is very telling.”
Brands have to fix the service issue or a day of reckoning will not be far off. “Any business can sell but successful businesses provide superior service,” says Melissa Oster. “We are only as good as the service we provide and if the manufacturers fall behind in their service then we cannot deliver to our customers. Customers become very impatient if they have to wait more than a few weeks for a repair and that can make or break a loyal customer and cause them to switch brands.”

Lead times and delivery
Another problem that brands and retailers alike talk about is the lack of available product.
“We, as an industry have, by good business, good timing, good fortune etc. created a large demand for high-end mechanical and automatic watches and now we cannot easily satisfy it,” says Zenith’s Ziff. “Fortunately, the clients have been willing to wait but we shouldn’t run the risk of frustrating them or pushing them to purchase some other luxury item. Since Zenith manufactures all of its own movements in house, we have an edge here in controlling our own destiny to a greater degree. But we still rely on some components from outside suppliers and this has caused stress in the market for the entire industry.”
It’s vital to be able to strike when the iron is hot, and many retailers are frustrated by a lack of product. “The newest and greatest have always been slow on delivery but it seems that even the basic pieces are slowing down and we can’t sell what we don’t have,” says Denis Boulle.
Tourneau is one of the United States’ biggest retailers and they are well aware of the challenges if there isn’t enough product. “We see difficult-ies with the brands’ability to deliver sufficient product to meet current demands,” says Tourneau’s Block. “The growth of the Asian market has diverted product from the United States We are also concerned about the value of the dollar versus the Euro and Swiss Franc. I’m not sure whether the market can sustain continued price increases.”

The future
Without a crystal ball and a fortune-teller, it’s hard to really say what is going to happen in the North American market in the next year. Most brands and retailers are cautiously optimistic, aware of how large and relatively untapped the market is. The United States market is still going strong. Certainly, this strong market cannot last forever, as these things tend to go in cycles, but brands and retailers are committed to ‘making hay while the sun shines’.

Source: Europa Star December - January 2008 Magazine Issue