he e-commerce takeover is final proof that the old retail model needs to be rethought. It is high time to reinvent it by separating the experiential and commercial functions, and the margins that go with them.
The traditional role of retailers was to offer a complete “package” combining the sensorial experience and the sale. Their remuneration was thus based on these two missions and took into account both the costs of representation and the sales costs. A boutique was both a showcase and a sales venue. The arrival of e-commerce has severed these two functions irrevocably. It is now possible to sell without offering the sensorial experience, and to offer the whole product experience without selling, because customers can take advantage of the physical infrastructure of a traditional retailer and then finalise their purchase on the internet.

Image by Fabian Oefner - disintegrating Audi Auto Union TypeC

This behaviour is going to escalate and become generalised. It is perfectly normal and legitimate for a customer to seek the best price for the best service. As high as it may appear to the uninitiated, a profit margin of 50% for a retailer on the sale price of a product – which is an exception in the watchmaking world, it must be said – has to cover far more than just the cost of the sale: an exorbitant boutique on one of the best streets in town, impressive display windows, sofas in the best leather, top-level sales staff, champagne and bouquets of flowers. You can’t show a luxury watch in a papier mâché shop in the middle of an industrial estate. The luxury experience has to be complete, otherwise it isn’t luxury.
What is abnormal is that the same margin should be granted indiscriminately, as it is today, to retailers who invest millions every year in their boutiques and to obscure players whose principal source of income is a virtual shopfront on Amazon, Yahoo or Chrono24.

Dividing the trade into two functions

The model we’re putting forward is extremely simple: it consists of dividing a trade into two functions: sales on the one hand and experiential promotion on the other.
Dematerialised sales require no major physical structure while offering the same service as far as delivery times, guarantees, after-sales service and convenience are concerned, whether physical or virtual. Consequently, they should be remunerated on the basis of lowest cost for greatest efficiency, that is, a margin of 10-25% of the sale price, whatever the channel used.
As for the “representational” function, it has to be dissociated from the sales margin and only be attributed to players who actually practise it, according to new parameters which have nothing to do with realised turnover, such as visitor volume, surface area and display quality, showcase area, training of sales staff, type of associated services and so on.
Redistributing roles in this way is the only way to keep the dependent businesses alive so they can sell physical sensorial experiences. It is also the only way of getting out of the damaging logic of the grey market and discounts, since the trade margin offered will no longer allow prices to vary so wildly depending on operating costs.
Lastly, it will give rise to genuine “experience professionals” instead of sales, since remuneration will only be very partially indexed to pure sales performance. It will also be more effective than all those product training campaigns that all businesses insist on holding at great cost and with no success.”

FEATURED IN THIS SPECIAL WATCH PRICES REPORT:

 The great upheaval
 Reshuffling the price cards
 Price constellation
 It’s the fault of…
 An objective look
 Denis Asch “I wanted to sell watches, not prices”
 Price hike between 2000 and 2010, then the slump
 All china’s fault?
 “As soon as a price goes up, they look elsewhere”
 The internet has changed the rules of distribution
 To raise or lower prices?
 A paradigm shift for distribution
 “Retailers need to turn into gallery owners”

Source: Europa Star TIME.BUSINESS/TIME.KEEPER Dec. 2016 - Jan. 2017