Consumer optimism despite a weak dollar

April 2004

If wishes and hopes could make it so, the American watch market would be back up and running at full speed. Unfortunately, it's not. Though there are some signs that the market is coming back, the truth (which many people are loathe to admit) is that things aren't as good as brands and retailers would like them to be, but they aren't as bad as they could be, either.
Denis J. Boulle, owner, de Boulle (Dallas, Texas) feels there is growth in the watch industry, "particularly with the higher-end brands, which are doing very well. Last year, for example, we sold three Pateks in January and February, while this year we sold eighteen. With the higher-end brands like Rolex and Patek Philippe, the more you carry, the better you do. That certainly isn't true with every brand.”

Unique and timeless
Jan Rose, owner of Rose Jewelers (Southampton, New York) is careful in her estimation of current market conditions. “Things are fair,” she says. “I think that people are still being very cautious in their spending. You have to be creative and you have to have the right selection of product. I'm seeing a mixed trend of looking for things that are unique but that at the same time are timeless. Customers don't seem to be as trendy as they used to be, because if they are spending more money, they want the product to be versatile and more timeless. The good news is things haven't gotten worse and I am hoping to see an increase in sales. Right now any retail is tough, especially with the Internet, flea markets and more.”
Having unique product for the times seems to be the key. “If the product is right, then people are buying again,” says Sue Garvey-Welsh, Director of Communications, Piaget North America. “People are looking for unique pieces. We are doing very well with our diamond product.”
“People want something that no one else has,” agrees Stuart Sklar, President, Maurice Lacroix USA. “It's neat to be different. We have very exclusive distribution, under 350 active doors in the US. We have a nice base of great customers, and we are bringing on board some exclusive, blue chip retailers.
”I think there are a lot of brands out there and it will come down to relationships, a good distribution strategy by the vendors and I don't think you will see brands being in every single door,“Sklar continues.”Retailers won't put up with this. We want alliances with the best jewellers and we are going to protect those alliances."

High-end sales strong
High-end brands are doing pretty well, proving the notion that luxury goods do well regardless of the state of the economy.
“Sales are still strong for us in the US, we are still seeing a wonderful interest in our complicated pieces, as well as our collection,” says Tania Edwards, Vice President, Patek Philippe USA. “What we hear from our retailing friends is that the very high-end has stayed very strong and weathered the ups and downs of the market. That really reinforces that when people spend money they will spend it carefully.”
Even for Patek Philippe, though, it hasn't been a bed of roses, because of the very weak dollar. “The effect has been that we have had to put our prices up on February 15,” Patek's Edwards admits. “We have tried to avoid this - we had not put our prices up for six years, which is unusual. We are always trying to give our customers the best value. If we can avoid putting our prices up, we will, but we have to buy in Swiss francs, so we had no choice.”

Optimism for 2004
Ron Jackson, President, Girard-Perregaux USA/JeanRichard USA, feels good about the state of the US watch industry. “I've spent the first quarter with luxury retailers from all the major markets and with very few exceptions, they are very positive,” he says. “They had strong sales for the holiday, versus 2002, and they are optimistic about the coming year.”
Zenith, who hit a home run in the USA with their ChronoMaster Open, is feeling good about the future. “I think things are going very well for the watch industry,” Paul Ziff, Managing Director, Zenith North America states. “The American public is becoming more and more aware of why they should spend more money and get into the luxury watch industry. Generally, last Christmas was solid; retailers met or exceeded their sales goals. I see optimism that has been missing for four or five years - it's the most optimism I've seen for a long time.”
Zenith will capitalize on the Open by introducing several new models at Basel this year, including a ladies’ Open, an Open in the Port Royal case and more.
Moderate price brands seem to be doing well, as they operate in a price range where a purchase doesn't have to be as carefully considered.
“In general, business for everyone is fairly decent,” says Sue Rechner, President, Swiss Army Brands, Inc., Victorinox Swiss Army Watches. “Most department stores did OK, 2% to 10% up. All of our retailers had a good year. All of them are reporting sales increases over 2003, and there is a higher level of profitability as well. Generally, the business is stabilizing and sales are increasing. There is a sense of consumer optimism.
”Consumers, however, are looking for something unique,“Rechner continues.”A lot of what the consumer wants is a complete experience from a retailer or a brand, from the initial sale to personalized sale to follow up. Customers want to be catered to and taken care of."
Seiko has been strongly targeting this moderate price range (under US$ 1,000) with great success. “We are seeing the return of that US$ 500 to 800 price category customer, and there is phenomenal growth,” says Les Perry, Executive Vice President, Seiko Corporation of America. "There is a huge void in that price category, so there is opportunity.”

Election year = uncertainty
“The Seiko brand, because it has such great recognition, has proved that we can sell product in that price category,” Perry continues. “We might have had some sceptics last year when we introduced these new products, now we have believers. Most retailers are in the positive, both in watches and jewellery. That's why I am pretty encouraged. I know what we have coming and I see the market opening up.”
Most brands and retailers remain optimistic about the year ahead, though as it's an election year here in the US, that might make people be even cautious, not knowing what to expect from a new administration.
“I feel that the economy is coming back slowly,” Denis Boulle concludes. “We don't really hear any customer whining, which we had before. That may change with the election coming up, which might hurt our business because people will be uncertain about the future.”