onsumer behaviour is changing rapidly. More and more potential clients come in to a shop to look at a watch and try it out, then go away and buy one online. Given that retailers are still carrying too much stock and inventory, these unsold watches then end up feeding the grey market. In short, the current model no longer works.
What we are trying to do is embrace this new state of affairs, and encourage retailers to become showrooms. They have to embrace their new status. The only other option is to declare war on the internet, and that battle has already been lost.
We now offer retailers a starter kit, as part of our launch of the CODE 41 brand. For example, they might take five watches priced at CHF 2,000 each, along with a parallel display leading to an online catalogue, which has the entire collection. When a client buys a watch through our platform, a code is generated which tells us that this sale originates from such and such a vendor, and we can pass on a percentage. Obviously, the margins are smaller than for the traditional system, but on the other hand the retailer has no inventory to deal with, and his risk is reduced. We’re aware that there is always a risk that the client will go away and buy the watch on their own, behind the retailer’s back, so to speak. To counteract this, we have devised a system whereby a retailer can give potential clients a code that entitles them to a 5% discount (deducted from the retailer’s profit margin), but which also connects them to the point of sale concerned. However, the ideal scenario would be for the retailer to order the watch directly for the client, thereby keeping their 35% margin.
The aim is also to optimise the logistical side. If a retailer sees that a particular model is selling well, they can choose to keep more in stock. It all depends on how much risk the retailer is prepared to take in terms of physical stock. The obvious upside is that the buyer can take the watch they want home with them straight away. At the moment, the profit margin on stock ordered via conventional means hasn’t changed: it’s around 50% to the retailer.
We have surveyed several retailers, and they are aware that they need to find a solution in terms of the growth of e-commerce. In the end, it all comes down to negotiating percentages, as always! But at bottom, what we are offering is a new approach to retail, which as a new brand we are in a particularly good position to do. Established brands are often hampered by exclusivity contracts with distributors in certain territories. Some of them are probably waiting for these contracts to expire to launch their own e-commerce initiatives. Another challenge that we face is breaking down the psychological barrier of those people who believe that it’s not possible to try a watch they have ordered online, and then return it. It will be possible to send watches back to us. The watch is delivered free of charge, anywhere in the world, with a guaranteed right of return. At the same time, the entire thrust of this new approach is to enable retailers to legitimately transform themselves into showrooms, which is what they actually now are, albeit against their will. Alongside that, we have to ensure that the logistical operation runs as smoothly as possible. That’s our response to the physical/virtual retail problem.”
Read more: the article Retailers Need to Turn into Gallery Owners, by François-Xavier Mousin and Caroline Buechler, Opus Magnum, published in Europa Star Time Business 1/17, explores similar issues.