The digital transformation of watchmaking


Ariel Adams on the digital evolution of the watch industry

CONVERSATION

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décembre 2020


Ariel Adams on the digital evolution of the watch industry

The founder of aBlogtoWatch shares his thoughts as new digital initiatives are piling up this year in reaction to the pandemic crisis. A candid conversation with Ariel Adams.

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atch brands have been – quite understandingly – rushing online in 2020, be it for communications or sales, as the pandemic crisis hit the world. For the better?

Ariel Adams: Actually, the COVID-19 pandemic has only accelerated existing trends in the watch industry business space. Perhaps outside of not allowing workers to come and operate factories, assemble watches, and ship out products, the pandemic did not really create too many brand-new problems for the watch industry that it was not already facing and could easily image would continue to be problems over the long-run. The watch industry today suffers from another malady, and that is not having enough leaders who are incentivized to think long-term.

The watch industry has vacillated over its relationship with the internet… from the very start of the internet. I am a digital native which means I grew up with the internet and while I remember life before it, I celebrated its disruptive effect. Not everyone can do that. After years of experience with the European watch industry, at this point the summary of my sentiment on the matter is that the threat of the internet was disruption (nothing more), and these are companies that by design hate change or disruption.

“Tolerance for innovation and risk is what the watch industry needs to reinvent itself, and it is in short supply.”

How did you reach these rather harsh conclusions?

Ariel Adams: It is easy and incorrect to call watch brands “lazy,” but that might be what it looks like from the outside. Rather, these are companies who are trained to look at the past, draw lessons from it, and try to apply those lessons today. This exercise is only possible when there is a past to look back on and learn from. Imagining what the future might be like isn’t something the watch industry has been even remotely decent at doing since perhaps the mid-20th century. The luxury watch industry, as we know it today, will almost always struggle with matters of innovation and risk. Tolerance for innovation and risk is what the watch industry needs to reinvent itself, and it is in short supply.

I don’t actually think that will change. For the watch industry to succeed on the internet, they will need good lessons to learn from. Already we know that the modern watch industry is more emulative than creative. This implies that until there is someone out there who “does it right on the internet” in a way that the watch industry can learn from, there is little hope for the established watch industry and the internet. I hope I am proven wrong, but all the evidence supports it.

Could you give some concrete examples?

Ariel Adams: When it comes to online sales, watch brands have embraced this not out of sincere desire to focus on e-commerce, but rather because of the lure of “margin recapture.” E-commerce is just a channel to achieving direct-to-consumer sales for brands. They have long lusted for this more profitable way of doing business, not-so-secretly resenting their network of third-party authorized dealers.

The first big push to go direct-to-consumer for brands was to end third-party distributorships and authorized dealers in favor of wholly-owned distribution and brand boutiques. This was a failure for at least 60% (or more) of the brands who tried it. You saw many of them backpedal. Then they realized that the internet might allow them to try again to sell directly to consumers and bypass the middle-person.

“Only some of the most conservative brands decided that rejecting the third-party distribution model was unwise – and they were right.”

Ask most watch brands who have e-commerce today how much of their total sales (pre-pandemic) came from their websites and you’d rarely hear any numbers above 10-15%. That’s nothing if you think about it. Only some of the most conservative brands like Rolex and Patek Philippe decided that rejecting the third-party distribution model was unwise – and they were right. Direct-to-consumer only works with a small number of brands who are willing to invest huge amounts into marketing (think Richard Mille) otherwise is it a futile exercise for brands not willing to spend at least 30% of their income right back into marketing.

With the increased polarization among brands, isn’t it logical that many watchmakers have tried different paths, especially online, to reach out to their end consumers?

Watch brands have not pursued a similar marketing approach online as they have in the real world. The effective theory of real-world watch advertising is to put watch ads where wealthy, likely customers regularly hang out. Luxury brands are spot on that the rich people who can afford their products go to high-brow sporting events, like culture and shopping districts, are passionate about global affairs, travel regularly, and like to look impressive at social gatherings.

What is their strategy online? For one thing, they seemed to entirely forget that they are trying to seeking a rich, educated audience. Watch brands sink more money into reaching mainstream audiences on social media than anything else. They are paying Facebook and Google huge sums of money for very little return. These are indeed the “trendy” places to advertise. Facebook will even come to your office and give you a seminar on how to spend money with them. Watch brands are not supporting the luxury and lifestyle media that once connected them with the right audiences online, nor are luxury brands investing in serious online events or other gatherings. In other words, the lesson about marketing via association with another publication or event that worked well in the real world, has been entirely lost of them when it comes to online advertising.

“Watch brands sink more money into reaching mainstream audiences on social media than their core target customer. They are paying Facebook and Google huge sums of money for very little return.”

What watch brands are doing is trying to create their own “media verticals” online (think of a watch brand’s Instagram page) versus buying ad space on someone else’s channel. This is highly problematic because there has never been any evidence consumers want to actually regularly follow these verticals.

If there is one company that is intensely followed by most brands in this space it is Rolex. Rich and institutional, Rolex is considered to be a company that “knows what they are doing” and whose every move has an impact on the entire industry.

How Rolex participates with the media has a huge effect on watch industry culture as a whole. At this time Rolex has made the decision not to directly advertise in digital watch media, because as I understand it they want to encourage their retailers to do so. Unfortunately this latter part hasn’t happened yet and the optics seem to suggest that Rolex does not value digital media in the same way they have traditionally valued print media. Concurrently, Rolex does heavily invest in original content creation which is primarily shared on their own Instagram channel and other social media channels. Many of these same assets are made available to their retailers to use for marketing purposes - a fact which is still mostly misunderstood among many watch industry professionals.

The unfortunate outcome is that when Rolex does not directly invest in most forms of online watch media advertising, it functions as a signal to the watch industry that digital media is not worth investing in. I don’t think that Rolex intends this outcome, but it just shows how the watch industry’s practice of « follow the leader » can be counterproductive much of the time.

“Actually, the brands which begin online (most of the so-called micro-brands) are the ones who win right now.”

Actually, the brands which begin online (most of the so-called micro-brands) are the ones who win right now. They lack the digital prejudice of the traditional luxury brands and as entrepreneurs simply do what they can afford in order to make money. I’ve personally seen start-up watch brands with only around $100,000 in annual marketing budget accomplish what big brands where not able to do with millions. Why? Because they were able to think like consumers and thus know where and how to message consumers. For whatever reason, and with all their expensive consulting reports, the major luxury watch brands still can’t do what a fresh brand founder can do online with a few grand, and out of his or her living room without a view of the lake. Like a watch, the internet is merely a tool. Its glory comes through how you use it.

Ariel Adams, founder of aBlogtoWatch
Ariel Adams, founder of aBlogtoWatch

Could you identify what are the key expectations from end customers when it comes to interacting with a watch brand online?

Watch brands have a reckoning to face. It is their dilemma with watch lovers themselves. I’ve yet to meet a watch sales executive who does not lament the existence of their most dedicated and passionate consumers. People who like watches tend to become very picky and stubborn on price and other matters. So this makes them harder to sell to, even though they end up buying a lot. Watch lovers who keep buying over time continue to get more picky as consumers – but that is to be expected. The problem is the one of the watch brands themselves when it comes to discussing them. Brands literally mock the people who go to their events, and then criticize them for not buying often enough and fast enough. I’d say the first thing watch consumers demand from watch brands online is some respect.

“I’d say the first thing watch consumers demand from watch brands online is some respect.”

In what form?

Well for one thing there needs to be communication respect. Actually speak to your consumer. If you don’t develop a one-on-one relationship with a consumer then you have a limited chance of selling something expensive to them. I’m not saying watch brands need to be best buddies with each of their consumers, but they do need to engage in dialog that is relatable and feels like it has the target consumer in mind. This notion needs to be considered both on a watch brand’s website, as well as the marketing material they see outside of an e-commerce environment such as marketing and advertising. If you don’t speak directly to your consumer, even if you message them online they will ignore it.

Respect also comes in the form of respecting the consumer process. Part of that process is price checking. If a quick Google search of a watch model results in easy to find discounts, then what self-respecting consumer is going to buy confidently at full retail on your website. Asking consumers to ignore easy to miss discounts is a serious sing of disrespect.

Finally, consumers want to be able to actually speak with brands online. Luxury experience probably means a human being that is able to speak or chat with you live on the website 24 hours a day – in your language. Luxury means being given answers to any and all questions, or given extra photographs or media of the actual product they might be getting.

Luxury is also about relationships and making people feel important. Most luxury watch e-commerce websites feel like a fancy ATM. Nice pictures with all the charm of a software menu. There is almost nothing human about it unless you happen to be lucky enough to connect with a live person after you decide to initiate a chat session. There are no doubt novel techniques to make people feel human and welcome while at your website. Just like a nice storefront in a nice part of town, luxury consumers expect watch brands serious about their business to invest in their digital store fronts.

“Most luxury watch e-commerce websites feel like a fancy ATM. Nice pictures with all the charm of a software menu.”

Actually, I really don’t think there is much of an emotional distinction between what get someone buying in person versus online. They key is to create the right emotional recipe that has a good chance of getting a sale from a consumer who can afford it. The trick is to understand that psychology for each brand, and then to create an experience which ends with a digital watch sale.

When acquiring watches online, aficionados actually face many possibilities on what may still seem like a “digital jungle”. What could lead them to buy on the brand’s own platforms rather than other (numerous) channels?

I’m known for being verbose but I won’t be here. This question has been posed to many consumers and the answer is surprisingly consistent as consumers quickly state “price.” The internet is only a jungle because price and quality are anything but consistent. If there is a consistent price for a watch model then buyers will simply shop from those stores with the best fringe benefits such as free shipping, gifts, extra service, etc… The internet will remain a jungle as long as brands fail to closely control inventory available on the market which leads to the mass proliferation of published discounts. Consumers don’t expect a rock bottom product price, but they don’t want to pay a penny more than they have to. It is just human psychology.

How can brands efficiently manage the segmentation between physical and digital sales?

Brands need to appreciate that consumers today will have not only learned about their brand online before the real world. But also that the consumer has probably engaged with their brand more online than the real world. If a consumer strolls into a boutique with an idea of what they want to buy (which is often the case now), they learned what to buy online.

Physical experiences for watch consumers will take one of just a few forms in the future. One is to sample a watch either by wearing it themselves or seeing it on others. Next is to physically purchase a product they more or less decided they wanted to buy prior to actually seeing it in person. Finally, a watch consumer may interact in a physical store for things like aftersales service or repair.

This means that the physical experience for consumers is one that is done right, helps someone who already wants to spend money, spend money. Those physical experiences can turn off consumers and prevent sales, but rarely can they facilitate sales that would have not otherwise happened. This is a crucial concept.

The digital experience is where everything else happens. It is where the brand first flirts with the consumer via market. It is where the consumer dates the brand by researching reviews on it and looking at pictures other people have taken of it. Finally, when the consumer is ready to “go all the way,” they either trust their instincts and buy online sight-unseen, or they physically go into a store to do one final physical check before making a purchase. Understanding this psychology is how to best adapt a marketing and sales strategy between the physical and digital world.

Should watch brands turn to third parties whenever possible or go “solo” in the new business landscape?

I’ve personally vacillated on this concept a number of times. Currently I am in the “trust third parties” camp and believe that less than 20% of all established watch brands should have a direct-to-consumer approach to their business. Rather, I feel that there should be a new crop of digital distributors or e-tailers around the world which are the sales side of the watch industry. I believe that the watch brands themselves should more or less entirely stay out the sales side of things. They should be entirely focused on researching and developing new products and then producing bulk watch orders for the market.

I believe in a business model where each watch brand had between about one to as many as twenty or so distribution partners around the world (in the internet age, no more than that are necessary). These distribution partners either have their own stores or sell to stores as traditional distributors did. Only these distributors would not have markets so much as they would have niches segments by things like consumer demographic reached, primary language reached, shipping methods, etc…

Going solo in the watch industry isn’t even possible for the major greats like Rolex. While they pride themselves or so many in-house parts, the reality is that Rolex not only requires a functioning watch industry in its backyard, but also a legion of third-party retailers around the world. Going truly solo for any brand is lonely and unwise. It is also a strategy only suited to the most aggressive and probably lucky brands. Going solo means you get to keep all the profits, but it also means you are doomed to live in a silo with no friends or support.

Ariel Adams is an internationally renowned expert on watch collecting and the timepiece industry. He is the founder of aBlogtoWatch, a published author, and a celebrated voice for the timepiece enthusiast and consumer.

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