Watchmakers have recognized that luxury timepieces must be produced in limited quantities. However, this poses a challenge to other industry players, such as distributors, brands and retailers, since they must compete for sales profit margins. A new trend is emerging where watch manufacturers are integrating their digital distribution networks.

Recovering Margins

One good example of this is Bulgari. Jean Christophe Babin, the current CEO, has recently revealed that the company desires to lower their points of sale down from six hundred to three hundred. The remaining three hundred stores account for eighty five percent of their sales, and did a better job of brand promotion while allowing Bulgari to regain fifteen percent of business that had been lost. Other watchmakers have taken notice, and are enacting similar measures.

Through the elimination of intermediaries, namely retailers and distributors, watch manufacturers can gain tremendous profits, in some cases as high as fifty percent. The worldwide economic downturn that occurred between 2009 and 2015 contributed to this phenomenon. Watchmakers, even the prestigious Swiss houses, were hit hard, hard enough for them to realize that a change needed to be made.

How The Internet Shook Up The Industry

There are three fundamentals which are accepted as gospel among watchmakers, and these are information, time notions, and space. The internet eliminates time and space, only leaving information, which is both free of charge and widely available, which wasn’t the case in the past. Customers participated in this process, since traditionally they had to visit a space (the store) at a specific “time” to receive “information” on a specific watch. The space and the watch itself are the factors that increase margins the most.

Through the usage stock availability online, watchmakers can eradicate the most expensive factors, while simultaneously giving customers more choices across a greater spectrum that no retailer can match. Most important of all, direct sales have the advantage of being able to give brands essential information that normally would be missed. This info allows the brand to be aware of real time sales which then allows it to better optimize its consumer operations, as well as marketing and production itself.

The Customer Experience Is Still Important

It is true that many consumers still prefer the experience of buying a watch in the store. Studies have shown that it is possible to allocate about fifty percent of a watch’s production and market cost to the consumer experience. However, the days of multi branding are coming to an end. Many experts believe that watch retailers will have to specialize or lose market share to those that do. Another possibility is the emergence of augmented reality, which will give users the ability to try on watches in a virtual environment before buying and shipping them in the real world. The possibilities of the digital world and internet are endless, but in order to thrive in such an environment distributors and retailers must adapt.