The Breitling Watch Source Forums

I went to a jewelry store to analyze some Rolex movements and parts for one of the owners who has been a friend for longer than I can remember. During my visit I struck up a conversation with his brother who is also an owner and a fellow watchmaker. This store used to have two full display cases of Rolex watches, but now they have none. I asked him what happened and he went into a long dialog which I will condense into a few sentences.

Rolex has cut back their global inventory and production because of the global recession. They laid off a whole bunch of watchmakers, both in service and assembly. He lost a sale of a $22,000 watch because of a ridiculous delivery time. Rolex is drying up the parts to approved repair shops and taking the work in house. Go back to a previous sentence. How are they going to service the huge influx of repair work that was being done in the field when they got rid of watchmakers?

Breitling is losing ADs left and right. I'm not sure who is abandoning who, but the requirement to display and sell a certain number of watches is certainly a factor.

Add this to the Swatch Group no longer selling ETA movements.

I could go on and on, but it reminds me of the conditions during the 70's and early 80's when the Swiss dried up the parts availability and the quartz movements were everywhere. They almost fell on their sword then. Apparently, history is about to repeat.

Anyway, one more bit of information to put in the mixer.

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1809 Cosmonaute
1903 Navi
Navi Olympus
Super Avenger

I think that the 2010 numbers are going to show a marked improvement over 2009 on a global scale, but there is absolutely no doubt that the vast majority of that is from the Far East, and the US is just about the slowest recovering market for the industry as a whole.

I don't think the Swiss watch industry is in "freefall".

I do see that the major brands of watches are changing their business models in front of our eyes.

There is a lot of consolidating being done, especially with Rolex.

In major markets Rolex has picked a solid chain of dealers and made them pretty much exclusive. For example, Miami and Orlando are all Mayors and Tourneau. Orlando is completely Mayors and they even have a boutique sponsord by Mayors in one of the local high end malls.

That will be the next step. Boutiques. Rolex, Omega, Panerai, IWC, Hublot, JLC etc... are all using this model now. In a major metro area, boutiques are the way to go. More control, less AD drama and undercutting the brand. There will be some small AD's left to serve smaller, affluent communites, but those dealers will be SCRUTINIZED not to screw up the plan.

Which way is Breitling heading? Not sure. They seem to be filling a void created by Rolex leaving some AD's. They are getting more space with larger displays. But the New York boutique is not something to be ignored. They are looking to see how that does as the Breitling brand is getting sullied a bit by grey market and some aggressive discouting by dealers. Luxury brands hate that stuff, so boutiques may be Breitlings channel of choice five years from now..

Not sure if it looks like "freefall" to me, but like every business, and especially those who deal in luxury goods, the watch industry has no doubt been feeling the pinch over the last year or so.

Perversely, this is also no doubt why we're still seeing price increases, despite the industry suffering. If companies have to cut back on staff and therefore produce less, the only way to remain profitable in the short-term is to increase prices. We're seeing exactly the same thing in the UK financial services industry, and especially in insurance. Companies have been apply rate increases (i.e. raising insurance premiums), while at the same time scaling back on the markets they're in, and in many cases laying off staff. Obviously this kind of thing works for a pretty inelastic good/product such as car insurance (i.e. everyone with a car should have insurance), but I'm unconvinced that it's a wise decision for watch manufacturers. Ultimately expensive watches are totally luxury goods, and it's pretty easy for people to go without them if needs be. For example, we're openly laughing here at some of the prices of Breitling's latest offerings, which will no doubt translate into people simply not buying them.......

To me, Rolex laying off trained staff and reducing output is a real short-term solution. When (if?) the market turns they will find Rolex trained staff hard to replace at speed. But then, cutting prices isn't really an option for the likes of Rolex and others who trade massively on the mystique they've created for themselves of being expensive and desirable. Image is everything, and it's a brave luxury goods company that'd stand up and say, "Yep, we're struggling because consumers don't really need what we sell". Bit of a catch-22 for the industry really.

Only Zenith, it seems, are prepared to actually drop prices a little - but then Zenith have been a little "unconventional" of late!

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Driver8

Site Moderator

Nick Hayek Jr (new CEO of Swatch Group) recently said that the reason that they are expanding the boutique model in the US is that they feel forced to by the low quality of US retailers, especially chains - criticising the mentality of them being retail outlets with poorly trained staff rather than specialists with highly knowledgable staff.

His perspective is that the long term strategy has to be to create a training / development program with retailers to address the knowledge gap because boutiques can't replace a strong retail partner network. That will likely mean that Swatch Group brands at least focus on one or two major chains because of the investment necessary to develop skills.

boutiques almost never make money, there isnt enough margin in watches only to support the HUGE overheads of these stores. most of them operate at a loss but write it off as advertising expenses. and spread it through the company.

Typical US perspective. Rolex, Breitling etc. are probably being hurt by the recession, but they are also going to use this opportunity to re-orient their business and brand toward higher growth markets like SE Asia, Middle East and South America. This will entail short-term head count and AD reductions, but will eventually result in growth in their new markets.

Europe and the US are dead money for a long, long, long time. Probably the next time you see growth rates above 2-3% in either region, we no longer be calling them "Europe" and "U.S.".

Rolex has a history of being "in short supply" of popular watches. Between Breitling and Rolex, trust me, if the market is there, they'll keep cranking out the watches.

I think it has more to do with your location than anything. I've lived in Chicago for the past 12 years and there hasn't been a Rolex or Breitling or Omega or Panerai - hell, damn near any watch - that I couldn't get my hands on through local dealers/connections. If you talk to the right people - you can get whatever you want here. I had a few dealers in Detroit who told me there was an 18 month wait list for a Rolex Daytona....come to Chicago and a dealer told me to give him about 4 weeks.

It's more about who you know in my opinion.

Location, location, location......

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PAM359, Omega PO Big Size, 1951 Omega Seamaster, Rolex Sea Dweller

Not saying it's apples to apples, but 'Boutiques' have worked out pretty well for Apple and most people thought they were crazy at the time.

COMPLETELY different ball game!

I don't see here a freefall either. But what do You expect, will happen with a dealer, selling mainly the lower product range of a brand, when the brand upgrades their products?

You just have to look at the average sellout prices of a dealer: When You see it somewhere in the range of a Superocean Heritage, You know, that dealer can hardly sell a 01 movement. Breitling or their agent can try a little bit with teaching, promotions or advertising help, but if that does not work out, they can only close the store.

That will reduce cost for Breitling, increase the overall performance for the brand, take away big problems from the dealer (having stock discussions and merchandise on stock, he cannot sell himself, so he has to sell them on the grey market)
Also it will help the other dealers around to increase their turnover.

This situation happens with nearly all better brands. Some of them have done it already for the last years (or only in some markets), others are just starting.

Best example here in Austria was Omega: 1990 they had almost 100 Outlets selling for an average price of 1000 Euros (for a country with 8 million people!!!) now they are at about 25 selling for an average price of 2500 Euros, doing probably 5 times the volume than before.

BG
Thomas

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http://www.ellert.at

The Swiss brands are doing so well in China that they have nothing to worry about.

found out today breitling is opening their second factory store, but even they admit they dont make money, but are more for branding and line awareness. coming this fall to aventura florida.

The boutique in New York City sells on average 2 to 3 watches a day at full retail and about half their business is tourists.

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Justin
Please contact me via PM for the contact details for Govberg Jewelers
Govberg is an AD for over 50 fine Swiss and German watch brands.
Visit them on the web at http://www.govbergwatches.com or call 800-528-8463

Is that info published somewhere?

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"I don't own any watches, I just lease them"