Google+ Followers

Tuesday, 4 December 2012

Enjoy this Christmas, it will never be the same again

I have noticed on Amazon that many sellers are selling goods at less than cost price and, this being an unusual state of affairs, it is important to ask why they are doing this and what the longer term consequences are going to be...

The watch retail business is an interesting case study; everyone wants to sell Rolex and if you sell Rolex any brand will be desperate to put their range in your shop - of course selling Rolex is not easy, you have to have an invitation to even step onto their stand at the trade shows. The trend is for fewer and fewer Rolex agents and losing the agency is the death knell for that business, take C.T. Maine's for example. With a minimum spend of £250,000 per year of the models selected for you by Rolex (rather than the ones you want), it can be a double edged sword.

There are the 'branded' watches; the Armani's, D&G's, Police etc of this world which when you open the case are £20 watches using old Citizen mass produced Miyota movements, which are sold at a massive mark-up because people are stupid enough to pay those prices. I would not buy Rolex jeans so why people buy Armani watches is beyond me, but that's people for you. If that is the price of fashion, you can keep it! The old adage is true, there are many people who know 'the price of everything, but the value of nothing'. Geoff Southern's views on Plemont seem are the perfect example of this.

Then there are the traditional watch manufacturers; the Swiss makers (Rolex, Omega, etc), Citizen (Miyota) and Seiko. Virtually every other watch you buy will have one of these movements in.

Now I am Seiko's golden boy of the moment when it comes to the junior brands, but because my shop is in the Central Market and not the high street I cannot stock Seiko, it's a harsh world out there.

For the vast majority of these Seiko junior brand watches I am the UK online market leader (i.e. I have the lowest price) and for those of you in Jersey the price is even lower in store. I get the maximum discount with only John Lewis/Debenhams, Argos and H Samuel selling more watches, but then they have more shops than me.

There are some interesting points to note... for example Argos have their own special range of watches made just for them (initially) these have very high RRP's and of course are then sold at 50% off, which is still higher than the price for similar watches in the main range. I am beaten on a few prices on a few models the reasons are due to grey imports, bankrupt and clearance stock and lets face stolen goods being sold online.

There are interesting developments in the watch world, manufacturers are dedicated to their retail stores (and most will not supply you if you intend to sell on the internet only) and they are also dedicated to protecting their brand, which means that the priority of supply, goes to those who maintain reasonable prices and do not price gouge. They cannot tell you what price to sell at but they do not have to supply you.

In my first business venture as Space-Craft I successfully sold Games Workshop products to the point that they are no longer allowed to be sold on the internet because it was destroying the brand, now watch companies and other manufacturers are catching on and the internet trade is more strictly controlled.

Realistically the prices of goods online should be higher than in store, there is the postage cost, the cost of buyer fraud, the cost of buyer returns and of course, like employees, it is the buyer who is overly protected by statutory protections.

Why do manufacturers want products in stores? Well firstly because the retailer acts as an effective filter to stupidity - I can show you how to push the crown in on your watch to make it go, without you having to return it to Seiko under guarantee. I can tell you that all that is needed is to change the battery. I can adjust the watch bracelet so it fits you. More importantly there is no advertising that compares to a shop window.

So we are back to the issue of some retailers selling goods at less than cost, now this has always occurred. The simple reason is that if I can sell 1,000 things at 99p without any problems then my 'customer metrics' on eBay or Amazon are always going to be within their parameters so if there are problems then it is only with a tiny proportion of my sales. If I only sell 50 watches at £1,000 each and two have problems then Amazon and eBay are on your back tell you to buck your ideas up. If I have sold a 1,000 things and have problems on nineteen then that's fine, it's all about gaming the system.

But for people to start selling £50 watches at a loss is a new development and points to desperation; they are risking their agencies with the very manufacturers who ensure their long term survivability and a lot of this is going on this year.

This is a short term purple patch, that consumers would be advised to take advantage of. Very soon the weak hands will be shaken out, go under or sell up and once that happens prices are set to rise and fast. Hyper inflation is just around the corner, I only have to look at the cost prices of the this year's models against those from previous years to see that.

Forty one jewellers and 100,000 people in Jersey, the market seems over-saturated... I wonder whose lease is expiring this year, maybe they are the lucky ones.