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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.
"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."
ReplyDeleteCan I not find this information out from a few minutes spent on Google? Even Youtube has a plethora of videos showing how to adjust watch straps.
Retailers need to face up to the fact that society is in a process of radical flux, the like of which has never before been experienced.
It's only going to be another generation or two until we see the first batch of teenagers for whom online buying is the norm for just about everything.
Once that day arrives retail as we currently know it, and as we (and all of our ancestors) have always known it, will be in freefall and fading fast. All that will survive are retailers who the customer NEEDS to deal with on a face-to-face basis (harware stores and pharmacies?), and the few retailers large enough to be able to afford to remain open in an environment where offline shopping is no longer the standard.
I agree that it is in flux, but I think the ultimate destination will be different to how you see it. I don't think you quite understand how much it has already changed and where it is going to go next.
ReplyDeleteI already buy almost exclusively online and I am 40.
Profit will always be maintained at around the 15% mark, how that is achieved will change.
Internet shopping is already the norm as far as I am concerned, it is more than 50% of my business, but fundamentally it is more expensive to operate than in store retailing and so over time the prices on-line will rise.
I package the goods up between customers in the shop, but those who want the best prices will still shop in my store because it is cheaper, simple as.
Where once the shop covered the overheads now the internet has to cover the overheads and the shop income is just a side-line, which again forces the online price up.
You may be able to find the information on how to do it, I can find out how to lay bricks, but I would not do it myself, I'd leave it to someone who knew what they were doing. I don't believe that everyone is going to want to start doing everything themselves.
Ultimately we are human beings who enjoy interacting with one another and the level of service which can be provided in store will always be superior to that which can be provided online. Not that it always is, but that is for each business to deal with.
The online/offline balance will adjust but it will settle down over time. My experience of UK sales is that the majority are to those areas a long way from the main retail centres (a disproportionately high percentage is sent to the Highlands and Islands for example) but those in the big cities still seem to like wondering around the shopping centres.
I also think that retailers will be increasingly small scale, boutique style shops where you deal directly with the business owner and away from the large chain stores, simply because the small businesses are a lot more cost effective to operate.
They will deal with the retailers who they WANT to deal with. I go to those Jersey shops where I know the staff and I know the staff will look after me. It is the service, not the price that gets my money.
I like buying food and chatting to the staff at the same time, I like buying clothes and chatting to the staff at the same time, I do not want to sit on my computer 24 hours per day.
Finally, there is a lot to be said for the wisdom of our ancestors; gold not cash, under the mattress not in the bank,
"You may be able to find the information on how to do it, I can find out how to lay bricks, but I would not do it myself, I'd leave it to someone who knew what they were doing."
ReplyDeleteI hate to state the obvious but there's a vast difference between bricklaying and altering a watch strap. A two minute Youtube video can show me how to alter a strap to exactly the same standard as you could in person. A two minute Youtube video may show me the basics of bricklaying, but without the addition of hands-on professional training over an extended period it's not going to equip me with the skills required to build a sturdy wall.
"I like buying food and chatting to the staff at the same time, I like buying clothes and chatting to the staff at the same time, I do not want to sit on my computer 24 hours per day."
You, as a 40 year old man, may enjoy chatting to shop staff. Most school-age old kids don't. Most school-age kids never have done, (unless their mates were working in the shop) and most school-age kids do it now less now than ever before (another consequence of the digitised age). Those kids are the adult consumers of tomorrow. This is where I believe you don't quite understand how much it has already changed and where it is going to go next.
You say you already make the bulk of your purchases online. Why do you do that? You do it because you choose to do it, in full awareness of it being an alternative. When the average kid makes the bulk of their purchases online it's not through that same pattern of choice or consideration. It's through habit. There lies the difference which you are missing. It is already becoming ingrained in the psyche of younger generations that the normal way to shop is via computer. For them it's the journey to the brick and mortar store which is the optional alternative.
Currently we are seeing only the first sproutings of that mentality, but look how radically things have changed in retail over just the course of the previous decade as a direct consequence of the Internet and associated technologies. Combine that with the speed at which computing continues to leap forwards, then picture the retail landscape 20 years hence.
You're coming at this from an angle which doesn't commonly put you in touch with youth consumers. My experience in retail places me in an environment where the regular footfall is probably 70% youth consumers, yet because of changes in the modern world it's a dying retail sector. Bear that in mind, because if today's kids are turning away from physical retail, tomorrows adults are not going to suddenly flock back.
I doubt your business will have an offline presence ten years from now. Twenty years from now, certainly not. The only thing I can see which may derail such a bleak future would be a devolution of the computerisation of modern society to a pre-1990s environment. And what are the chances of that?
Give me an update in 2022 and feel free to laugh in my face if I'm proven wrong.
People will always want to interact with people, face to face because that is what we do as social animals.
ReplyDeleteI have been an online retailer for 14 years and as such an online consumer also for 14 years, it is not new at all, you may have only just recently joined in but...
I have also been an avid MMORPG player which has given me a unique and fascinating insight into online economies and indeed into how 'banks' or in this case 'platinum sellers' can destroy economies.
I guarantee I will have an offline presence because the manufacturer's will not supply anyone who doesn't. Simple as that.
Even Apple have offline stores and you really cannot get more online than them, their product and prices online are very strictly controlled.
It is proven that if your product goes online without strict controls then it ends up with no value. If it has no value no one wants it.
People like to say I paid £1,000 for this because a) that was a good price and b) they are telling you that they spent £1,000, now if they only spent £500 that is nowhere near as impressive.
You are quite wrong also as I have a good number of school children as customers and that is a jewellery shop which doesn't sell things you can afford with pocket money. My step-daughters 'go to town' two or three times a week.
This is a very good article, and these are some very helpful comments.
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