This is perhaps a truism but it is nevertheless a current hot potato: without high performance distribution networks, Swiss watchmaking would not be in a position to ride the crest of a wave that has been this positive for the last three years. This obvious fact, as corny as it seems, is nevertheless clearly easier to put into words than it is to put into practice. With more than 95% of its production sold abroad, this industry has its finger on the pulse of the international climate and must adapt to the particular characteristics of markets as different as those in the United States, Brazil, Russia or Singapore.

This is not very difficult, it might be retorted, insofar as the major watchmaking houses currently find it hard to keep to deliveries because of the strong demand world-wide. But if the profession is now facing a few bottlenecks it is also because of the efforts made by the brands over the last few decades to establish a global presence, an obligatory task for all the Houses actively engaged in the world of luxury products. Indeed, competition is so fierce that no company can allow itself to miss the avenues for growth that are opening up on all five continents. The rush to China or Russia is a good example of this. Anyone who misses the boat runs a serious risk of being sidelined in the long term.

Risk sharing

In general, the watchmaking brands in search of new markets begin by working with local distributors, whose role is to maintain a link between the manufacturer and retailers. They purchase the products and are generally responsible for the marketing and advertising costs. In exchange for this investment, they have exclusivity in a given territory for placing the watches with retailers. The advantage for the brands of this type of configuration is that distributors share with them the financial risks relating to the sale of their time keepers.

In other words, the success of this type of partnership is closely linked to the efforts put in by both parties. It is up to the brand to create attractive products with the latest innovations, while maintaining its aura and image, and to the distributors to provide the opening to the various markets in order to create a path to consumers who are being increasingly solicited. Distributors have other, no less essential advantages: their detailed knowledge of the local networks, the potential complementarity of the portfolio of brands with which they are working and their ability to evaluate the purchasing habits within their territory.

Subsidiaries are increasing in number

However, there is an increasing temptation, especially for the major companies in the sector, to establish their own subsidiaries in places in which the market is promising, thus eliminating one intermediary in the distribution chain. The motives for this approach are clearly financial but not only so. The fact of having their own employees on the spot encourages rapid decision making and the control of sales networks. What is more, some Houses may feel that they are badly served by distributors who deal with far too many exporters. Not to mention the advantage of having a structure totally devoted to the various brands of the same group.

In general, businesses in the sector have developed both types of network in parallel. “In the end, it is a question of results and not so much knowing whether one procedure should be adopted over another” explained Matthias Breschan, the Chairman of Hamilton International, recently. “It all depends on the quality of the organisation you have in the various countries. As long as the service is good and the retailers are satisfied, there is no reason to want to change things. With a subsidiary, the course of operations may be faster, but some distributors do really good work.”

Agents are no longer highly rated

The solution of having agents, on the other hand, has increasingly lost favour with watchmakers. As they operate essentially as intermediaries between the Houses and retailers, they receive a commission on sales, but have no financial involvement in the process, which is considered to produce a lack of motivation to promote the brands in local markets. It remains a fact that none of the companies, in particular those that are new in the market for luxury watches, have either the firepower or the reputation and still less the production volume required to impel distributors to invest in the future of the brand. Recourse to agents or even direct contact is then a possible solution.

As an example, Hautlence works with distributors in Asia and the United States, but prefers direct relations with its distributors in Europe. “It all depends on the countries in which it is physically possible for me to supervise retailers personally”, explained Renaud de Retz, the Head of the company. “In Europe, I can catch a train or a plane and visit a particular distributor that day. This enables me to maintain control over them relative to the brand image and to ensure that the work done in Switzerland has good sales outlets.”

Training at the centre of discussions

This is the effect of one of the major challenges to the established networks: to ensure that the world of the brand is properly relayed to retailers. There is no need to toil year after year to construct a strategy based on the long term, imbued with tradition, innovation, know-how and industrial integration, if the distribution chain has a weak link in its final phase. Although the retailers are often quick to complain about the arrogance of the brands who are reproached for imposing world-wide sales policies that take no account of the particular needs of the various markets, not to mention the gaps in after sales service systems, they cannot claim to be above criticism either. Even own shops that the Houses are opening at top speed in the major capitals of the luxury trades do not necessarily raise the level because on occasion they have been entrusted to managers whose watchmaking culture is not always in tune.

Should we then be surprised that efforts to train and inform retailers are being increased? A satisfied customer is a loyal customer, we are constantly being told. But we still have to find professionals seasoned in the arcane practices of Swiss Luxury Watchmaking to put this principle into practice to the letter. And it is only too true that, wherever in the world you are, this is not always the case. New consumers are happily subjected to the parade of every possible prowess, such as that they are given full information and are free to choose. Nonetheless, at this stage selling is a subtle art that is worthy of every attention. ■

See also:
The Chinese retailers, a model?

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