Is there a future for independent distributors in the watch industry?

Due to the impact of the COVID-19 pandemic, watch brands are increasingly selling directly to customers. In this climate, is there a future for independent distributors?

Thierry Huron, consultant and co-founder of The Watch Distributors Directory, presents the latest research and data on the changing global watch distribution landscape, and interviews distributors from various regions to discuss their expectations and future challenges.

Now, many digital natives are shifting their strategies back to traditional distribution.

　Watch brands and independent distributors have long enjoyed fruitful relationships. For decades, partnering successfully with a distributor meant making the numbers and having a physical presence. To reach customers, brands had to be physically present everywhere and build a large distribution network. Having a large distribution network meant they could distribute more products. By relying on distributors, brands could expand their sales without increasing the running costs of their direct business.

　Even before the COVID-19 pandemic, brands had been trying to expand their direct sales. The idea was that direct sales were the most appropriate and effective way to promote the brand's values ​​and identity, deepen relationships with customers, and maximize control over business strategies. Many watch companies, especially larger ones, have adopted this strategy by establishing local offices, which has led to a direct approach to customers. Direct sales not only offer many benefits for brands, but also very high profit margins, sometimes even enough to make up for a decline in sales volume. At the same time, they can deepen one-on-one relationships with customers and enrich data (while also facing the challenges previously faced by distributors).

　So is there hope for independent distributors? Partnering with a distributor can be important for emerging or local watch brands looking to make a name for themselves in a specific market. Such partnerships can help with distribution and customer service while building brand awareness in new markets. Many young brands are unable to spend enough on digital marketing to gain the presence and competitive edge they need in their own channels. Distributors can prove valuable by being integrated into their business strategies from the early stages. Many digital natives are also now shifting their strategies to selling in brick-and-mortar stores. The emotional power of a physical presence is irreplaceable.

　There is no doubt that distributors will face many challenges in the coming years, as they are sandwiched between brands and retailers, and as brands increasingly appeal directly to their customers. Those watch retailers that embrace digital change and adapt their business models, services, and corporate culture to societal and market changes will ultimately emerge stronger.

Overall picture of the watch distribution industry

Global watch distributors and their directly managed branches

　There are an estimated 1335 distributors and their directly managed branches worldwide. According to the Watch Distributors Dictionary, these companies operate in 127 countries. Independent distributors have the largest presence in global watch distribution, with 900 listed companies. Directly managed branches account for the remaining one-third.

Region

　The number of distributors varies by region. The Middle East and Latin America have the highest concentration of companies, with 154 and 103 companies, respectively. These figures indicate a large number of retailers who also act as dealers. Following the Middle East and Latin America are Western Europe and East Asia (including China, Hong Kong, and Japan).

Price range

　The largest number of distributors, 463, belong to the entry-level category, selling watch brands with a retail price of under CHF 300, followed by the economy category (400 companies) with a retail price between CHF 300 and CHF 800, and the value category (332 companies) with a retail price between CHF 800 and CHF 5000.

Product Type

　The non-watch products sold by watch distributors include jewelry, other clocks, watch winders, leather straps, batteries, eyewear, writing instruments, clothing, apparel, fashion accessories, etc. Surprisingly, only 32% sell jewelry.

Number of brands handled

　131 distributors carry only one brand. Of these, 15% are not geographically specific and partner with brands that have a stronger presence in the entry-level, economy, and value segments. Agents that carry two to four brands and five to nine brands are the most common, accounting for 31% each.

How about digitalization?

　Many independent distributors believe that online communication and sales are not very effective for their business, and the numbers reflect this: 15% do not have their own website, 42% are not active on social media (Facebook or Instagram), and the vast majority (81%) do not have an e-commerce platform. These latter two figures reflect their unique communication strategies and sales methods to customers.

Asking distributors around the world

1. Please tell us your company's background story.
②How has the spread of COVID-19 affected your business?
3. Do you think there is still a future for independent distributors?
4. What kind of e-commerce investment makes sense for your company?

Monica Polesin, Founder and Managing Director of The Blue Company

1. Please tell us your company's background story.

I am the founder and managing director of The Blue Company, a watch and watch accessories retailer established in London in 2008. As a foreigner and a woman with no prior industry connections or experience, I started the company from scratch in a male-dominated environment. However, I was fortunate to be in Great Britain, a land of opportunity, a meritocracy where nationality and gender are not important. We operate in the mid-to-high-end segment, selling luxury watch brands ranging from £500 to £10,000. A turning point came seven years ago when we added Junghans to our portfolio. Under our management, the brand was nominated for the "Rising Star of the Year" award in 2015, and I believe this was a moment of recognition for our work as a distributor in the UK market, both from retailers and brands. Every brand in our portfolio has a unique DNA and rich heritage, which is by design, not by chance.

②How has the spread of COVID-19 affected your business?

② The UK is known as a very advanced country when it comes to online platforms. British consumers are very accustomed to buying things online, whether it's groceries or cars, which put the country in an advantageous position during the pandemic. Dynamic retailers have adapted very quickly to the situation, and some of our clients have been able to ride the wave and increase their sales in 2020 despite all the difficulties. Our company's sales fell in March and April 2020, but from May onwards, they returned to "normal" monthly sales and continued to grow, recording +10% growth at the end of the year.

3. Do you think there is still a future for independent distributors?

3. I believe distributors have a future. In the UK, most major brands have their own offices in London. However, there are still many independent watch brands that would rather work through distributors than open their own branches. For a watch brand to open a branch in the UK, it would need to be in a prestigious location, such as London, which is expensive. This is not feasible or worthwhile for all brands. This means that distributors will still be necessary. In a post-Brexit UK, the role of an agent will become even more important if the brand does not have a presence in the UK. It is essential for brands to have someone who knows and understands the market. It is unrealistic to think that a brand in a certain country can be directly managed from its headquarters in Switzerland or Germany.

4. What kind of e-commerce investment makes sense for your company?

④ Currently, our website is just a digital business card. We are not actively considering e-commerce, leaving that to our retailers, who are experts in that field. We recently started building an e-commerce platform, but we have no intention of taking business away from our partners. The goal is to increase brand awareness and drive traffic to our retail stores.

Khaled Zainal Abedin & Mazan Ebrahim / 10tenlabs

1. Please tell us your company's background story.

① In early 2020, we launched 10tenlabs, aiming to change the face of watch retail in the Middle East by introducing a digital platform for watch collectors and enthusiasts in the region. We specialize primarily in independent brands and select, high-quality, small brands. Our business includes an online boutique offering approximately 23 watch brands, a watch club community, and a lab that creates very special limited edition models. So far this year, we have successfully created 10 limited edition models with partner brands, and four of them - Kudoke, Minase, Alexander Shorokhoff, and JS Watch Co. - have sold out.

②How has the spread of COVID-19 affected your business?

② By moving away from brick-and-mortar stores and focusing on digital platforms, we have been moving in the right direction. The Middle East retail market is undergoing major changes and is actively moving towards digitalization after the pandemic. Consumers are becoming more familiar with e-commerce, and as an e-commerce company, we have seen very healthy sales growth even during the COVID-19 pandemic.

3. Do you think there is still a future for independent distributors?

3. I believe there is a future for independent distributors. With platforms like ours and smaller boutiques catering to independent brands, brands in this category can get more exposure than larger retailers who don't focus on growing independent brands. With endless waiting lists for authorized retailers, independent retailers and distributors have the opportunity to reach a large market segment that these brands don't serve.

4. What kind of e-commerce investment makes sense for your company?

④ Utilizing artificial intelligence (AI) and leading fintech companies to facilitate payment processing and further strengthen digital retail systems.

Mohamed Rabat/Bellagio Jewellers

1. Please tell us your company's background story.

① Our family has been in the watch and jewelry business for over 70 years. We originally specialized in retail, but over the past 10 years we have also been selling watches in South Africa. During this time, we have handled a variety of watch brands, and currently sell Franck Muller, Bell & Ross, Oris, and Nomos in South Africa.

②How has the spread of COVID-19 affected your business?

② Among South Africa's retail businesses, the watch and jewelry industry in particular has been hit hard by the spread of COVID-19. Much of the industry relies on the tourism industry, which is currently at a standstill. In addition, the country's economy is suffering from significant restrictions due to the spread of the infection.

3. Do you think there is still a future for independent distributors?

3. The COVID-19 pandemic has provided an opportunity to reexamine the relationships between distributors and retailers, and between retailers and end users. For retailers and distributors to survive, a closer, more proactive, and adaptive relationship is essential. End users want to know they're buying value, especially in these uncertain and uncertain times. Only independently owned stores can provide this peace of mind. This logic also applies to the relationship between distributors and retailers. The relationship between distributors and retailers is not a true partnership, especially when the retailer works with a corporate brand subsidiary. This type of relationship is very rigid and prevents rapid adaptation to strategies and understanding. Independent retailers and distributors who survive have room to grow, and together they have a promising future.

4. What kind of e-commerce investment makes sense for your company?

④ Social media such as Instagram seems to be the most anticipated.

Christoph Hopf/Bausele/Tempore

1. Please tell us your company's background story.

① We have two activities. One is the development of our own brand, Bausele. This is a Swiss-made watch brand that I founded in Australia in 2011, shortly after I moved from Switzerland, where I was CFO of Universo (Swatch Group). Bausele watches are priced between 300 and 800 Swiss francs, and were recently commissioned by the Royal Australian Air Force to be the official watch of their 100th anniversary in 2021. The other activity is the distribution of watch brands. We are the official distributor of Girard-Perregaux in the premium and luxury segments, and we are considering handling other brands as well.

②How has the spread of COVID-19 affected your business?

② When the COVID-19 pandemic hit in early 2020, Australia closed its borders very early on, severely limiting our retail business. This forced us to focus on the only thing we could directly control. At Bozel, we focused all our efforts on online channels, and the results have been impressive. Brand sales have increased 300% year-on-year, and awareness has grown, leading to inquiries from retailers outside of Australia (we recently began working with Lotte in Korea). Our biggest challenge is maintaining production volume and managing cash flow. For Girard-Perregaux, the situation is very different, as we relied heavily on non-Asian tourism. We focused more on the local market, providing detailed information to collectors, and training retailers. Our biggest challenge is the decline in tourism. Border closures are expected to continue until 2022.

3. Do you think there is still a future for independent distributors?

10. Brands have the option of bringing their own in-house team. What sets us apart is that we're not "just brand managers"; we're passionately and financially invested in the brands we represent. The traditional distribution model, which relies solely on relationships with retail staff and "walking in" to sell watches, is challenging. Our approach is different. With the exception of a few brands that sell independently, we're all competing for the same customers. To differentiate ourselves, we see ourselves as a full-service marketing agency. From the start, we focused on building a database of high-quality potential customers, which we then reach through monthly newsletters, personal contact, lunches and dinners, social media, and private messages. Of course, since watches are sold through retailers, training and personal connections with store staff are also essential. This allows us to combine the best of both the physical and online worlds. Part of what makes us unique is our in-house brand, which we've successfully developed for the past decade. Members of the watch community appreciate this, and it also helps us understand not only the theory that our headquarters members are good at, but also the practical aspects of how to connect it to sales.

4. What kind of e-commerce investment makes sense for your company?

4. Growing e-commerce is constantly evolving. You need to optimize the customer experience from acquisition to conversion as much as possible, but it's hard to keep track of everything, as new tools are emerging every day. If you're using a platform like Shopify, you're probably on the technology side. Their app store and integrations are impressive. From a conversion perspective, it's good to have something that makes your product stand out. For example, great 3D modeling that lets customers experience the watch on their wrist wherever they are.

Emiliano Snitzer Bartocchi/CTE Watch Company

1. Please tell us your company's background story.

① My father-in-law, Meir Schnitzer, and his business partner, Jose Luis Waingarten, each had many years of experience in the watch industry before founding the company together in 2002. We now operate not only in the United States, but also in the Caribbean, cruise ships, and travel. We have expanded our product offering beyond watches to include handbags, leather goods, footwear, jewelry, sunglasses, suitcases, and more, so we have something to offer to any customer.

②How has the spread of COVID-19 affected your business?

② The biggest impact was on cruise ships and travel. This business was growing year after year, but it went from zero to zero in a matter of weeks. The biggest challenge we face right now is finding and retaining talented people to work for us.

3. Do you think there is still a future for independent distributors?

3. Independent distributors definitely have a future. While many brands excel at managing large retail chains and a wide range of customers, small, independent shops are essential for dealing with specific issues. There are also issues with inventory management, and each region needs to meet its own unique demands. Because we're based in South Florida, we have convenient logistics access to the Caribbean. The biggest difference is that we're a family business, not a corporation, which allows us to make decisions and solve problems very quickly. Our activities are dynamic, allowing us to respond to our customers' needs. By gaining information from both the brand (and what it says) and the customer (and what they want), we can quickly grasp new trends.

4. What kind of e-commerce investment makes sense for your company?

4. We are investing in automated systems, which also means creating more personalized touchpoints with our customers. Society is changing, and this was especially evident in the travel industry last year. Today, our customers use a variety of communication methods, including WhatsApp, SMS, and email. We are constantly looking for ways to stay connected with our customers, even when we are not physically present.

Arnold Lapierre/Equation of Time

1. Please tell us your company's background story.

① We have been bringing independent Swiss brands such as Perrelet, Giuliano Mazzoli, Reservoir, David Candeau, and Leroy to the US market for 15 years.

②How has the spread of COVID-19 affected your business?

② After the COVID-3 pandemic caused the economy to stagnate for three months, many people saved up their income and began purchasing most of their necessities through e-commerce. At the same time, some brands reduced production, drying up the market and driving up prices. This widened the gap between the haves and have-nots for both consumers and brands.

3. Do you think there is still a future for independent distributors?

3. I strongly believe that independent distributors have a future. However, this path is not open to everyone, and only a few will be able to achieve it. You need a solid, clean background and the ability to represent the brand. This means you need basic assets in terms of products and finances, as well as a strong team. In our case, we have independent brands that we can propose to customers seeking genuine Swiss watches at reasonable prices. For those who are tired of wearing the same old watches or are exhausted by ever-rising market prices, there are independent brands that offer solid history, quality, and appeal. The challenge is to make these brands known to the public. To do this, we need to provide diverse space in a limited number of retail stores aimed at special market segments.

4. What kind of e-commerce investment makes sense for your company?

4. As a distributor, you need to rely on the efforts of the brand or retailer to maintain a strong position in e-commerce. The online world is a battlefield between popular luxury brands that have built their value and social status over time and are well-versed in social media, and independent brands. Only top-tier independent brands with clear designs, distinctive communication, and perseverance can thrive. However, when it comes to the jewelry business, there is more room for those who can move away from the "over-the-top" approach mentioned above and have creative products, reasonable prices, and a good image.

Watanabe Retsurin/GM International

1. Please tell us your company's background story.

① We started with Givenchy fashion watches and then produced fashion watch movements in Japan. Based on this success, we became the world's first distributor of Frederique Constant, which contributed greatly to the expansion of the brand. We offer fashion watches, diver's watches, classic watches, and complications that appeal to a wide range of price ranges and customer segments.

②How has the spread of COVID-19 affected your business?

② Sales have fallen due to factors such as consumers being unable to go out and the closure of stores, particularly in department stores. Due to the nature of watches, close communication and in-depth product knowledge are required in the relationships between stores and retailers, and between retailers and customers, and new methods will be required in the future.

3. Do you think there is still a future for independent distributors?

3) I think there is still potential for distributors. Our strength lies not only in mass communication through advertising, but also in face-to-face individual communication with retailers and customers, which helps to increase favorable perceptions of the brand.

4. What kind of e-commerce investment makes sense for your company?

4. We believe that e-commerce is an essential sales network amid the COVID-19 pandemic, and we believe it is important to invest in limited edition models that can only be purchased through e-commerce sites operated by distributors. We also believe that demand for expensive watches aimed at high-income earners will increase, so we will consider new high-end brands.

Thomas Herzog/Premium Brands Agency

1. Please tell us your company's background story.

① Our distributor has 25 years of experience in the luxury watch business, offering consumers a diverse range of options. The distributor is also a response to the void left in wholesale distribution by the recent concentration and consolidation of sales by large companies and groups in the premium segment. These companies have leveraged the power of digital to move from personal luxury businesses to a stylized sales concept. Our brand portfolio is built around independent brands, offering a unique segment while emphasizing design, tradition, finishing and access to affordable luxury.

②How has the spread of COVID-19 affected your business?

② Although the COVID-19 pandemic has hurt my business in terms of new store openings and acquisitions, we have been able to consolidate our distribution and strengthen our "customer care" to increase customer loyalty. We have also launched our own website. Sales recovery will come from identifying and discovering new and better opportunities to generate business.

3. Do you think there is still a future for independent distributors?

3. I believe there is a future for independent distributors. My approach is to offer more than just products: I not only represent the brand, but also provide customer care, training, and all kinds of digital support.

4. What kind of e-commerce investment makes sense for your company?

4. E-promotion over e-commerce! We understand that digital platforms are the ideal tool for providing information and conveying the emotions of our brand. Many of our luxury products are closely linked to emotions, precious moments, and special experiences, so we need to provide opportunities for people to experience them. However, it is also true that there are some items that are better suited to online sales, such as WOLF watch boxes and jewelry cases.