Discounts
Deep Thoughts, Uncategorized

Discounts

There are a few things in this industry that are just plain broken.  To me, one of the most glaring examples is the system of selling watches at negotiated discounts.  Recently in a Facebook group there was a discussion about an Audemars Piguet model that, to my knowledge, has not even been delivered yet.  Multiple people – not dealers – were offering to get the piece at 30% off.  Obviously this is broken.
Of course, like anyone else, when I buy a watch I want to buy it as cheaply as possible.  However, the current system is bad for everyone.  The only other product I can think of that people pay different amounts for the exact same item is cars, and that is hardly an industry to be copied.

It is bad for brands as they completely lose control of their market.  It is bad for retailers as they are always dealing with unhappy clients and ground-down margins.  And it is also bad for customers.  If watches were sold at their retail price like most other goods, they would be much easier to buy and they would retain their value much better in the short run.

Of course, the solution is not easy.  All three parties: brands, retailers, and customers, are complicit in the state of things today.  There is no doubt in my mind though that this cannot continue forever.  At some point, I do believe that a watch will cost what it costs and no one will even think about negotiating.  And we will all be better off.

  • Marc

    Interesting look at it Steve…I looked at that post in the group and laughed to myself honestly…these guys are bottom feeders as I call it…they take the money first then find you the watch…I love how people coin in any AD will give you 30% off…not likely with many higher end brands such as they were discussing…most AD’s will not be able to get that watch right away…the other thing though is distribution around the world is different…many play with currencies and tax refunds which can make quite a difference…many manufacturers are on top of this and thus the reason the AD network has shrunk…Compared to years ago AP has really tightened their network so I am having an issue believing it will actually happen…then again some AD’s didn’t seem to care and lost their authorized rights to selling the watches

    • Hey Marc,
      Spot on. There are lots of games that can be played. But let’s not forget
      that EVERYONE is complicit in this. For a long time the brands have over
      produced, retailers have over discounted and customers have grown to expect
      bigger and bigger discounts. It will be interesting to see how it plays out
      in the next 5-10 years. I think the trend you have noted with AP closing
      retailers and opening boutiques will certainly carry forward for lots of the
      bigger brands. What happens then when the boutiques have too much
      inventory?

      -Steve

  • Dan

    For watch vendors who sell direct to the public via the Internet, this is largely already true. Also of note: some car manufacturers have successfully changed their buying experience, including Saturn in the old days (one reasonable and low price for everybody) and Tesla currently (where dealerships are owned directly by the parent company rather than franchised).

    • Absolutely. Things are already changing. I don’t think selling directthrough the internet is the only solution, but it certainly is one that
      works for some brands. At the higher price points and more esoteric stuff,
      there are still issues to be worked out with internet sales.

      Thanks for the comment!

      -Steve

  • Skellern

    I am not sure that saying that everyone is complicit is the right term Steve. Discounting and the gray market is the logical outcome of brands trying to fix prices. There is a reason price fixing is illegal in most countries: it’s because consumers usually ripped off. When the brand’s production way out-stripped demand – as has happened in the last couple of years – then something has to give, and that something is logically prices. Some brands bought back stock to control the supply side, but more didn’t. Keeping supply more inline with, or slightly under, demand would reduce the incentive or necessity to discount.