March 15, 2012
Luxury watch and jewelry brands typically opt for third-party retailers, but many are opening their own monobrand boutiques at a quick rate. The problem lies in whether or not brands can forge relationships with their retail partners while still creating a brand culture for customers.
Brands including Hublot, Jaeger-LeCoultre and Ulysse Nardin are increasingly setting up their own shops in major metropolises worldwide, honing in on affluent consumers in an environment that will not have competing brand distractions. However, watchmakers must find a way to overcome these challenges and work out how and when to branch out on their own.
“One of the biggest marketing challenges that watch and jewelry brands face is channel conflict,” said Darren Floyd, cofounder of luxury marketing consultancy Fondue Mix, New York.
“Brands have worked very hard to cultivate relationships with key retailers, which is critical for the health of their business,” he said.
“The challenge arises when brands are reluctant to forge ahead with their own marketing or retail expansion initiatives because of the fear of what may happen to the lion’s share of their business with the wholesale partners.”
In this Q&A, Mr. Floyd discusses the rise of the monobrand boutique, the problems that come with it and a possible solution. Here is the dialogue:
Why do you think that luxury brands are reluctant to open their own brand boutiques and instead opt for wholesale retail partners and online locations?
Most often, the reason is cost and resources.
Not only do you have the cost of real estate, design and construction, [but] a brand boutique and ecommerce Web site requires a significant investment in marketing and infrastructure.
Besides just opening the doors, it is necessary to create awareness through marketing to drive foot traffic into the new store or online, not to mention all of the other back-end systems necessary to run the operations and properly support customers.
The investment is substantial and it generally works better if multiple boutique locations can help absorb the fixed costs.
A plan like this requires very good foresight, planning and patience, because the return is not always immediate.
Wholesale partners selling through their retail locations are an ideal solution for many luxury brands because the marketing and operations costs are covered, generally 100 percent.
The marketing may not be what the brand would like, and the margins are less, but often it makes better financial sense.
There has been an influx in monobrand watch boutiques lately. Why do you think that is?
There is no better way for a luxury brand to communicate their culture, values and visual branding than to have their own retail presence.
A boutique is intended to be the perfect brand environment, which is often difficult for wholesale partners to achieve.
In addition, a boutique provides the ideal venue for new collection launches and private shopping events for brand insiders.
What are some of the main problems that watchmakers face with distribution channels?
One of the biggest marketing challenges that watch and jewelry brands face is channel conflict.
This is also true of high-end electronic brands, apparel and many other categories.
Brands have worked very hard to cultivate relationships with key retailers, which is critical for the health of their business.
The challenge arises when brands are reluctant to forge ahead with their own marketing or retail expansion initiatives because of the fear of what may happen to the lion’s-share of their business with the wholesale partners.
This is why most watch brands have been reluctant to sell a complete assortment, or any assortment, online.
This is also true of many great brands in other product categories that conspicuously do not sell online.
What are your suggestions to overcome these challenges?
Understandably, brands need to walk a very fine line to craft marketing campaigns that help their own sales channels as well as the entire ecosystem of brand stores, brand Web sites and partner stores and Web sites.
Most of the major retailers these days know that successful brands generally want to have their own bricks-and-mortar presence and absolutely must sell online.
Major retailers also know that brands planning this must have a robust marketing strategy behind these efforts.
Where the collaboration happens is when the brand approaches the wholesale partners to discuss key elements of the marketing plans.
Creating brand awareness through marketing helps all sales channels, not only the brand-owned sales channels.
But if there is not a solid marketing plan in place, or if the brand is reluctant to have these discussions, then the wholesale partners will rightfully suspect that this brand is not a safe bet.
Having clear thoughts about how the marketing plan will drive foot-traffic into brand boutiques, into wholesale partner locations, to the brand Web site and to the wholesale partner sites, [which] is critical to overcoming the objections of brand expansion into new sales channels.
Rachel Lamb, associate reporter on Luxury Daily, New York