In 2011 IWC Schaffhausen CEO Georges Kern said the brand would never use e-commerce to sell their products, citing a need to protect the boutique experience (their MSRP). This month IWC launched a new website with an online store for US based customers. Bravo to IWC for realising that the landscape has changed dramatically, thus entering the online scene and being transparent about their prices (to some degree). However, their foray into online retailing, and other brand’s decision to advertise local prices raises the hottest topic in the world of watches – the grey market.
In every industry we shop in as consumers, we look for the lowest price possible for the product we want. Whether it be technology, clothes, cars or watches, why pay more than you have to? I’ll use myself as an example. Five years ago I bought a grey market IWC Pilot 3717 (goods that have not been obtained from an official supplier). One of my friends bought the exact same watch here in Sydney for $2500 more than I paid. For the next three years, his watch caused him grief, not just because it kept having issues, and mine did not (that’s the luck of the draw) but because he was infuriated that he paid so much more than I did. Years later I sold the watch for $1500 more than I paid for it. As far as product ownership goes, it doesn’t get much better than that result.
Which brings me to my point of discussion in this article, a point that has repeatedly been raised in the comments of the Hodinkee advertisement (article, sorry) about the launch of the store. If you can purchase an IWC watch on one website for $9000, why would you buy it directly from IWC for $12000 when both come with the same international manufacturer’s warranty? Perhaps you can justify it by going into one of IWC’s boutiques, but when you take that store experience away, there’s no logical reason to pay more for a watch than you have to.
I met with a chap this week to purchase a vintage watch, and he was wearing an IWC Big Pilot. I asked him where he got it, and he simply said, I’ve always been a fan, and I got it at a great price. I asked him if he’d seen the new online store, and he said, “of course, but I rarely buy watches at retail price. If I’m in a boutique on holiday and feel compelled at the time, I might.” And therein lies the issue, buyers might seek that boutique experience occasionally, and be happy to pay the price that goes with it (usually discounted anyhow), but online, it’s a different story. Who is going to pay IWC’s absolute ticket price with no chance of a discount want for a watch on their website, or Mr Porter, when they can get the product at a discounted price in an IWC boutique, a jeweller or elsewhere online. And while their online store is advertising MSRP, it’s so easy to compare how large the gap between the manufacturer and grey market price is.
And it’s not just IWC. While you can’t transact on the Omega website, they still advertise their local pricing, and again the disparity is immense.
Cartier only offers a small selection of watches available to purchase online, but you can see pricing for all models, including their marquee pieces.
Essentially it boils down to a pricing issue. In Australia tax rates are high, so folks do everything they can to minimise them. In Hong Kong the top tax rate is a fair 17%, so people accept it and pay it. The point I’m getting at is, if Swiss watch industry priced their products with greater consideration of the entire landscape (new and existing customers, inflation, currency fluctuations and to avoid excess stock being sold into the grey market) and less about their brand and their celebrity ambassadors, perhaps more people would be happy to purchase at retail price and the grey market wouldn’t thrive. Of course, pricing also has to be in line with their position as a ‘luxury brand’, but an industry average 5% price increase year on year, for the same product is unjustified in my eyes. Especially when the luxury car manufacturers are reducing their prices while giving the consumer more tech, better safety and fuel economy and greater performance, from a better product, year after year.
From the TVG Store:
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