Distribution networks are saturated, and have not kept up with modern purchasing behaviors. In relation to this we will be fostering community power by giving a commission of 10% to anyone who helps to generate a sale.
Today the distribution of a particular watch brand is predominantly regulated by the traditional model. The brand invents and manufactures the product; the distributor (or a subsidiary of the brand) develops sales in the territory in which they have exclusivity; and the retailer displays the product in their store and helps to inform the customer.
Traditional distribution does have some clear advantages: a watch aficionado can see, touch and try his timepiece before buying; he can also receive advice from the retailer, and is then able to wear his new watch immediately.
But the distribution networks are saturated. Moreover, in recent years, retailers are under pressure from major companies:
- Setting minimum quantities much too high, immobilizing significant amounts of money
- Requesting large window displays at the expense of smaller brands
- Threatening the withdrawal of one of their flagship brands if they also stock a particular competing brand
In this environment, it is very difficult for a young brand to fight for a place on the shelves. In addition, inventories have built up among retailers who find themselves in a very difficult position. This situation, aggravated by the global crisis, is stimulating the development of the gray marker.
Distribution networks are saturated and retailers are under pressure from major companies
There are two types of parallel market which remain within the legal framework.
The secondary market, generally controlled by the brand, allows the latter to sell past collections that have not had the success that was anticipated in its key markets. They are sold at lower prices in other countries where the brand has less visibility.
The gray market, even where it is legal, is not authorized by the brand. It consists of independent dealers whose strategy is to sell in volume rather than with high margins. They usually buy overstocks from official retailers and sell them at a discount of around 30 to 50%.
Of course normally brands try to combat the gray market, but in critical situations they often turn a blind eye, because this parallel network helps them to clear overstocks and avoid explosion.
Here are some factors which can stimulate the gray market:
- Excessive variance between the cost price of a watch and its intrinsic value.
- Excessive production which creates overstocks among brands and retailers.
- Price differences which occur among territories when the retail price is adapted to the country’s purchasing power.
The gray market is the gangrene of distribution.
SO WHAT ARE WE PROPOSING?
The significant growth of the gray market in recent years is one of many indicators that purchasing behaviors are changing. Today the internet has shattered the notion of exclusive distribution by territory. In addition, social networks have given rise to a consumer who stays informed, shares, and comments.
In this environment we have decided to use the distribution channels listed below in an effort to be closer to our customers, thereby removing the margins of some middlemen:
Direct sales to end consumers through our website
Sales through Dropshipping
Dropshipping is a tripartite system wherein the customer places an order on the website of an e-commerce partner. The order is then sent to the brand, which provides delivery and manages inventory. The partner doesn’t bare any risks regarding immobilized stock, and earns a commission of 20 to 40%.
Sales through pop-up stores
The pop-up store is a concept which emerged in the early 2000s. A store is set up for a few days, sometimes for a few weeks. This is an interesting concept for two reasons: firstly the fact that these stores are instant and fleeting arouses the curiosity of the consumer, and stimulates the act of purchase; secondly these “unusual” events attract media interest.
The internet has shattered the notion of exclusive distribution by territory.
BUT WHAT’S REALLY SPECIAL ABOUT OUR MODEL IS…YOU!
Online sales are growing fast but still have some downsides; most notably the inability to touch the watch before buying. Pop-up stores are a good alternative, but they are not suited to all locations.
The internet has given rise to veritable communities who like to share their passions. Therefore as the person who can best represent our timepieces, we have decided to involve the customer in the selling process. We will encourage him to discuss his watch with his “community” by involving him in development, and by giving him a commission of 10% on any sale he generates.
But that’s not all; a potential customer interested in buying one of our models, but yet to see it, will be able to contact a nearby owner. Using a mobile application, they will be able to discuss and arrange a meeting. The buyer will be able to order his watch with confidence, and the sponsor will receive his commission of 10%.
The best ambassador is a satisfied customer. That’s why we’ll give him 10% on each sale he generates
An application will allow a potential customer to meet a watch owner so that they can see the product before buying.