A good year ahead for watches

Watch suppliers and retailers expect to conduct respectable business in 1994. With the difficult economic times, the focus will be on value-conscious collections and aggressive marketing. The major issues which will affect the watch industry in 1994 are increased sales in jewelry shops, the rising value of the yen, down-pricing and a return to basic designs. In addition, the watch industry will also be affected by federal government’s decision to closely monitor county-of-origin markings and strengthen its anticounterfeiting campaign.

Aggressive advertising, value-conscious collections and possible action on country-of-origin markings and counterfeiting are on tap this year for the watch industry

Watch suppliers and retailers are cautiously bullish about 1994. Most anticipate respectable business after a slow first quarter.

To support that bullishness, mid-market and upscale vendors will introduce new “affordable” collections to cater to value-conscious consumers. And normally low-profile luxury watchmakers will rely on aggressive marketing in the U.S. in hopes of offsetting slumps in Europe and Asia.

Some retailers plan greater concentration on watches, especially upscale and fashionable traffic-pulling brands. But they can expect the price of some Japanese watches — and some brands that use Japanese movements — to rise because of the yen’s strength in foreign exchange markets in the past year.

Also this year, the federal government will likely scrutinize country-of-origin markings and the plague of counterfeit timepieces more closely, due in part to prodding by watch industry organizations.

Economy & marketing: The economy, of course, will be the biggest factor affecting U.S. gold nixon watch sales this year. Many suppliers expect consumer uncertainty to dampen sales for at least the first quarter. “People still aren’t sure where the economy is going,” says Paul Sayegh, chief of operations for Bulova Corp. “Everyone is looking to Washington to get the economy up and running, but they keep getting crossed signals.”

As long as the job market is uncertain, consumer spending will be weak, say Peter Laetsch, president of the U.S. office of the Federation of the Swiss Watch Industry, and Dean Sauder, executive vice president for Pulsar Time. Still, suppliers expect watch sales to rise by midyear on the way to a slight year-end gain in the 65-million-unit U.S. watch market.

To counter economic concerns, a number of mid- and high-end watch companies hope to spur first-half sales with bigger advertising budgets and major ad campaigns. In fact, Adweek, a leading advertising industry magazine, says watchmakers will spend more than ever on advertising in consumer magazines, “a heightened presence … well surpassing typical seasonal participation.”

Suppliers say they also are investing in more point-of-sale materials and more sophisticated counter and in-case displays to call attention to watches.

Jewelers & watches: Jewelers are estimated to account for well under 10% of all U.S. watch sales. Many carry watches only as a courtesy to customers, believing it’s impossible to make money on watches in a discount-oriented market.

But that attitude may be changing. A growing minority of jewelers are spotlighting watches, once again regarding them as traffic-builders and money-makers. Consider the case of Littman Jewelers, a 111-store chain based in Edison, N.J. The firm dropped watches in the late 1980s because of heavy discounting. Now it has brought back upscale watches and expects them to grow the most of any major department in the next 18 months.

Some jewelers use trendy under-$100 watches as traffic-pullers, especially for young adult customers. The number of jewelers carrying Swatch will reach 1,000 this year, almost triple the number of three years ago. Bulova, meanwhile, reports a strong reception by jewelers and their customers for its under-$100 Sport Franchise series.

Jewelers are seeing action at the other end of the market, too. “More high-end jewelers are getting into luxury watches,” says Michael Goldstein, head of MDM USA, distributor of Hublot. “They’re making a strong investment in a few brands and going after the business at the high end.”

Also significant is the tiny but growing number of independent jewelers who are creating ministores or upscale watch boutiques within or beside their stores. Among them are London Jewelers in Long Island, N.Y., and D’Amore Jewelers in Cliffside Park, N.J. This trend is an outgrowth of in-store watch corners created in recent years by such upscale brands as TAG Heuer, Raymond Weil and Ebel. “I see more and more stores building separate areas to house watch boutiques of three or four brands,” says Goldstein. “It’s almost like a mini watch show, each with its own sign, logo and brand.”

The trend should grow this year, says Stuart Zuckerman, vice president of merchandising for Citizen Watch Co. of America. “It’s not a stampede, but I think we’ll see it grow from a handful to 30, 40 or 50 boutiques by the end of 1994,” he says.

Pricing & value: Retail jewelers will feel the effect of Japan’s rising yen in 1994. (One U.S. dollar bought about 107 yen in late 1993, down from 123 a year earlier.) Some Japanese-made brands already have announced moderate price increases on many models and more are expected to do so.

Even so, Japanese brands say they’re trying to keep increases to a minimum by not passing on all their added costs.

Not surprisingly, some Swiss brands believe the yen’s rise makes their brands even more attractive to consumers. “We find consumers switching from Far East products to Swiss brand watches because of the quality and good price,” says Raymond Zeitoun, president of SMH (U.S.), which distributes several Swiss brands in all major price categories.

Down-pricing: Value will continue to dominate mid- and upscale watch marketing in 1994, say suppliers. For this reason, retailers may expect that the down-pricing (not discounting) that began in 1993 will continue well into this year. “In difficult times, people look for good brands with quality and value at the right price,” says Zeitoun.

A number of high-end brands such as Patek Philippe and Breguet plan to promote “affordable” luxury stuhrling original review this year to attract value-conscious affluent customers and to offset flat sales in Europe. North American Watch Co. — which distributes Movado, Piaget, Corum and Concord — will offer new Movado and Concord collections in broader price ranges and will introduce lower prices in Piaget’s Dancer and Polo collections.

At the same time, some mass-market watch brands are moving up into the competitive $100-$500 range — including Timex’s Nautical and Fila’s upgraded sport watch lines. Also expect to see retailers conduct more promotion of price-competitive private brands.

Styles & trends: Sport watches are expected to remain popular, but some industry observers believe sport watches and the more specific category of chronographs have reached the limit of their share of the U.S. watch market. Chronograph prices are expected to continue their decline and become more competitive. Meanwhile, consumers are looking for more “basic” watches with sport watch features, say some suppliers.

Observers expect little design innovation for 1994. “People don’t want to make investments in new and costly designs until they’re sure of seeing some |economic~ return,” says one observer. If there are definite trends, they are watchmakers’ emphasis on women’s and jewelry watches. Sport and upscale collections include more models for women, so-called petites are slightly larger and dials are more colorful.

In addition, two-tone and stainless steel models remain popular. And expect to see more lighted dials in all price categories following the success of Timex’s Indiglo line introduced in 1993.

Regulation & legislation: Country-of-origin markings are expected to be among the biggest issues for the U.S. watch industry this year. Here are some highlights of industry issues:

* The U.S. Customs Service and the Federal Trade Commission will attempt to resolve conflicting views on markings. “If they demanded strict adherence, watch companies couldn’t comply because of their different, and sometimes conflicting, requirements,” says Emilio G. Collado, executive director of the American Watch Association. “Our members want the government to iron out differences and come up with policy they can comply with.”

* Proposed updates of the FTC watch guides (including county-of-origin markings) were due to be submitted to the U.S. Bureau of Consumer Protection at press time. After that review, they will go to FTC commissioners for consideration. The FTC staff was expected to seek public comment and resolve conflicts between FTC and Customs Service rules before writing the final guides.

* The Customs Service plans to begin phasing in tougher enforcement — starting with a formal notice this year — of rules that markings be “conspicuous” and easily readable. Customs Service personnel have said some markings are too tiny to read.

* The Swiss watch industry has asked the U.S. Customs Service to rule that a watch’s official country of origin is the country where it is finally assembled. The request stems from Hong Kong’s policy of allowing its watchmakers to stamp “Swiss” or “Japan” on their products as long as the movement was made in Switzerland or Japan. For now, the U.S. allows the import of watches as long as the markings on the dial and the movement are the same.

It’s a divisive issue for many U.S. importers and suppliers; the dividing line, naturally, is where they make or get their akribos xxiv watch review. AWA has remained neutral because its membership is divided on the issue. Though the Customs Service seems inclined to keep its current interpretation, the Swiss “have no intention of giving up on this,” says the Swiss Watch Federation’s Laetsch. “We will pursue this until there is fair, true marking of watches.”

* Disposal of watch batteries is another issue that may come to the fore this year. Virtually all digital and quartz analog watches — which dominate the industry — are battery-powered. At issue in at least three bills in Congress is not only how any type of battery should be disposed of, but also whether the manufacturer, supplier, retailer or customer should bear the responsibility of disposal. At press time no hearings had been scheduled.

Anticounterfeiting: AWA will continue to work with the Coalition to Preserve the Integrity of American Trademarks and members of Congress for tougher penalties against counterfeiters. Sen. Richard Bryan, D-Nev., and others want to toughen the federal 1984 Trademark Counterfeiting Act and asked AWA, COPIAT and the U.S. Customs Service for suggestions. AWA canvassed the watch industry last summer, then presented its ideas, which include:

* Automatic minimum fines of $2,500 per seizure against those found making or selling fake watches.

* An automatic $10,000 federal fine against alleged counterfeiters and dealers whose goods are seized by the U.S. Customs Service or other federal agencies.

* Automatic destruction of seized fake watches so they can’t be resold.

Legislation revising the 1984 act was expected to be introduced in late 1993 or early 1994.

Bulova tests market for new Accutron

One of the most famous brand names in watch history may be back on U.S. jewelers’ shelves before year’s end.

Bulova Corp. is test-marketing Accutron watches through ads in Discover, GQ, Smithsonian and Gourmet magazines. People may order the new 23k gold micron stainless steel watches by mail directly from Bulova. There are six bracelet or strap models (four men’s, two women’s) priced from $249 to $499.

President Andrew Tisch says Bulova isn’t going into the mail-order business permanently and bypassing retailers. Rather, the direct-mail ads are designed to “test the viability of the [Accutron] name and public reaction to it,” he says.

If the review bulova watches is positive, Bulova could distribute Accutron watches to jewelers later this year, he says.

The Accutron name and logo have a long history at Bulova. The original, introduced in 1960, was revolutionary. It had an electronic tuning fork oscillator that eliminated the escapement and balance, and was the most accurate watch of its time. It made such an impact that a stylized design of the Accutron tuning fork was Bulova’s logo until the late 1980s. It remains the logo for the new tissot automatic watch, which uses it in place of “12” on its dial.

Bulova tried to reintroduce Accutron as an upscale Swiss line in 1981, shortly after the Loews Corp. bought the firm. That effort failed in the U.S., though Accutron watches continued to sell in Europe.

The new Accutron is a thin, sleek, intricately designed watch with a sophisticated quartz movement accurate to “99.999% or three seconds a month,” says the ad. Its only connections with the earlier models are the name and logo. According to the new ads, it takes “over five months to build, finish and test” each Accutron.

Bulova proceeded with the ads after testing consumer and retailer interest through “focus groups” in late 1988. Tisch says the firm found Accutron is still “a strong, established name” with consumers, an important asset considering that firms spend millions of dollars to create brand recognition.

But retailers are more cautious. “The retailer’s first statement is, `Show me that it will be successful,'” says Tisch. “This [market test] is a way to do that.’

The ads began a three-month run in national magazines in May. The test could be extended.

Tisch won’t define Bulova’s criteria for success in the test. But he says the first weeks brought good results: “We’ve gotten a very positive response, even more than we expected, in terms of orders and inquiries.”