Welcome to QP’s first ever Special Report – a look at the rapidly-growing world of online watch sales
Over the next four weeks we will be taking an in-depth look at why the stage is set for online retail to explode in the coming years. We address the wide variety of approaches being taken by the big brands (including exclusive news about which brands are about to start doing so), look at what it means for retailers of new and vintage watches, and cast a look at what the future may hold.
By Chris Hall
Research by Caitlin McDonald
What makes people comfortable spending large sums of money on luxury goods? Or – to put it another way, what makes something luxurious rather than simply expensive? Yes, it’s down to things like the strength and reputation of the brand, and the quality, provenance, and rarity of the product, but a huge part of it is something more intangible – the experience of actually buying it.
How do you arrive at the purchase? How much contact do you have with who created it? Do you get a chance to see it, touch it, try it on or test it out? Are you fully informed about its every stage in life before it arrived in front of you? Are you treated with consideration and respect, and given the undivided attention of the seller? Luxury goods are expensive, and we are hard-wired to treat expensive purchases differently; they inevitably have a certain gravitas and can play out over months, even years. Whether you have saved for six years to buy a Rolex, or are mulling over a Greubel Forsey that could just as easily be a central London apartment, you want the person receiving your money to understand its significance to you, and treat the transaction with a certain degree of ceremony.
Except that model no longer fits with the world around us. The last fifteen years have seen an explosion of e-commerce, and the rise of a generation that wouldn’t dream of leaving the house to buy groceries, electrical goods, furniture or clothes; book a holiday or even buy a car.
€70 billion: the projected value of the luxury market online by 2025, as online sales reach 18 per cent of the market
It makes sense that our considered luxury purchases would be slower to follow suit; but follow they have. And now we find ourselves at a tipping point. Management consultants Bain & Company reports that e-commerce doubled its share of the luxury market between 2012 and 2015, up to 7 per cent. That may not sound like genuine disruption, but according to a report from McKinsey last year, it represents a significant mark. It says: “Once they begin to have sizeable revenue coming from e-commerce — around 6 to 7 per cent of total sales —luxury players reach a tipping point where they quickly scale their e-commerce operations and launch full e-shops.” McKinsey forecasts that sales of luxury goods online will triple in the next decade, reaching €70bn by 2025. Narrowing the focus slightly, GfK reports that online sales of watches over £1,000 have risen by 88 per cent between 2014 and 2016 in the UK.
The watch industry has not been quick to adopt e-commerce; heavy investment in own-brand boutiques around the world and long-established relationships with major retailers mean that many brands are wary of anything that could hurt their traditional sales model. And you have to remember that the Swiss watch industry turns like an oil tanker. But the more forward-thinking CEOs – like TAG Heuer’s Jean-Claude Biver – recognise that without an e-commerce presence, brands risk losing access to an entire generation of customers. Those on the front line of watch sales, both major multiple retailers and relative newcomers, are already reporting data that supports a much greater investment in online sales. At Aurum Group, the parent company behind Watches of Switzerland, Mappin & Webb, Goldsmiths, WatchShop and WatchHut, online sales last year amounted to £100m, or 20 per cent of all business.
87%: how much the average price of watches sold through WatchFinder has risen since 2010
The sluggishness of the big brands to get online is symptomatic of the disconnect between luxury watchmaking and consumer technology, to an extent – marrying the mentality of gradual evolution with the rapid iteration cycles of apps and digital platforms isn’t always easy, something we’ve seen with some of the haute horlogerie forays into the smartwatch market. Regular browsers of luxury watch websites will not need us to point out that they can lag somewhat behind the curve in terms of design and “UX”; times are changing, but the same goes for the e-boutiques.
All brands that we spoke to for this report identify similar points as crucial to ensuring a good online buying experience: simplicity of design; smoothness of journey from entry to check-out; presence of advisors 24/7 to answer questions, and clear presentation of information about the watches. It’s something the major players are going to need to devote as much attention to as their Bond St boutiques if it’s to be a success. Next week we’ll look at the established brands that are already making hay online, what they’ve done right, and who is watching intently from the sidelines.