IN U.S., WATCHES BOOM, BUT NOT FOR JEWELLERS

Americans bought 125 million to 150 million watches in 1988, everything from cheap refrigerator magnets with digital displays to diamond-studded luxury timepieces. That’s up considerably from only 43 million watches in 1969.

But even as U.S. sales grew by leaps and bounds, watches and clocks became a smaller part of jewelers’ total sales. At the same time, the remnants of the U.S. watch production industry virtually disappeared.

U.S. production: The demand for digital watches in the 1970s produced a brief boom in U.S. watch production. In 1969, for example, U.S. watch production totaled 17.7 million. By 1977, production totaled 31 million watches, most of them digital, and more than 1000 stuhrling review. But aggressive price-cutting and a global glut of cheap digital watches burst the balloon. Many small manufacturers and marketers went out of business because they couldn’t compete financially or couldn’t develop an adequate distribution system.

Many nonwatch firms — such as General Electric, Texas Instruments, Gillette and Fairchild Industries — also tried their luck with digitals. They all failed because they didn’t understand watch production and marketing. They thought watches could be sold in the same way as pocket calculators — which a year or two earlier enjoyed immense success in the market. Like pocket calculators, digital watches started at a fairly high price but dropped dramatically as production soared and production expertise grew. While it was possible to sell calculators through almost every conceivable retail outlet, this wasn’t possible with watches.

At the same time, rising costs led other manufacturers to go off-shore to low-cost, labor-intensive production centers in Asia. Timex, for example, shifted most of its production and assembly operations to Taiwan, Singapore and the Philippines. The result: U.S. watch imports mushroomed from 58.1 million units in 1980 to 210 units last year.

By 1988, all that remained of the U.S. watch production industry were some Japanese-run assembly operations in California, a Swiss-run assembly operation in Pennsylvania and small Timex operations in Arkansas and Connecticut.

Jewelers’ sales: Industry experts estimate U.S. watch and clock sales total at least $2 billion annually, and some say as high as $5 billion. (Major vendors in this hotly competitive market don’t like to reveal results of their market surveys). But watches and clocks account for only about 12% of jewelers’ sales, down from 17.9% in 1969.

Why? Many jewelers reduced or dropped their watch and clock departments when discount and off-price retailers stepped into the market. Jewelers and Better Business Bureaus warned consumers that off-price retailers used huge markups to allow for markdowns, and that the discount prices weren’t much different from jewelers’ regular prices. But consumers still flocked to discount houses.

The fodder for much of the off-price watch market was gray-market goods (brand-name items made overseas for foreign markets but imported here and sold at discount prices by unauthorized dealers.)

Off-price retailing of watches got a major boost in 1980 when K mart, the nation’s second-largest retailer, added gray-market Seikos to its jewelry department. Other mass-merchandisers followed suit. By 1984, gray-market watches had become a $100 million market in the U.S.

Efforts increased in the mid-1980s’ to dam the flow of gray-market watches. Watch firms, the American Watch Association and Jewelers of America were among the founding members of the Coalition to Preserve the Integrity of American Trademarks. COPIAT lobbied aggressively against the U.S. Customs Service, which allowed the entry of gray-market goods if the trademark owner was a U.S. firm or had a U.S. outlet. But in 1988, the U.S. Supreme Court ruled in favor of the Customs Service.

Counterfeit watches: Counterfeiting also affects jewelers’ watch sales. Consumers buy fake watches at bargain-basement prices, thinking they’ve bought the real thing for much less than they’d pay a jeweler. But that creates two problems: consumers akribos xxiv reviews end up with a watch of little value and also take away business for jewelers dealing legitimately.

Some watch vendors have started to fight back to protect their names and their profits. Rolex, for example, now spends more than $1 million annually to find and prosecute watch counterfeiters.

And as a whole, the watch industry persuaded Congress in 1984 to pass the Trademark Counterfeiting Act, which makes trafficking in phony timepieces a criminal offense.

The American Watch Association also battles counterfeiting, working with individual watch firms, the Watchmakers of Switzerland Information Center and other trade groups. In addition to lobbying, AWA funded three major investigations of bogus watch trafficking. The most spectacular was “Operation Watchcase,” which uncovered a counterfeit watch network, resulted in scores of arrests and recovered tens of thousands of bogus watches in 1987.

In 1988, AWA, WOSIC and Jewelers of America initiated a successful program built around a phone number (1-800-333-FAKE) to report suspected watch counterfeiters. AWA also produced a video warning TV viewers about fake watches, helped to develop a model state law making making counterfeiting a felony and pushed to erase weaknesses and toughen seizure provisions in the Trademark Counterfeit Act.

Repair service: As watches and clocks started to claim a smaller share of jewelers’ sales, so did repairs. For generations, jewelers and watch repairmen were virtually synonymous. In fact, many jewelers entered the jewelry industry as operators of small watch repair shops.

But from 1969-1989, the number of watchmakers in the U.S. labor market dropped from 30,000 to about 12,000. While every jewelry store once had its own watchmaker, 37% of those polled by JC-K in 1989 had none.

One reason is the smaller role that watches play in jewelry-store sales. Another reason is technological advances such as quartz watches, which need few repairs. Wages also can be blamed. In late 1988, the approximate starting salary for a watchmaker was $10,000 to $12,000.

Yet jewelers say watch repairs are a valuable service. As a result, watch repair trade shops and factories have increased, serving jewelers who no longer offer the service themselves.

Other changes: The U.S. watch market has witnessed a number of other changes in the past 20 years.

The advent of electronic digital and analog watches, with their precise timekeeping, led to great emphasis on marketing and styling. As yuppies began to prosper in the 1980s, advertisements across the U.S. promoted nixon watches for men as fashion accessories first, and timepieces second.

A pioneer in this marketing concept was the Swatch, the trendy, inexpensive, Swiss watch introduced in the early 1980s.

In 1986, clothier Benneton licensed Bulova Watch Co. to produce a line of fashion watches. It was part of a fast-growing trend toward designer name timepieces. By 1989, watch and clocks bore the names of prominent designers and even leading automotive products such as Ferrari, Jaguar and Harley-Davidson.

Luxury watches ($300+) also became a growth market in the U.S. in the latter 1980s, despite rising gold prices and the devalued dollar.

Nonwatch accessories: Some watch firms even expanded into nonwatch fashion accessories. Movado offered products ranging from handbags to glasses. Bulova has a line of 14k jewelry and launched the Buly line of tote, backpack and gym bags in trendy colors with clocks affixed to the outside.

Cartier opened several in-store boutiques and reportedly considered licensing its Piaget watch name for various accessories.

Ironically, Swatch, which helped to launch the trend, is getting out of the fashion accessories business. Swatch officials said the experiment was unsuccessful and that the firm now will concentrate on its core business of watch and watch accessories.

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