The fashion watch explosion

For the accessories market, it was a timely introduction. When Swatch Watch USA unveiled its plastic quartz watch in 1983 — selling for $25 to $35 — the Swiss firm started a revolution.

Now literally dozens of companies in the U.S. and abroad are aggressively trying to carve out market share in what is being called the “fashion watch” market — an amorphous category that covers everything from low-end imports, with a splash of color on the face, to sophisticated graphic pieces that have become a showcase in better department stores.

The key players have become the accessory industry’s vanguard — entrepreneurs who depend on sharp marketing techniques, imaginative promotions and advertising and a constant injection of new styles to insure the area’s longevity. No one knows how large the market is nor its potential, since even the traditional watch makers have begun adding their version of fashion watches to their lines. Estimates of total wholesale volume from executives run the gamut from $100 million to $300 million, and that number grows daily.

But even Swatch Watch did not have an easy time of it at first. Looking to rebuild Switzerland’s position in the watch market — having suffered serious incursions from the Far East — Swatch (a combination of “Swiss” and “watch”) set out to capture the lower end, which had been virtually untapped by the Swiss. The watch, test marketed in the U.S. through traditional watch channels, was made of plastic, could not be repaired and sold at price points far below what watch buyers were used to.

As Swatch began approaching department stores, response was lukewarm and sell-through was initially soft. As Max Imgruth, president of Swatch Watch, said in an earlier interview, “We had to convince the fine lady accessories buyers that the watches were chic.”

The firm expects to sell more than three million watches in the U.S. this year, with total volume for the U.S. subsidiary breaking the $125 million mark, including its expanded group of accessory items.

Competitive firms are quick to give Swatch its due as the forerunner of the trend and will concede that it holds anywhere from one-fourth to one-half of the market share.

Yet they feel there is a department store place for them as well, and are striving to differentiate themselves from Swatch and attract their own following. Said Mort Gershman, president of Lorus Products, a well-established watch firm that recently added a fashion line: “Swatch is a significant part of the market, but I don’t think it creates the same hysteria in areas outside of New York, Los Angeles, Chicago and Florida.”

While Swatch has used its watch’s customer base to create an apparel tie-in, other firms, such as Fiorucci, Colours by Alexander Julian and Guess, have been able to capitalize on the success of their apparel to build their watch business.

The Guess line, which is marketed by The Callanen Watch Corp. here and has a wholesale tag of $21, claims to be second to Swatch in department store sales, doing $12 million in wholesale volume. Since the major fashion watch business is being done in women’s department stores, where Guess has a strong foothold already, the firm has a natural distribution outlet, according to Mickey CAllanen, president.

Callahen also introduced a lower-priced fashion line, under the Brooke label, which wholesales in the $13.50 to $17 range.

E. Gluck Corp., a watch firm based in Long Island City, N.Y., which claims to be second in unit sales in the U.S. to Timex, has brought out two fashion watch lines: Awatch, a plastic watch aimed at mass merchandisers, sold through the Armitron division; and Slinkys, a watch that comes with different color metal bands that resemble the “Slinky” toys, targeted to department stores. The Awatch wholesales for under $20, while Slinkys wholesale for under $30.

Overseas Products International, based in Texas and represented in New York by Discoveries, Inc., introduced a plastic watch called Linus Q for spring 1985 that came with four interchangeable faces, wholesaling for $18. Discoveries owner Dan Thurston, who was new to the watch business, was “totally freaked” by the positive response. The company also has introduced a fashion watch with a metal mesh band for $20 wholesale.

Timex is one of the traditional watch firms that has taken the “if you can’t beat ’em, join’em” route.

“There’s no rhyme or reason why these watches sell,” said David Rahilly, vice president of marketing and sales for the U.S. “Some of the dials are even hard to read.”

Nevertheless, in the fall Timex introduced its Watercolors fashion line. Rahilly conceded his company was late in entering the market. “We had not anticipated the enormous impact Swatch would have,” he said. Rahilly added that the Watercolors line, which wholesales from $9 to $13, will be expanded and that fashion watches become a “very, very important part” of the Timex line.

Even Swatch’s sister company in Switzerland, Tissot watches, has decided to take advantage of America’s appetite for the new and different. In the fall it launched The Rock Watch in Chicago and Boston — a mid-priced watch whose granite face was chiseled from the Alps.

Swatch, however, does not believe imitation is the highest form of flattery, and has at least 20 lawsuits pending against firms that it claims have violated its patent or used deceptive advertising exploiting the Swatch nme. In Imgruth’s opinion, most of the fashion watch firms “have taken advantage of our spearheading and have copied us in every respect.” He bitterly assails the lower-priced styles, in particular, saying, “Every piece of junk out there damages our image.”

Swatch’s competitors have their own bones of contention. Since Swatch’s policy is one of limited distribution, there is frequently not enough supply to meet demand, according to several executives.

“Swatch can’t deliver, and no stores have open-to-buy because it’s tied up with Swatch,” one watch company executive complained. Commented Imgruth, “It’s better than having too much merchandise and not being able to get rid of it. Stores have become too greedy; they want to maximize their business, we want to optimize it.”

One aspect all companies agree on is the necessity of continuously bringing out new looks to maintain the fashion excitement. As Callanen noted, “If we want to keep the business healthy, we need newness. When the counters start looking staid, business will go bad.” Many firms are coordinating their colors with ready-to-wear trends and introducing their collections in conjunction with rtw markets.

But, cautions Abraham Shafir, president of Oraflex, Ltd., licensee for Bonjour Watchwear, manufacturers must be extremely careful in their designs or they will have huge inventory problems. Timex’s Rahilly agreed, “I’ve heard many unhappy stories of competitors stuck with items like all white watches.”

The need for quick turns and for shallow inventories has been “a little alien to traditional watch buyers and somewhat disconcerting,” Rahilly noted. Said Shafir, “The old-time jewelry buyers have had the hardest time. They know they have to have a fashion watch segment, but they don’t understand the fast turns. While traditional watches may take 90 to 180 days, our types of watchescan be sold out in two weeks.”

Gershman, of Lorus Products, pointed out that a lot of basic watch buyers have switched their open-to-buy, hungry for those quicker turns. But, he warned, they could find themselves short on better goods for the holiday season, and they must remember “the margin on a $25 watch is not the same as on one costing $75.”

Unlike other accessories, fashion watches require little education from salespeople; customers do not have to worry about fit, merely price and looks. Consequently, a number of firms have begun offering displays that can act as “silent salesmen” for their merchandise. Some firms, such as Callanen, have borrowed merchandising techniques from other industries. Using cosmetics’ purchase-with-purchase strategy, Guess watch customers have been able to buy a Guess clock for $15 or a Guess calculator for $5. Companies such as Bonjour and E. Gluck have used television advertisements to call attention to their products.

While the momentum for fashion watches shows little signs of subsiding, several companies have expanded their accessories offerings beyond watches to embrace a lifestyle concept. Capitalizing on its watches‘ success, Swatch introduced an accessories line last spring that includes everything from umbrellas to sunglasses. This fall, it expanded further by bringing out selected apparel items. Imgruth said watches will continue to be emphasized, but he expects this year’s product mix to be about 55 percent watches and 45 percent nonwatch products.

Fiorucci recently introduced its accessories line, including fashion watches, which ties into its rtw themes. Watches, which are priced higher than Swatch, are expected to bring in 25 to 30 percent of overall volume.

Retailers are working with manufacturers to create boutiques within their department stores to group these items. Fiorucci has announced plans to open Fiorucci Time accessories shops in Jordan Marsh in Boston; Woodward & Lothrop in Washington, D.C.; Burdine’s in Miami; and Macy’s in San Francisco. According to Carlos Martinzez, president of Time Distributors, Inc., the exclusive agent for the shops, 500 in-store boutiques are planned nationwide by midyear.

Swatch is hoping to have 400 of its Swatch shops opened by the end of February. Its ingredients for continued success call for complete watch turnover at least every month, controlling the merchandise for each store it does business with and delivering against sell-through. “As long as we stay a sharp, innovative young team, we can keep ahead of any watch revolution,” said Imgruth.

The fashion watch category is as hot as it ever was.

A number of medium-priced lines of sport wrist watches are selling well in department stores. These include the Ann Klein, Ann Klein II, Fossil, and Guess lines, as well as licensed cartoon-character watches. Most of these watches are selling in the $20-$200 range, and some industry executives believe that sales are coming at the expense of higher-priced watches. In addition, Joe Boxer and Timberland will launch wrist watch lines in 1995.

And, according to industry vendors and retailers – a segment in which merchandise typically retails in the $20 to $200 range – brands are currently the biggest news of all.

According to a variety of retailers, brand names have become a critical factor in determining fashion watch purchasing patterns. In the meantime, the price issue, which heretofore had been considered paramount, has become less important.

Much of the action right now, stores say, is happening in the Anne KIein, Anne Klein II, Fossil and Guess lines, as wen as novelty-oriented licensed lines, Looney Tunes and Disney among them.

In addition, merchants say they are always willing to test new entries. Some recent brand-name newcomers cited by stores include Nautica, Liz Claiborne, Swiss Army Watches and Hugo Maxx. Balancing out this group is a slowdown in a few other brands, such as Swatch, which some stores said has not been performing up to par of late.

Watches are one of the more explosive driving forces for main floor business,” said Kim White, merchandise manager for watches at Federated Merchandising, the buying arm for Federated Department Stores. “We’re positioned for another year of tremendous growth.

“Consumers are now building a watch wardrobe for their varied needs – career, casual Friday wear, weekend, sport and young-at-heart looks,” White noted. “It’s hip to wear a Looney Tunes watch with an Armani suit.”

Guess and Fossil are anchor brands in Federated Stores, according to White. These are followed closely by Anne Klein and Anne Klein II, which are expected to grow even more this year as a result of the return to ladylike dressing.

Sportly merchandise has also been scoring big, White said.

“It’s still `Clinton Chic’ to wear a plastic sport watch,” she noted. “And the more functions the better.”

J.C. Penney is also going strong with its fashion watch business.

“While our growth may be slightly less than last year, we’re still projecting good double-digit gains this year,” said Don McKean, merchandise manager for fashion and better watches.

Business is coming from a combination of the big brand names as well as newer entries such as Hugo Maxx and even Penney’s own private label line, Arizona.

He added that although the fashion watch category continues to grow, this is probably to the detriment of the better segment of the market, which includes such brands as Seiko, Bulova and Citizen. This segment struggled to finish last year with flat sales, McKean said, and he expects that performance to be repeated this year.

Among big-brand vendors in the fashion watch field, most reported very healthy increases in 1994 and are projecting similar growth this year. They claimed increases averaging 20 to 50 percent for last year, despite the fact that Christmas sales came very late in the season. Many are particularly optimistic because of early reports of strong retail sell-throughs in January, traditionally one of the slowest months of the year.

“The launch of bracelets and metals last fall greatly contributed to our success,” said Mark Odenheimer, vice president for the Anne Klein and Anne Klein II divisions of E. Gluck.

Those categories will be further exploited this year and, he added, “We’re being very aggressive in terms of focusing on high-performing areas like interchangeable sets and classic strap business.”

Mark Shell, vice president of sales for E. Gluck’s Armitron division, which also includes its licensed Looney Tunes and other cartoon character lines, credits his products’ growth to a surge in items priced at retail in the $20 to $30 range combined with a rebound in sport business.

Armitron’s Instalite sport line, which has a dial illumination feature, will be expanded this year to include more casual lifestyle and rugged outdoor looks with leather, suede and metal bands retailing for $35 to $45, he said.

On the novelty side, the firm has created the licensed collection of watches for “Batman Forever,” the third feature film about the caped crusader, opening in late June.

Fossil continues its focus on brand name and image expansion as well as product diversification, according to Peter Benanti, vice president of marketing.

To fill out its core watch line, this year the company is adding two new watch collections – Defender and FSL – as well as a sunglass line.

“Geared to urban sport kids, we hope FSL will attract an untapped customer niche,” Benanti said.

“We’re looking at snow boarders, mountain bikers, surfers, skate boarders and rock climbers – those leading-edge alternative lifestyle consumers that demand functionality,” he noted. “We took the utilitarian trappings of this market and made it into fashion.”

FSL’s retail price range of $85 to $90 is slightly higher than that of the Fossil brand. The firm will begin shipping it at the end of May to leading U.S. sporting goods stores as well as department stores.

Benanti declined comment on the Defender line, saying only that it will be shown at the May accessories market.

Timex is coming off a particularly strong year in 1994, which saw the launch of its licensed Nautica brand. Two more licensed collections will bow this year. The Joe Boxer line will hit stores in time for the back-to-school season, with Timberland arriving for the holidays.

Justine Jennings, manager of fashion watches, said Joe Boxer is geared to the teen and young adult market – a new market for Timex – with retail prices ranging from $40 to $100.

She would only divulge that the unisex line would represent a “unique way of telling time” and noted that the name, while known to consumers, hasn’t “maxed out yet.”

Timberland will be directed to a more upscale element. With prices starting at $60 and going as high as $200, the collection is geared for active outdoor enthusiasts, according to Susie Watson, Timex’s trend analyst.

Unlike sport, which focuses on endurance and timing, Watson said the outdoor market is geared to multiple fabrications like waterproof leather and nylon combinations, with style rather than functionality being key.

“Timberland is a global name with a strong image, which we intend to support with a large advertising campaign,” Watson added, noting that Timex will participate in the Outdoor Retailer trade show in Nevada in August in order to target sporting goods stores and other current Timberland-approved outlets as well as department stores. The print ad campaign will break in November and December.

Guess expects its projected 48 percent growth this year to come primarily from its new Waterpro line and from a new product category to be launched in August, according to Mickey Callanen, president of The Callanen Group, which produces Guess watches under license. He wouldn’t discuss any details except to say that the firm’s national advertising program, which began last Christmas, will also be expanded by 25 percent to support it.