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.