Luxury watch and jewelry brands are in a unique position when it comes to their distribution model. Traditionally the high end luxury brands such as Hublot, Jaeger-LeCoultre and Ulysse Nardin have relied on their retail partners in the distribution channel to get their products to the consumers. This includes the retailers providing 100 percent of the costs for the marketing, real estate and other overhead costs associated with running store fronts. This also includes the costs for the e-commerce platforms that retailers provide for the brands they do business with.
Recently though a new trend has emerged that threatens to cause conflict within the traditional sales channel. Some of the major brands have decided to open mono-brand boutique shops exclusively offering only their products. They focus on very affluent areas and it gives them the ability to have customers focus on their brand only with no other options within the store. Also, the can create a unique environment within the store to offer a better customer experience. For example, offering free drinks or food while looking for a diamond ring or watch.
This has been somewhat of a controversial trend because many brands do not want to cause irreversible harm to the strong relationships they have forged with their channel partners (re-sellers). “One of the biggest marketing challenges that watch and jewelry brands face is channel conflict,” said Darren Floyd, co-founder of luxury marketing consultancy Fondue Mix, New York.“Brands have worked very hard to cultivate relationships with key retailers, which is critical for the health of their business,” he said.
On top of that, the brands will have to take on the cost of running the store fronts which entails a marketing plan to drive as much foot traffic to the store as possible. One way to help mitigate these costs is to open several boutiques to help absorb the fixed costs and provide several revenue streams. This would require a substantial amount of capital and would be viewed as a high risk move by many business owners.
Most brands are satisfied with keeping their current relationships with channel partners in place using the 3rd party re-seller model to get their products to consumers. Not to mention having 100% of the costs picked up by their re-sellers. They view the risk of opening their own boutique or chain of boutiques not worth the reward at this point.