In Spring 2017, BusinessMontres.com editor and industry expert Grégory Pons counted that there had been in average 2 new watch brand launch per week. In an attempt to explain the growing interest of entrepreneurs for this industry, I listed seven incentives observed from monitoring this industry, and seven challenges that entrepreneurs have faced, or will eventually have to face:
Opportunity: the consensus amongst experts is that the traditional distribution model is outdated. Brands and shareholders are solely focused on sell-in, and the risk of sell-out is passed on to distributors, agents and retailers in exchange of a fat commission that inflates the price. Customers are yearning for fresh and disruptive distribution models, so direct Souscription or pre-sales, as pioneered by Abraham-Louis Breguet are back in trend, and the indirect souscription model used by Kickstarter and the likes is showing signs of success.
Self-actualization: launching one's own watch brand is sometimes motivated by the lack of choice on the market. Art Directors and marketeers are sometimes so busy analysing data and second-guessing options that they might be oblivious to what customers want. Since 2001, entrepreneurs have been pre-selling vintage inspired watches, and it took Tudor's launch of the Black Bay to acknowledge and formalise the demand in re-edition and vintage inspired models. Now every traditional brand is trying to come up with re-editions of its earliest sports watches.
Accessibility: thanks to globalisation, anyone can start their small scale watch business from the comfort of their home, with a budget similar to the price of a new car.
Delegation: there are subcontractors for every task in running a watchmaking business: design, manufacturing, quality control, warehousing or shipping. So it is extremely easy to launch a watch brand without even knowing the basics of watchmaking.
Independence: if things work out, one can create employment and decide the future of their own company.
Scalability: one can start with a stock of a few hundred pieces and scale up once that it starts selling.
Margins: and let's not kid ourselves, many Kickstarter brands get away with the claim of selling higher price segment quality at a lower price segment quality, which is nonsense; but the consumer is none the wiser. On a personal note we completely disagree with that line of business: the customer should never be mislead into thinking that they are being sold a better product than they are being charged for. So claiming that a Filip & Loringsson of Low Middle End quality is the same as a Middle End watch by Hamilton is simply dishonest. Just charge what you need to charge to grow your business, and leave the "affordable luxury"; claim out of it because it will eventually backfire.
Entry point: as said in the pros, the entry point to business entrepreneurship is equal to the budget of a new car. Some people want to do it with the budget of a bicycle, which is simply not enough.
Competition: with 5 new watch brands released per week, the place is getting crowded so one need a novel idea if one want to stand out. We believe that this is where we can help with our qualitative and quantitative analytical method.
Servicing: in their business plan, everyone leaves servicing out of the picture, but statistically one will have to repair at least 10% of what one sell, either for manufacturing defect or damage due to customer negligence. That is if one have a good sourcing quality. Imagine if one sources a bad quality...
Quality control: since each watchmaking entrepreneur is not a watch expert, everything has to be delegated, including quality accountability. And goold luck enforcing a signed contract with a small company in the suburbs of Dongguan or returning a faulty batch of watches ones it has exited Malinand China.
Advertising: the success of Daniel Wellington makes it look like there is no need for advertising, but the guy (whether he exists or not) has got an army of social media managers and he gives hundreds of free watches to influencers.
Fad: We are possibly at the fourth wave of micro-branding, and it will eventually go out of fashion and become a turn off rather than a turn on for the consumer. Especially when the consumer will realise that (s)he was sold mundane watches as "affordable luxury".
Lack of credentials: at the moment, anybody can claim to be a watch company, even if they are working in trunks and tank tops from the basement of their house. As consumers get familiar with this new market, they will organically decide and vote with their wallet in favour of the credentials that determine a "bona fide" micro-brand.
By the beginning of Summer, Business Montres increased the count of weekly brand launch to 5, which shows that the sector is now almost growing faster than it can be monitored.