Luxury watch industry: Timeless or stuck in time?

I read a post last week on Brandchannel entitled “Are Luxury Watches Stuck in Time?” which triggered a few thoughts including: How many luxury industries are stuck in time and what is the level of risk for the upper end markets?

First, I would have to agree with Milton Pedraza, CEO and Founder of the Luxury Institute, who said that “the [luxury watch] industry is stuck in time in terms of its distribution and customer relationship building innovations.”

Secondly, I was particularly attracted by the four key questions that were posed by the Luxury Institute in its questionnaire of targetted high net-worth individuals.  These 505 individuals were asked to rate the luxury watch brands by category across four equally weighted components:

• Consistently Superior Quality
• Uniqueness and Exclusivity
• Making the Customer Feel Special Across the Entire Experience
• Being Consumed by People Who Are Admired and Respected

The winners were Blancpain (Swatch), Vacheron Constantin (Richemont) and Breguet (Swatch).  I can only but agree with Blancpain which I happened to nominate as a Lovemark, although it only has two other fellow lovers and 1 loser!  I would note that neither Breguet nor VC have been nominated…

Which brings me to the point about the Watch Industry being stuck in time.  The distribution channel, the advertising and the product, like the players themselves, seem to be too dowdy and inward looking.  The “Made in Switzerland” and “Since 1789″  labels seem to be about the only marketing angles that they can come up with.  The category needs some shaking up.  If time is going to move forward like clockwork, this does not justify the industry’s lack of creativity.  A few watch matchmakers have crafted a definitive “look & feel” to their product, but for many the differentiation between one brand and another is hard to perceive.  Just a quick review of the watch makers’ sites reveals a very strong level of web 1.0ness.  The sites are full of beautiful images and [flash] animations, but the brands are all about themselves.  Full of it in fact.  And nothing in the way of opportunity for engagement or community building.  Not that every luxury brand should or could do so, but surely there is room to create more engaging content and interaction, even if the members are not immediately clients?  The high end watch industry may not need to create a community, granted, but they certainly have opportunities to differentiate themselves via the new technologies.  What about creating educational experiences around time management, or helping to integrate time devices into our bio lifecycles?

Part of the galling problem for many of the luxury watchmakers is that the distribution channel is particularly old fashioned.  The high end watch industry is filled with niche players, some of who have very original products (one of my favourites in terms of creative out-of-the-box pieces is Romain Jerome).  The number of obscure, two word name brands (Patek Philippe, Audemars Piguet, Ferdinand Berthoud, Girard-Perregaux…) that litter the luxury watch market is, to the say the least, hard to keep up with unless you are an insider.  However, these smaller players often struggle to pierce the rather closed distribution system and gain access to the affluent customer.

I believe the Champagne industry is another sector which banks on [hides behind] its appellation ”Made in Reims” and frequently needs to qualify itself with dates such as “since 1776″ (like Roederer).  The differentiation on the product side is indisputably difficult.  The communication and industry codes are so rigid that the consumer will, at some point, question the additional value for which they are paying for the 6 glasses of sparkling wine per bottle.

Another luxury segment that has shown the effects of aging is, of course, the Haute Couture where there are now eleven “Maisons de Haute Couture” in the house including the now defunct Christian Lacroix and three newbies which were admitted in 2008.  If there is value in exquisite design, the industry has yet to espouse values to which the younger generations can relate.

So, what are the challenges ahead for the luxury brands and industries:

1. Getting the service right.  Focusing on the annex services around the product requires hiring and training qualified staff.  Service from start to finish involves a massive collaborative effort between the brand, its distribution and customer service representatives.  Increasingly, technology will provide solutions to track customers around the world in intelligent manners.

2. Encouraging innovation involves, not only finding great minds and hearts, but creating an internal corporate environment that allows the creatives to flourish.   How many of the luxury brands are run in dowdy, toffy nosed environment?

3. Maintaining exclusivity (ultra limited distribution) means figuring out economic models that are radically different from those in mass market segments.  If luxury brands belong to larger corporations which are not truly luxury-minded, then the threat of dilution (shared services, management and technologies) will become ever more real.

4. Transparency (without putting into question the exceedingly important notion of discretion) as an increasingly considered quality, will render the task of justifying the higher prices all the more difficult and, yet,  powerful if it can be mastered.

5. With walls between distribution models rendered entirely permeable thanks to the internet, luxury marketers must become even more inventive and open to collaboration.

6. Luxury brands should consider the internet an opportunity today to grandstand their level of innovation.  A website can no longer just be a pretty shop window.  How attentive are the luxury brands to creating great interfaces on smartphones?  And, if luxury brands want to crack the “emerging’ markets, they will need to be much more sophisticated than they currently are on the Internet.  Take China for example, where people in the 60 largest cities spend around 70 percent of their leisure time on the Internet, according to a McKinsey survey conducted in 2009.

7. Finally, on the product side carefully juxtaposed to the need for transparency, the constant risk of forgery and copycats means that brands will need to find ways to qualify the difference between the authentic and fake products as well as accept to work with the state-of-the-art new technologies for protecting their IP.

In conclusion, luxury products have a beautiful future as the baby boomers take to their retirement; but, if luxury must remain timeless in its DNA, it must also know to adapt to the times.  The recession has had, at the very least, an impact on the pocketbooks.  There is little reason to believe that the luxury markets will not see major shifts as more fleet-of-foot companies hire better talent, innovate with more original products and cater to a wider, more elegant cradle-to-the-grave customer service approach.

I have three key recommendations for luxury brands :

1. Luxury brands must avoid at all costs the temptations to discount (e.g. Louis Vuitton chooses to trash its excess inventory rather than to sell off at a bargain; another idea is to offer a “reward” to super loyal clients).
2. They must find ways to recruit a younger generation of clientele with more adapted offers, without debasing their high end offer.  First, an attractive and well managed social media strategy can broaden appeal and create aspiration.  Secondly, certain luxury brands might consider entry level strategies (eg Armani’s sub brands or in the car area, Mercedes, BMW and Audi have all created entry level products).
3. Finally, they must turn the product into a total experience, one that is highly personalised and meaningful.

What are your thoughts?

When I was in London recently, I observed a lady parking warden walk up to a street sign and snap some close up photographs.  It was a curious sight, as I initially imagined that it might be a cross between curiosity and tourism.  Then, she went some five or so metres back and started taking photographs of workers climbing off the back of a lorry, parked off of Oxford Street. I went up to her to ask what she was doing and she replied that the new policy was to document with time-stamped photographs the infractions, at the same time as handing out a parking ticket.  The parking warden looks like a techy geek these days carrying a handheld machine for registering and printing out the offense, as well as a digital camera hanging around the neck.

I would have to believe that the responsible lorry driver would be less “flippant” about tearing up any parking tickets as a result of the patent proof.

In any event, I would have to believe this is a best practice for parking wardens around the world… Not sure how city governments and their parking wardens share any such “best practices,” but this blog post could mark a beginning!

Driving in Italy is quite an experience for most of us non-Italians.  However, driving in the south of Italy is considerably worse, in my opinion, than driving in the north of Italy (cut off at Rome).  Even if I consider myself a handy driver and get by in Italian (più o meno), I was still rather confused by the signposts.  I snapped this shot in Salerno, on the coast south of Naples.  Anyone’s guess as to what it means!?

You can find similar paradoxical signposts all along the middle of roads.  Rather unnerving.

Of course, there are also the southern Italian driving habits.  On dual-lane carriageways, there are, naturally, two lanes.  You might say, the ordinary lane and the overtaking lane?  The Napolitans have repurposed the lanes.  The super slow lane (less than 60 kmh) for the panic-striken and the super fast lane where the drivers, often in swank SUVs, speed up to your tail at over 150 kmh, ominously flashing their beams to get you out of the way, to move into the docile slow lane.  Again, rather unnerving. 

Anyway, when I returned to Paris, I found that some of the driving ‘habits’ I had picked up (to survive) in Naples came with me.  The Parisians found me particularly rude.  After a short while, however, I was able to curtail my Napolitan style driving and avoided any Parisian tickets.  Anyway, if you plan to do any driving in southern Italy, get your lead shoes on!

I particularly enjoyed Thomas Friedman’s editorial in the New York Times (or International Herald Tribune) of June 25, 2009, entitled “The Green Revolution(s)”. For those of you are still not inclined to believe in the need to reduce man-made pollution and join the ecological bandwagon, here is a well written exposé on why we should at least reduce our consumption of petrol in the Western World: reduce the demand of (and the dependence on) oil and prices will tumble. Friedman cites The First Law of Petro-Politics “…which stipulates that the price of oil and the pace of freedom in petrolist states – states totally dependent on oil exports to run their economies – operate in an inverse correlation.” So, regardless of any potential benefit for General Motors and Chrysler and their “Greener” cars, the geopolitics of the world would be a much better place if the “easy money” derived from oil exports was exposed for “bad money” and the auto-aggrandisement and self confidence == that comes from being financially secure — were deflated as speedily as oil prices decreased. Friedman cites Yegor Gaidar, a deputy prime minister in Russia in the early 1990s, as saying that “the collapse of the Soviet Union could be traced to Sept 13, 1985…” date on which Saudi Arabia officially changed its oil policy, unleashed its production and brought oil prices tumbling down and, consequently, the Soviet Union to its knees.

Friedman believes that by reducing the Western World’s dependence on oil, the Green Revolution (the reformers) in Iran will be able to take hold, allow greater freedom for its population and bring down the Islamic dictatorship. Along the way, perhaps the collateral benefits might also be applied to other oil-rich despotic regimes, such as in Nigeria, Venezuela and even the rigid Russia. As Friedman exhorts: “An American Green Revolution to end our oil addiction – to parallel Iran’s Green Revolution to end its theocracy – helps us, help them…”

So, this is just one more reason to take the greener roads, for surely the grass is greener on the other side of this hill.

I have long enjoyed the card machines that you use in Paris to pay for your street parking. Originally, you used coins to pay, then they introduced the prepaid cards (e.g. 10€ or 30€ option). Naturally, it took some getting used to because you had to know to buy the prepaid card from the tabac.

Now, most machines only accept the prepaid cards (or a system called Moneo where you top up a bank card for instant payment). Now, the thing that has come to irk me is the waste inherent in these cards.

Once the card’s credit is used up, there is no way to re-use (top up) or recycle it. My suggestion for the collection would be to add a little compartment on the side of the machines in which to deposit the used cards. Afterwards, I have no idea if there is truly a way to recuperate and/or reconfigure the cards. But, at least there seems like there would be an easy gesture to gather the used cards. Anyone know of any organization that could figure out how to make a business out of this opportunity?

Herewith some tips on parking in Paris, courtesy of parisinfo.com.

At Cape Cod Sea Camps, as you drive up to the camp’s entrance, there are speed limits.

You have to smile when you see an 11 miles-per-hour sign! At first, I thought it might have a translation from kilometers-per-hour, but that would be highly unlikely in the US, especially since 11 MPH is 17.7 KMH.

Anyway, it is proof that a little well-placed humour can capture a little more attention.

I would like to share with you with a little thought today.

There used to be a time when I thought it desirable to live life in the fast lane. What does that mean? Well, by my understanding it means living with time whizzing by, memories blurring, names & faces forgotten and years merging into decades. Surely, going to lose your mind… Oops, might have plagiarized that from somewhere (call it my Eagle eye).

Now, for many of us, life in the parking lot seems to be all we can handle. Between having to crane your neck (it’s so stiff) around as you reverse in the ever smaller spaces and watching out for the piping hot coffee in your lap, while answering the cell phone and inserting your earpiece and, simultaneously, turning down your music… life in the parking lot is sometimes as fast you might want life to be.

Then again, life in the odd lane might be the more fitting route these days. The search for the rarity and the personality. I came across this charming site, typically Canadian in a way, Life In the Fast Lane.ca. And what is quirky in this “Life in the Fast Lane” post is that everyone is walking with heavily laden horses to visiting the Hukuo Waterfalls of the Yellow River in China. And while I’m at it (nice one Deborah), here is a hoot: The new Hooters Calendar 2008. I attach this month’s oogle hooter to ogle.

In terms of riding in the fast lanes in cities, it does seem that the special bus or taxi lane is getting slower every year. As much as the traffic jams get worse, the fast lane slows down too. In large part, that is because there are too many deliveries and odd obstacles in the special lane, not enough police patrolling of the civilian infiltrators and, finally, because the special lane must merge with the plebeian (normal) lanes all too frequently. Enough to say, that life in the fast lane isn’t what it used to be, certainly not what it is cracked up to be and should be fastened onto memory lane, so that we can,–slowly and deliciously–enjoy our every day at the speed we can handle.

If you are needing a mundane definition of the idiom: try here: life in the fast lane.

Now back to my piping hot coffee. Have a great day. Oh yes, and Happy Easter 2008. (Don’t mind the Easter Chick).

Cars going on Green? Don’t you find it odd that, in today’s eco-sensitive world, a traffic light has a green light to “go?” Meanwhile, the automotive industry carries the stigma of being one of the most visible causes for global warming. Notwithstanding this notion, there is no doubt that the automotive industry has woken up to the eco-cause. Of course, if I take the French situation, it is perhaps the annual tax of up to 2,600 euros that may have helped “encourage” the interest. Since I am not in the market to buy a car (I already have a diesel Audi A3), I have not been paying particular attention. Only recently, I have noticed that automotive advertisements in France are consistently focused on the “green” cause. Of course, at times, it also sounds like they might be trying to appeal to the BoBo’s (Bohemian Bourgeois if you still have not heard of the sociological profile). I highlight two sets of ads stemming from the same company (someone is clearly “sharing best practices” inside BMW!):

BMW Hydrogen 7. The tagline? “L’eau, une solution aujourd’hui claire pour l’avenir.” [“Water, a solution today that is clearly for tomorrow.”] The ad discusses “responsible pleasure” and introduces a concept of “durable mobility” which is new to me. The “CleanEnergy” technology enables the car to function equally well with hydrogen as with kerosene. Continuing the text, however, the ad goes on to say that the BMW Hydrogen 7 has not been commercialized. Something akin to a virtual launch it seems to me. (See here for a full review from AutoBlogGreen). Considering BMW’s –albeit eco-friendly German–reputation, the green pitch seems like quite a tall order. But, you can see the BMW is putting in a serious effort — and one that should recruit future clients. It has a special CleanEnergy website, that is called BMW Education for 12+ year olds and their teachers…

On the other side of the BMW company, there is Volkswagen. And, I am keen to see how an SUV gets into the green game. With the ad for its VW Tiguan 4×4, the tagline is: “Pour les accros de la ville,” [roughly translated “For the stubborn cityslicker.”] The DPS image juxtaposes the SUV (with a Neuilly license plate) in the middle of some Amazonian type rain forest, replete with parrots (see right hand page of the DPS up above). The combination of Neuilly and the Amazon smacks of BoBo land, does it not? The sub tagline highlights that the injection engine uses a particulate filter (a.k.a. FAP). Nothing else is said on the matter. VW has also another ad running these days running the tagline: “eco(instants)” (only through Feb 23, you we missed the boat if you are still interested). For each car (there are three offers on promotion in this crammed one page ad, see right image), they highlight the grams of CO² per km. And there is an ‘eco bonus’ (of 700E) for two of the cars.

What strikes me about these ads is that we have moved away from performance (burning rubber!) to look toward the ecological criteria as the first point of entry. However, the consumer is still negative on the automotive industry as a whole. I think the automotive industry should do some thinking as to how to promote the overall industry and gain some traction on the most valid criteria before too many marketers debase the field and banalize the claims.

Even the car rental business is getting in on the action. Here is an ad from alphabet.com, a car leasing company, talking about ecomotivation, suggesting that leasing a car is not just about economical leasing rates, but also saving on the planet. (see Ad to the right). Rather consistent to find a BMW in this alphabet ad.

Meanwhile, it is Nissan and Smart that are pulling out the consumer approval within the industry. Of course, Toyota is a pioneer in this domain too.

And the tyre industry is also getting in on the act with their own eco-rating. Michelin, which sells 570 million “green tyres” per year, has been communicating on its tyre which delivers 4g less of CO² per kilometre, uses 0.2 litres of petrol less over 100 kilometres. The Michelin Man (Bibendum) even looks slimmer in certain photos.

A survey by Landor Associates, entitled “ImagePower Survey” placed the automotive industry as 4th behind grocery, appliance and body care in terms of brand power. By having specific taxation on CO² emission, there is clearly a reorientation – at least in France – to the way cars are being marketed and sold.

Since I live in France, I am not up to speed on the advertising on cars in other countries. Anyone else report on the approaches in other countries? Would be be happy to hear that the other side of the hill is greener still.

Even if the bloom is off, I admit to being fascinated by Carlos Ghosn, CEO of Renault-Nissan. Not a highly original thought, but he is a Brasilian native, to French parents with a Lebanese heritage, sporting a Spanish first name, running a Franco-Japanese company. And, notwithstanding the Nissan turanaround, there are many doubts about his current reign and the promised $3,000 car.

Whatever one might say about the occidental Logan and the slagging top line (not to discard the improving bottom line), for the version of the new Logan destined for India and built via a JV with Mahindra Renault, the company has managed to come in under cost and ahead of schedule for the $7,100 car. Including supped-up suspension (to handle the Indian potholes) and improved air conditioning (vital), this new car is a phenomenon.

Then, I hear of the new factory in Iran, in conjunction with IKCO (ever heard of them?)*. In an agreement set up prior to the UN sanctions, this factory is producing the local version of the Logan, the “Tondar.” They have registered more than 100,000 pre-orders for this car. It resonates with me to say that this is the first “modern” car to be available in Iran for an entire generation. A way to win the hearts & minds of the Iranians (ref to my prior blog on “Containment”)?

Ghosn is perhaps small and frugal, but his impact is enormous, worldwide, and even generous!

——

* if you didn’t know, Iran Khodro is the Middle East’s biggest car maker. I certainly had no idea. Makes me ponder my level of ignorance that I have never heard of them. Courtesy of my father, Victor Dial, I am emboldened to give a little history:

“They assembled a Chrysler-Simca-Talbot-Peugeot car (based on the Sunbeam). It was called the Peykan. Imported cars were strictly licensed. You had to assemble to sell, and you needed a license for that. There were only three such licenses and these were awarded based on the number of cylinders in the engine – a unique method. Iran National (later Khodro) had a monopoly on 4-cyclinder engines. Citroen had the monopoly for 2-cylinder engines (Citroen was the only manufacturer producing such an engine), and Jeep US had the monopoly of 6-cylinder engines. Iran National, as it was called then, had about 90% of the market. The Shah had a majority, but secret interest in Iran National, which also made Mercedes trucks and busses. When Khomeni took over it was obviously nationalized, and the name was changed to Khodro.”

Now, you have to be impressed with this new technology from Microsoft (shared in Monterrey in March 07). Thanks to my good friend Ned in Montreal who sent me the link, here is Photosynth software which is basically able to create complex hyperlinks of multiple images to create the ultimate in 360 degree viewing as well as immaculate zoom in and out capabilities. It allows a new exploitation of the network (example on Flickr) — and perhaps a new dimension to travel. It won’t be available for a few more years for us pedestrians, but it is neat to look at, almost like peering into the future. Don’t mind the car ad. But do check out the “punchline” on Notre Dame de Paris (around 4:30mins into it). See the film.