By  on March 7, 1994

NEW YORK -- The fashion watch category, a consistent winner for retailers, is still on a growth curve, but the company that started it all might be losing its edge.

Swatch all but spawned the category -- fashion-forward and novelty merchandise retailing under $100 -- a little over 10 years ago, but brands such as Fossil and Guess have recently been making deep inroads into that territory.

Right around the corner are even more firms. Seiko -- often called the best-selling watch brand in the world -- is poised to enter the business.

Vendors estimate the fashion watch business in department stores at up to $600 million a year, although many decline to give their individual figures.

The consensus among stores seems to be that Swatch led the pace for many years with its novelty styling and promotional attractions and set the tone for the market. These days, though, the Swiss firm is hampered by a slow-to-react marketing apparatus and too much color-driven merchandise, merchants say.

As one department store retailer, who asked not to be named, said, "Swatch has gone through ups and downs in the past and is definitely going through a trough now." He noted that this down cycle is worse than others.

Asked to respond, Raymond Zeitoun, president and chief executive officer of SMH (US) Inc. -- the American division of SMH, the big Swiss watch firm that is Swatch's parent -- wouldn't divulge department store sales figures, but conceded that the company needs to realign its efforts to better support the stores.

"We are striving to strengthen our connections with the department stores to increase our business, including providing training and staff to better service consumers," Zeitoun said.

He said Swatch in the U.S. logged a 24 percent sales increase last year in distribution channels other than department stores. These include jewelry stores, duty-free shops, freestanding Swatch stores and kiosks.

Zeitoun added that with so many department stores filing Chapter 11 or cutting back on staff, Swatch had to "split our risks by pursuing other retail environments." Swatch will also be expanding its freestanding stores and kiosks. Stores will open this year in Chicago and Las Vegas, bringing the total to six, and the company eventually hopes to have as many as 100 kiosks in malls across the country, according to Zeitoun.

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