Online, it seems, is no longer an option.
This story first appeared in the March 16, 2016 issue of WWD. Subscribe Today.
Long considered a haven for gray market dealers and counterfeiters, the Internet is becoming an increasingly important retail channel in the highly traditional world of luxury watches, especially in areas where brands do not have a large network of physical stores.
Online sales of luxury goods reached 14 billion euros, or $18.6 billion at average exchange rates, in 2014, up 50 percent from the previous year, according to the latest annual report of the Altagamma-McKinsey Digital Luxury Experience observatory. They now represent 6 percent of the global luxury market for personal goods, up from 2 percent in 2009.
The report forecast the share of online sales will double to 12 percent in 2020 and triple to 18 percent in 2025, making e-commerce the world’s third-largest luxury market after China and the U.S.
“Three out of four luxury purchases, even if they still take place in stores, are influenced by what consumers see, do and hear online. Digital, in other words, is now the engine of the luxury shopping experience,” the McKinsey report said.
Watches and jewelry have lagged other categories such as beauty and ready-to-wear, with only 4.1 percent of sales happening online, according to the study.
But retailers report sales are picking up speed. Britain’s Aurum Group, which owns Watches of Switzerland, Goldsmiths and Mappin & Webb, in addition to Watch Shop, the U.K.’s biggest online watch retailer, said its overall e-commerce business grew by 25 percent in 2015. The group, which recorded 2015 revenues of 414 million pounds, or $616 million at average exchange, now generates 14 percent of its sales via the Internet.
“There’s a very clear movement toward online becoming an important and viable market for luxury watches,” said Brian Duffy, chief executive officer of Aurum Group. “It’s inevitable. I think that the online medium really lends itself very well to watches.”
He pointed out that in addition to being able to see the watches at their actual size, even on a mobile phone screen, customers can easily research options thanks to the growth of specialized blogs like Hodinkee.
“We are finding that, progressively, people will research online, will look at our Web site, but then will come into the store to shop. The whole multichannel experience is probably becoming the most important trend that’s happening,” Duffy said.
Even luxury conglomerates, long fiercely opposed to e-commerce, are changing their tunes.
Cartier, the jewel in the crown of Compagnie Financière Richemont, launched an online retail platform in China in November and also operates Web stores in Japan, the U.S. and the European Union.
“After more than 20 years since we opened our first boutique in China, our retail network is now solid. However, it doesn’t cover all cities in China, and e-commerce now stands out as the faster way to expose our creations to all customers in China, while offering the same level of service as a physical boutique,” the company said.
Like many luxury brands, Cartier is coming to realize the importance of the multichannel experience.
“One of the very important things is that doing e-commerce actually gets us to see and question what we are doing right in the boutiques and how we are going to translate that into e-commerce and vice versa. In that sense, we see e-commerce truly as a complementary channel to reach out to our clients and enhance the experience they come across in our boutiques,” it added.
Meanwhile, Zenith recently became the first brand owned by a group — in this case, LVMH Moët Hennessy Louis Vuitton — to sell its watches with men’s online retailer Mr Porter. The other brands on the site are Bremont, Junghans and Ressence.
Aldo Magada, ceo of Zenith, said for a comparatively small brand like his, Mr Porter offers a gateway to new customers.
“The result so far is that in terms of communication and contacts, the number of visits to the Zenith page is just unbelievable. In terms of sales, I would say it’s encouraging, but we are nowhere close to the volumes that Mr Porter hopes to reach in the coming 24 months,” the executive said.
Toby Bateman, buying director at Mr Porter, confirmed that growing the business is a slow process. He declined to provide overall sales figures, but the company said the number of customers purchasing fine watches on Mr Porter grew by 34 percent year-on-year in 2015, while gross sales rose 149 percent as the site began carrying a larger range of more expensive watches.
“When you’re working on this end of the market, it’s a business that doesn’t happen immediately. You have to recruit those customers,” Bateman said.
“Most brands, in fact all of them, are extremely reluctant and it’s particularly challenging within the fine watch world because a lot of the key brands are group-owned, and until the group decides that they have a policy towards online selling, then all of the brands within that one group would be excluded,” he said.
Bateman, who will be heading to Baselworld for the third consecutive year, said he felt encouraged by Zenith’s move and hoped to enlist more partners.
“I noticed last year in Basel, people were much more interested to know about our business than they had previously. That’s natural. They’re being forced to look at new markets, and the Internet is the most obvious one to look at.
“But until these brands figure out how they’re going to approach the online market and protect the integrity of their brands, in the same way that they have very established and firm rules about their distribution policies in the physical world, it’s going to be difficult for people like me to bring them on board. I have to be persistent, because I think it’s worth it in the end. It will happen,” Bateman insisted.
Magada agreed that it was only a matter of time before the sector widely adopts e-commerce.
“I think that sooner or later, watches will be sold at least partly online like all other luxury products, but companies will have to find the right synergy between clicks and bricks,” he said. “Trust is the most important factor in the purchasing decision, and even more so on the [Internet], where you know there is anything and everything.”
Hermès was one of the early adopters of e-commerce some 15 years ago, and in late January began selling the product of its collaboration with Apple on its Web site. The Apple Watch Hermès was originally launched in October at Apple and Hermès stores, as well as multibrand retailers and department stores.
Laurent Dordet, ceo at La Montre Hermès, said the luxury brand has big plans in the digital arena this year, though he declined to go into detail. “The customer experience in general, before and after the sale, goes through the multichannel experience and our Web site will become a major tool in our development,” he said.
Not everyone is ready to jump on the bandwagon, though.
Chanel tested the waters last year by launching its Coco Crush fine jewelry line with a pop-up shop on Net-a-porter. As it gears up for a wider e-commerce launch in 2016, Nicolas Beau, international director of watches at Chanel, suggested it was too early for those products to join the mix.
“There are still a lot of obstacles today. There are obstacles to pleasure, there are obstacles to service and there are obstacles to security,” he said. “It’s better being a little late to the game and doing it very well, than being early and doing it badly.”
Beau argued that selling watches should involve face-to-face contact for a number of practical reasons, including sizing the watch to the buyer’s wrist. But the most important factor for him is psychological.
“The pleasure of going into a store to choose a watch is still something that no experience online, in my opinion, is capable of matching today,” he said. “It’s a precious object with a strong symbolic and monetary value. It’s not a toy.”
Specialist retailers agree that a high-touch experience is key.
“It’s not a perfect safe market for consumers yet, but the few brands that are doing it well and building trust with the consumer, they’re kind of blazing the trail,” said Michael Groffenberger, senior director of fine jewelry and watches at luxury consignment site The RealReal.
“You have to make a name for yourself and you have to stand behind it, even more than what brick-and-mortar has to. Our return policy, for example, is even more generous than most brick-and-mortar retailers because our customers don’t have the benefit of seeing it before they buy it,” Groffenberger added.
The RealReal has more than four million members and has sold two million items since it was founded in 2011. The site offers vintage timepieces from brands including Rolex, Cartier, Hermès, Chopard, Bulgari and Breitling, among others.
The RealReal has also started operating physical locations that provide free-of-charge valuation for consigners. So far, it has opened spaces in New York, Los Angeles and Chicago, and another three to five locations will be added by the end of the year.
Meanwhile, Aurum Group is gearing up to revamp the online services offered by Watches of Switzerland, Goldsmiths and Mappin & Webb.
“Within the next few months, we’ll have done a very significant upgrade of our online luxury watch site that will be aesthetically very different to what it is today, and we will be offering a full range of services: reserve and collect, click and collect, or concierge delivery,” Duffy said.
“I honestly think it’s all going to become one big marketplace in which the consumer gets everything they want. They get a great choice of product, they get a great choice of personal service and they get to decide: Do they want to go into a store and have that experience, or do they want to have it delivered at home or in the workplace?”