New strategies for the Swiss watch industry

The Swiss watch industry is currently in a disruptive market. Digitalization is massively upending traditional distribution. "Verticalization" is the buzzword of the day. But what does this mean strategically for the manufacturers of the sought-after timepieces?

To this day, many watch manufacturers' contact with end customers is almost exclusively through specialist retailers and, in some cases, their own store concepts. And why not? This model has worked very well for decades and has brought the industry good profits. The vast majority of top manufacturers still do not sell online themselves. Digitization is now bringing about profound changes in the watch industry as well.

It offers companies the opportunity to successfully redefine their own position in relation to end customers and specialist retailers. For the first time, manufacturers have the opportunity to interact directly with their customers without the need to build up a close-knit branch network. At the same time, the new market conditions are forcing manufacturers to develop their own digital strategies in order to maintain their competitiveness in the future.

But what does that mean for manufacturers in concrete terms? Are they the dealers of the future? And what does that mean for the dealers as a consequence? Or are the interests of both parties smoothly compatible after all?

Main reasons for verticalisation

The focus of verticalisation for manufacturers is not usually on opening up a new sales channel via their own online shops. Rather, the changes in the market are pushing them to adopt new approaches to customer loyalty and brand communication. Therefore, the most important reasons for verticalization among watch manufacturers are:

1. Specialist dealers become their own brands

In the past, watch manufacturers transported their brand experience to the consumer through their presence in the specialist retailer. Today, it is no longer sufficient for the specialist retailer to offer the end customer a specific range of brands. This is because this assortment is usually available in many places online - at competing retailers and sometimes also on platforms. Although manufacturers in the quality and luxury segment do not yet offer their products on platforms themselves, they are nevertheless represented there via other channels and as a result are only one click away for customers. As a result, successful retailers are focusing more on expanding their own corporate brand. Because in the end, only those specialist retailers survive who have become a brand themselves. For manufacturers, this means that they have to go their own way in their brand communication.

2. New media require different approaches

For many years, the classic print ad was the manufacturer's tool of choice when it came to branding. But the new media have long since established themselves as a central channel towards the end customer and have put print media under pressure. The watch-enthusiastic target group is of course also online and informs itself in social media or other special interest communities. Manufacturers must therefore develop digital concepts to reach their target group. But branding only through content - without products - doesn't work. Customers expect an end-to-end brand experience, including the ability to purchase the brand's entire product range. And that combined with perfect service. Especially in the high-priced segment, exceptional service that matches the value of the watch and the image of the brand is a prerequisite.

3. Millennials in focus

Younger consumers in Switzerland and internationally have grown up with online shopping. Shoppers under the age of 35 in particular offer good opportunities for Swiss watch manufacturers, as they are very interested in their products. Their first port of call for information and products is not the specialist retailer. For the most part, information and purchases are made online. Only manufacturers who provide product information online (for example, in their own online shop) can reach their target group with their own messages about brand promises, and be able to make a pre-selection between different brands.

Primary goals of verticalization

When it comes to verticalization, manufacturers often only see their own online shop. But that is too short-sighted. Manufacturers who tackle the topic of verticalization "properly" approach it from the perspective of branding and end customer communication. The own online shop and the revenues from it are rather a means to an end. The primary goal of verticalization is to ensure brand staging, to establish contact with the customer and to get to know him and his needs better. For example, with additional services. For example, manufacturers can build up their own CRM database and inform their customers directly about new collections, offers and services.

But it is by no means just about collecting customer data and marketing measures based on it. Manufacturers, also in the luxury segment, need experience with the high international price transparency through online platforms. Knowledge of their dynamics on the one hand and opportunities to exert influence on the other have become significantly more important. Therefore, by means of verticalization strategies, manufacturers must succeed in building a community that identifies with the values of the brand, that becomes fans and thus loyal customers. The knowledge generated from such a community about customers and their needs can ultimately also be valuable input for the further development of one's own products and help to tailor watches perfectly to the most relevant customers.

The right strategy

Building a community is all about turning leads into fans. The best way to do this is through high-quality content that is geared to the interests of customers (e.g. in the area of mechanical watches, special digital shopping advisors, appealing video content on the manufacture of watches, stories about design ideas, events and brand ambassadors). Differentiation from specialist retailers is therefore not based on price, but on targeted emotionalization and the perfect service addressed. This is because brands can offer end customers significant added value: For example, in the form of exclusive products that are not available in stores, exclusive content, or the offer to send the product to the manufacturer's workshop for repair free of charge.

The time is definitely ripe for verticalization through e-commerce. Because potential customers are exactly there looking for inspiration, information and purchase opportunities. Due to the rapid development of technologies and the now extensive possibilities for design and user experience in e-commerce, verticalization via the online channel offers the potential to present and sell premium brands appropriately. If the strategy succeeds, it will not only have a positive impact on sales in the company's own online shop, but much more so on the sales generated via brick-and-mortar and online retail partners. Because a digitally strong brand creates a radiating effect that is far greater than one's own online shop.

And the dealers?

Most manufacturers will continue to need dealers in the future, because almost no brand is so strong that it can do without the dealer network altogether. Dealers will continue to have a raison d'être with their cross-brand product range functions. They can also play an important role in after-sales service, for example. Therefore, manufacturers and dealers need not see themselves as competitors in the future. Rather, they should look for ways in which they can benefit from each other in order to move successfully into the future together.

About elaboratum suisse - New Commerce Consulting

elaboratum offers manufacturers, retailers and financial service providers holistic digitalization, e-commerce and cross-channel consulting from a single source - from strategy, technology guidance and conception to implementation support, marketing, research and testing. At elaboratum, specialists with a proven track record of success work in the top management of the largest e-commerce players, manufacturers and financial service providers.

Our consultants bring together expertise in technology, conception, user experience and online marketing. elaboratum knows the best practices of a wide range of industries and supports them in leading projects to holistic success. The clients of the expanding, independent consultancy with headquarters in Bern and offices in Munich and Cologne include cross-channel companies and pure players from medium-sized businesses to large corporations.

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