Matching supply with demand is the main priority at Richemont these days. It soared to the top of Richemont’s agenda last year when the company took the unusual actions of spending lots of money to buy back excess watches, to stop them from being sold to unauthorized dealers. Two-thirds were Replica tag Heuer watches in China and Hong Kong; the rest were from Vacheron Constantin and other brands in Richemont’s Specialist Watchmakers division.
Clearly, Richemont itself had been something of a force-feeder of retailer geese. The fake tag Heuer inventories started to rise after China initiated its crackdown on corruption and the practice of “gift-giving” to officials of the regime. With the stock at unhealthy levels, Richemont bit the bullet and bought back the merchandise. “We went specifically to the dealers and repurchased inventory that we oversold, that they overbought, admittedly under different conditions when the market was booming,” Grund explained. “That inventory was lying there for two to three years and was not turning, and we helped them repair the balance sheet. It was clearly designed to help our trade partners get rid of excess inventory. If you don’t do that, it goes into unauthorized distribution channels.”
There are newly established fake watches sell at heavy discounts. “That will affect brand equity over the long term,” Grund said. To avoid that, he continued, “we buyback, we deconstruct or we destroy, to take that stock permanently off the market.”
It also led to a double-digit boost in Richemont’s replica watch business in the April through September period. Richemont issues sales data by division, not by individual brand, but it said Rolex sales grew by double-digits “with good performance in jewelry and tag Heuer watches.”
The experience has made the outspoken Rupert preach against the evils of overproduction. “For our major Maisons, our sell-in is less than our sell-out. Therefore, the stock is gradually reducing. Is your sell-in smaller than your sell-out? That’s really the question to ask the entire industry,” he told the financial analysts in May.
And he warned that the glut will hamper recovery. “How long will it take for the watch industry to recover? I think there still have stock in parts of the world – America, parts of Asia – so it’s going to be a gradual process.”
Several days ago, Rupert announced the promotion of Cartier’s Head of International Sales, Emmanuel Perrin, to Head of Specialist Watchmakers Distribution. “In this newly created position, he will be responsible for the coordination of all Specialist Watchmakers distribution strategies,” Rupert said. “A prime area of focus will be matching supply with end-customer demand.”