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SWISS ARMY WATCHES : I have a question that relates to most retail sales of watches. I justhappen to use Swiss Army as an example.I was bidding on a watch on ebay, which I didn't get. So, I went to a localstore to see what the price was. I was told Swiss Army had a contract withretail outlets that spelled out the price(s) at which they must sell. Andyet, on ebay, the watch I wanted went for almost half - and it was new.I assume other manufactures have much the same practice, but I wanted toknow a littler more about the arrangement with the retailers.You must be talking about "controlled or limited distribution". Afterthe determination that fair trade laws were unconstitutional in theUSA, manufacturers began establishing "single dealer per citycontractual agreements" (although some "cities were just parts of alarge city like New York). The manufacturer or distributor could cutoff a dealer for any reason as written into these agreements. Not inwriting but in the general understanding between the seller's nationalsales manager and the retailer's buyer was the maximum amount ofallowable discount. With some products there are no discounts allowedfrom the manufacturer's suggested retail price. With othermanufacturers there is no problem with whatever discounts the retailerwants to use to sell the maximum amount of product possible.
SWISS ARMY WATCHES : Some companies like Rolex are very strict. Swiss Army is not verystrict. I often saw discounts of 30-40% off of MSRP in ServiceMerchandise stores and catalog retailers in Florida. I think that offers substantial discounts. Swiss Army sells onlyquartz watches (albiet very nice ones) and they are not productionlimited, so if a dealer discounts to undersell Seiko or Citizen or evenLongines or Tissot on comparable models, Swiss Army will encourage themby offering secondary discounts (like paying for the retailer's costsof advertizing a big sale). In small towns Swiss Army products may notbe discounted but the really lagre retaillers have more leeway on thisissue. Companies which sell mechanical watches often have a greaterproblem supplying product and thus may not encourage discounting. Theywant their retailers to make the maximum profits so the dealer willA)Stay in businessB)Improve the appearance of the store(s)C)Pay better salaries to attract nore knowledgeable salespeopleD)"Push" the product line of a manufacturer because the store makesmore money on it than on a discounted brand
SWISS ARMY WATCHES : Unfortunately this means that some stores will lie about which productis made better or performs better because their standard of measurementis whether the store makes a better profit. In Hong Kong andSwitzerland the Rolex myth is punctured by salespeople who can judgewhich products are better. The prices are low in both places becausethere are almost no taxes and there is little the factory can do tocontrol pricing. If Rolex were to limit its distribution in eitherplace the tourists purchasing gifts in these two locations would returnto their home countries with stories about how the salespeople withaccess to any and every brand were laughing at Rolex products andpricing. To some extent many Swiss watch salespeople do think thatRolex buyers are silly at best. In Geneve I do see Swatches on a fewvery young salespeople, and stores like Bucherer offer very specialpricing for salespeople to wear Bucherer watches at work. Otherwise Isee many many Vacherons and Jaegers on salespeople although there arethe occasional Pateks, Royal Oaks, Gubelins, Cartiers, OmegaSpeedmasters and Constellations, Bulgaris, Rotarys with a couple
SWISS ARMY WATCHES : Your Country might be a decisive factor. But in the US price-fixing isillegal. Foremost, should you want to explore this area more thoroughly don'tuse eBay for any sort of comparison.By the way price fixing is actually legal in the USA although it isn'tcalled that anymore. It is now called discount fixing. In a landmarkdecision in favor of Bose Corporation (who make loudspeakers) the UScourts determined that Bose had the right to disenfranchise anyretailer who exceeded the discounts from MSRP which Bose wrote intotheir dealer agreements. This policy is not very strictly enforced byBose but is tightly enforced by many watch distributors in the USA.Although a dealer may sell whatever watches they have in stock at anydiscount they choose, the retailer can then be cut off by the sellerany time the seller chooses.
SWISS ARMY WATCHES : When this situation is carried to its logical end the seller makes surethat a new retailer only has one item to show and only a few to sell ininventory. If the retailer sells the one or two models he has of anyproduct at a price the seller doesn't like, the seller cuts him offbefore other retailers can begin discounting on the seller's products.This is how distribution agreements are used to fix prices at highlevels. Price fixing is also possible to achieve when sellers createartificial shortages.This explains why a Cartier watch sold on ValueVision is onlydiscounted 12% and then the next item which is a Movado watch isdiscounted 25% and then the next item which might be a Pulsar watch isdiscounted 55%. The first two items mentioned here had maximum discountclauses written into their dealer franchise agreements and the priceValueVision had to sell their product for (in order to keep theirfranchise) was determined by Cartier and Movado. In the USA many watchbrands have strictly controlled pricing using the methods mentionedhere and the policies of some companies are so well known they don'teven have to be written down but they work just as effectively inreality. Watchking
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