What the World’s Most Expensive Watches Can Tell Us About the Future of Retail
You know things have changed when the watch-maker’s watch maker Patek Philippe starts selling its products online. Patek Philippe, like several of the world’s highest-end, exclusive watch brands, has only ever let you buy one in person.
It guards its brand so closely that you have to prove your eligibility to buy. Even then, first-time buyers are only allowed access to entry-level models. It’s a brand that exercises complete control over the customer experience, because when your customers are spending a minimum of £10k on a watch, you’d better make sure they get a decent cup of coffee.
In a way, Patek is an example of how a brand has always retained a direct-to-consumer (DTC) approach, sidestepping the control and power of retailers. Patek’s authorised retailers operate purely as an extension of the brand. Customers visit them for the watch, not for any other.
Times are changing: the future of retail
But now, you can buy Patek watches online. According to the watchmaker, it’s a temporary situation, and it seems unlikely that even a worldwide slowdown will permanently end the exclusivity of the brand’s buying experience.
Nevertheless, it’s an early indicator of what we can come to expect over the next few years. After all, it’s been a while since retail has been the_ only_ channel for brands. Post-coronavirus, it might not even be a channel for many.
With so many people confined to their homes, and with most physical retail closed, customers are increasingly looking to shop online, giving many businesses the opportunity to re-evaluate their digital set-up (or lack of). Buying habits are changing and, for some, may never change back.
For retailers especially, digital commerce has become a top priority. During this period, engaging your customers with respect and authenticity is more important than ever. Now is the time to establish or build on connections with your customers, and there are many brands out there already doing it.
Breaking free from the retail mould
Sports sunglasses brand SunGod has an extremely devoted following. Partly thanks to the pricing, which pitches a guaranteed-for-life, fit-for-the-mountains product at the same price point as a pair of mass-produced fashion glasses. They’re also significantly cheaper than a pair of Ray Bans.
DTC companies such as shaving brand Harrys and flower delivery business Bloom & Wild have reported a considerable surge in demand for their products. As more consumers get used to these subscription models, it’s going to make similar offers from retail giants seem increasingly less attractive.
Of course, selling direct-to-consumer has its own risks, and brands can sink as fast as they rise. Mahabis sold smart woollen slippers at £70 a go, turning over £25m in 2017 and making £2.5m profit three years after launch. It went into administration at the beginning of 2019, due to a combination of rising marketing costs and a management distracted by takeover bids.
Now under new ownership, Mahabis is back to making the same product and still sells direct, but its fall from success has prompted many to question the sustainability of DTC brands.
Typically, DTC brands start with a business model rather than a product innovation, are funded by private equity, and enjoy rapid growth – but keeping them going once demand peaks can be tough. The increasing cost of social media advertising – often the go-to channel for DTC brands –has also prompted speculation about their future.
These are serious concerns, but they’re mostly operational, failing to observe the basics of running a business (debt, cash flow, supply of and demand for your product, etc), and shouldn’t distract brands from the fact that soon, there’s going to be little excuse for not letting customers directly interact with you. They expect it, now more than ever.
There’s no denying that coronavirus is prompting businesses like Patek Philippe to change how they work. But with change, comes opportunity. It’s not the way we would have wished it to happen, but if we can emerge with a better idea of what customers want, and how to give it to them, we might be in a better place than we were before all this started.
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