Time for a change: rugged styles are providing retailers with higher price points and better margins - includes related article on the United States Watch Council - Apparel Merchandising Supplement

Discount Store News, August 21, 1995 by Faye Brookman

While on vacation on Beach Island, Howard Shatinsky is favorite Tag watch. With no department stores in sight, he went to the local Wal-Mart for a replacement watch for the duration of his stay.

He was so surprised at the quality and styling of the watch he purchased, he hasn't replaced his Tag.

The Statinsky scenario is a microcosm of what is happening in the mass market watch category. Once content to sell inexpensive watches under $10, chains are trading up in quality and price points. Wal-Mart, Target, Sears and Hill's have been among the leaders in upgrading the offerings.

This strategy not only serves shoppers' tastes, but produces higher margins. Promotional watches typically yield retailers margins in the 25 percent range. With trade-up models, margins often exceed 35 percent.

"Retailers are looking for ways, with finite space for watches, to make more money out of the space and not only sell promotional watches," explains Stephen Powers, president/coo of Gruen Marketing Corp., who believes that discount stores should generate at least I percent of their volume through watch sales.

"With the cost of warehousing and inventory," Powers adds, "it makes more sense to sell a watch for $24.99 than $9.99. There's pain at first, but it can make a difference in margins in the end," he says referring to the effort retailers must take if they're to get off what he believes is a promotional treadmill.

Adds Jerry Dikowitz, vice president marketing and advertising for Armitron, "The major issue is that retailers don't just turn dollars. It doesn't make sense to spend $15 and take in $15. There is a concerted effort to protect margins, but remain competitive. It is important to carry products that drive business and have healthy margins."

But are customers willing to spend more, for watches in discount stores, which in most cases still lack the cachet of traditional department stores? Recent evidence suggests that is in fact the case. Swiss Army watches, for instance, have sold well at $70 in stores such as Hills. They are perceived as a bargin because most department stores sell versions that retail for $125 and up.

Merchants at Bradlees have also recently extended their price points. The chain recently did well with $29.99 Casio Illuminator Watches. Illuminated watches, lead by Timex's Indiglo, are lighting up sales throughout the entire industry.

At Caldor, there is 25 percent more space allocated for glass displays of watches in new stores to take advantage of shopper interest in brand names like Timex and Sharp.

A buyer for an East Coast chain adds that not only are price points being pushed up, but there is a need for an even broader selection of watches than ever before.

There's still a place for watches piled high on display tables, but the real sales story is in better watches, according to Hill's Department Stores' buyer Donna Kessler.

Kessler says she is seeing a movement upward in prices from the $10-and-under price point closer to $20 and much higher for better watches. With this has come a need for mass marketers to react faster to watch fashion trends. "The speed at which decisions are being made is increasing, but discounters still need to jump onto new trends faster," says Dikowitz.

The more fashion-forward emphasis has helped push discounters' sales of watches into the high single digits at a time when overall watch sales are growing at a 1 percent to 2 percent clip. In 1994, 236 million watches were sold in this country, according to industry sources.

The hottest styles continue to be those inspired by outdoor and casual looks.

"The outdoor looks are very big," says Susie Watson, advertising and public relations manager for Timex, which offers a line called Trailblazers that retails for $24.95 to $39.95.

"The whole casual look is doing well because of dress-down days in offices and the move to the outdoors," she observes.

Watson says the watch industry used to take its fashion cues from the ski and surf industries. "Now it is outdoor activities like camping and hiking," she says.

Kessler at Hill's says outdoor styles have been so popular that she is launching a private label called Appalachian Trail this year.

As far as sports looks, Kessler noted that Genender's Britannia line is doing well in her stores.

The popularity of the rugged styles has also been a boost for men's watches. "Our men's sales are doing better than women's in sport looks, although there are a few hot women's designs," says one buyer.

At Sears, men's styles have also shown great growth thanks to outdoor designs such as watches with woven straps and features such as chronographs, according to company spokeswoman Jan Drummond.

To tap into customers' desire for sporty casual looks, Drummond says Sears is introducing a private label watch called Victory. She says it is inspired by watches such as Guess?

Although women have been adopting the sport look, too, watch manufacturers are looking to tie into today's new glamor trend in apparel by launching elegant smaller-face watches and bangles and silver-plated offerings.