IDEX Online Research: Movado Brand Distribution to Be StreamlinedMarch 11, 08
In a move that other smart jewelry and watch suppliers should consider considering, Movado is streamlining its distribution strategy by trimming its worst performing wholesale accounts and updating its brand presentation. With the economy soft and store traffic down, the timing is perfect. When the economy rebounds, Movado and its retail partners will be ready with a new marketing message, improved in-store presentation, and a fuller product line.
Movado is planning to drop about 1,400 of the doors where Movado brand watches are now sold; that’s 35 percent of the current distribution of 4,000 doors. In a slight twist of the 80/20 rule, these stores – 35 percent of the distribution base – generate less than 5 percent of Movado brand watch sales, and less than 2 percent of corporate sales. In other words, they are not very productive, though they are slightly profitable for the company.
Only the wholesale channel for Movado branded watches is being affected currently. However, the company has nine brands; we expect distribution channels for the other brands will be reviewed closely.
Highlights of the Streamlining Strategy
Efraim Grinberg, Movado Corporation’s CEO and president, says that the Movado brand has among the highest levels of brand recognition with consumers for watches in the $500-1,500 retail price range. The company’s goal is to harness the power of that brand, he said. Among the tactics that management plans to implement are the following:
- Product development, marketing, and merchandising will be centralized.
- The company is recruiting for a new president of the Movado brand division.
- A single marketing message will be developed for the Movado brand, regardless of the channel of distribution.
- Movado branded product offerings will be tailored slightly for each of the key retail channels – Movado Boutiques, specialty jewelers and department stores.
- Point-of-sale materials will be strengthened for both the Boutiques and the company’s retail partners
- Movado will require that its retail partners devote more linear feet of display to Movado branded watches. Of Movado brand revenues (about $200 million total last year), roughly 80 percent comes from its retail partners.
Market Research Drove the Process
Movado commissioned consumer and industry research which found the following, and helped solidify management’s decision to reduce its distribution and make changes to its brand presentation.
- Movado’s high-end retail partners produce substantial sales per linear foot of display, but lower-end jewelers who carry the Movado brand aren’t very productive.
- Movado apparently has the leading brand recognition for Swiss watches priced in the $500-1,500 price range (retail).
Even the company’s 31-unit chain of Movado Boutiques are getting a make-over, as a result of changes in the Movado brand strategy:
- Movado watches will be added, and the linear feet of display for those watches will rise to about 40 percent of the store total, from the current level of 20 percent.
- About half of the jewelry will be removed.
- Merchandise in other categories – tabletop and giftware, for example – will be trimmed in the Movado Boutiques.
- Movado will develop unique, exclusive Movado branded jewelry for its Boutiques. This jewelry will not be offered to other jewelers.
- Movado’s goal is to raise the sales per square foot in its Boutique stores to around $900 in three years, from the current level of $600. Management has always said that a three-year old store should generate sales of $800-1,000 per square foot, but its stores have never been able to consistently generate sales at that level.
- The Movado Boutiques are profitable on a four-wall basis, but lose about $5 million annually when overhead is allocated.
No Movado Boutique closures were announced.
Big Picture View – Confirmations and Warnings
From an overall industry view, Movado has found what others are also beginning to focus on:
- Jewelry must be unique and exclusive, if it is to create excitement and demand.
- Brands matter greatly; sales are driven by the confidence that brands bring to both jewelry and watches.
- A recessionary economy is a great time to make strategic – and sometimes painful – changes.
- If other suppliers follow Movado’s lead, it will accelerate the demise of the weaker jewelers. They will lose key brands and significant merchandise. Unfortunately, that’s capitalism at its best.
- At the end of the process, Movado’s sales should rise moderately, but profits should increase significantly. That’s the bottom line of any business – generate profits which grow faster than sales.