Horological Meandering

On Bloomberg news:

www.bloomberg.com

- SJX

? Exchange rates aside but 33% of the RRP difference is a huge amount. They should have better pricing allocation.

On another note, it also goes to show how much discount (at least) Omega is able to give to the retailers/distributors and how certain folks in different regions are taken in for a ride.

My humble 2 cents.

PAt

in terms of dealer cost in relation of discount to retail price, generally speaking. There cost differences are minimal, perhaps 40-50% below retail rather than 40 vs 70% as the report implies. The differences arise due to exchange rates, different dealer cost structure and also the desire to move inventory.

- SJX

They're trying to raise the effective price of their watches, but if they succeed, they may find that they won't sell at the higher prices.

No message body

Generally, luxury goods are seen as price inelastic. In some instances price increases can actually lead to increased demand, the perception being that the goods are more exclusive and therefore more desirable.

I suspect that the Swatch group believes that maintaining the integrity of the value of their timepieces and therefore their brand is worth more to them than any incremental sales they may get by having their goods widely available at discount prices.

If I'm honest and think about my own opinions of brands that are available at a small fraction of MSRP I must admit to having a bias.

I won't name any examples of the above, but I think most would probably agree that the companies that have succeeded in this area (Rolex, Patek, Panerai) have an enviable position.

-Patrick 

 

The copyright holder AND manufacturer should have direct control of the pricing of their goods. This is not a case of a copyright holder outsourcing to some manufacturer who could manufacture on a cheaper scale elsewhere and re-import similar goods. This is a firm that owns the brand, the technology and the manufacturing, as such, given the scale of their investment, they should have the basic right of pricing. Can they handle the situation better is a separate debate.

However, if a mere copyright holder in the US or swtizerland outsources the manufacturing to some third party contractor, to find the very goods they sold is re- imported to their domicile country, that's a different case....that's pure economics and international free trade and arbitrage at work, and should be encouraged.

I hope that distinction is made on that front.

That's my only 5 cents(Retail list price) of opinion on this matter, after discount 1.5cents.

Omega is fully responsible for flooding the market with (overstock) watches in the first place.

--Sancerre

I think that Omega will win....

Cheers

i presume Omega have already sold these watches to dealers worldwide for the price they wanted. the fact that they have effectively forced dealers to buy more than they can sell is their problem. the only way the dealers can offload this unsold stock is to sell them on the grey market at wholesale +5-10%. if Costco chooses to buy this stock and sell it via its retail outlets seems perfectly ok to me. they arent offering Omega warranties.

it seems Omega have got themselves into this position and will probably live to regret it.

just my 2c even though i know nothing about business.

Graham

Of whether these watches are sold to non US ADs who bought them 1)for their domestic consumption solely, then re export them because there is a price arbitrage 2) whther these were forced down the throats of overseas ADs which result in a overstocked situation for them 3) the ability of gray dealers to buy wholesale and sell in those amount to Costco!

Please for a moment forget about territorial pricing, though of course that appears to be behind the dispute at hand. 

An arguably legitimate policy perspective behind the position taken by Omega in this dispute is this:  If a copyright (or trademark) holder is not able to control parallel importation of its products, it loses the ability to tailor products for particular territories, and to ensure that those products are properly serviced. One example:  a manufacturer of a consumer product must meet the consumer product safety regulations of each country in which it sells.  At times those regulations are at odds with one another.  If it cannot ultimately control the territories in which it sells particular products, how can it be certain to comply with the regulations of each territory?

Another example:  A motion picture studio may determine that the release of one of its copyrighted films should be edited differently in one country versus another in respect for divergent social customs, so the versions of the film on the DVDs it manufactures vary by the regions in which the DVDs are intended to be sold.  If the studio has no ability whatsoever to prevent parallel importation, it risks offending large groups of consumers, and potentially loses the goodwill of its brand.

Now back to the case at hand.  Yes, it is clearly about price.  Might it also be about the perceived value of the brand, and about the warranty?  Omega chooses to sell through authorized dealers, like many luxury goods manufacturers.  It presumably chooses the retail outlets that it believes properly represent the brand, and are able to assist consumers with service issues.  It cleary invests many millions of dollars in building its brand identity (and its watches ).  Should it be allowed among the bundle of rights it obtains by virtue of its copyright (and trademark) the ability to prevent a "wolesale club" from reselling watches it manufactured and sold to an authorized dealer (or dealers) in another country?

Food for thought.

Best,

CaliforniaJed

The regulation of domestic policy should be one for governments. If Omega exports direct to a foreign market, then it is its responsibility to ensure foreign requirements are met. If a middleman exports and neglects to meet these requirements, then it is the job of the importing country to stop such imports and punish if necessary. To use the converse logic,  if arms are smuggled into a particular country, the traffickers are nabbed, not the armaments makers.

Regardless of what a company wants to export and what it wants specific consumers in a particular country to see or buy, the final verdict rests with the government of the importing country. So if the government okays it and the free market dictates that there is a demand for that particular product, and it is sold legally and not stolen or counterfeit, why should it be stopped?

Manufacturers still can tailor products for specific territories. If parallel imports are still happening in that case, it would mean that the tailored products are only tailorered for a portion of demand, leaving a substantial enough demand to make parallel imports viable. So that perhaps means the tailor isn't getting his measurements right. 

It would seem unreasonable to put the onus on the manufacturer to ensure that all products it makes end up in the country for which they are originally intended. For large companies making untraceable, low value products in huge volumes that would be practically impossible.

In fact, Costco selling Omega watches means that Omega's network is flawed. There is not mention of the watches being stolen or fake, which means they are original Omega watches that entered the official distribution chain before falling through the cracks along the way. Omega suing Costco has a whiff of the pot calling the kettle chromatically challenged.

It is obvious, even if Omega does not say so, that its aim with the lawsuit is not to enable it to comply with foreign regulations, it is about preserving the exclusivity and price of its watches, as you write in your last paragraph.

- SJX

Absolutely agreed with you. As long as Costco legally bought those watches, let it sells them at whatever price it deems reasonable.

cen@jkt

SJX, thanks.  I've made a few notes below.  I don't think we're fully engaging, though.  Your arguments seem largely in favor of the free market.  I'm not necessarily opposed.  I merely wanted to present, in the abstract, potential public policy rationale in favor of robust copyright and trademark protection with resect to parallel importation of goods.

The regulation of domestic policy should be one for governments. If Omega exports direct to a foreign market, then it is its responsibility to ensure foreign requirements are met. If a middleman exports and neglects to meet these requirements, then it is the job of the importing country to stop such imports and punish if necessary. To use the converse logic,  if arms are smuggled into a particular country, the traffickers are nabbed, not the armaments makers. But in any event, the armament maker, or the non-compliant consumer products manufacturer, faces a potential public backlash through no fault of its own.

Regardless of what a company wants to export and what it wants specific consumers in a particular country to see or buy, the final verdict rests with the government of the importing country.  So if the government okays it and the free market dictates that there is a demand for that particular product, and it is sold legally and not stolen or counterfeit, why should it be stopped? That it is sold "legally" and "not counterfeit" is not really the point.  If its import was not authorized, the product is very close to counterfeit, particularly if it was designed for another market.  That's not the case with Omega, but I asked that we set aside the case at hand and consider the public policy.

Manufacturers still can tailor products for specific territories. If parallel imports are still happening in that case, it would mean that the tailored products are only tailorered for a portion of demand, leaving a substantial enough demand to make parallel imports viable. So that perhaps means the tailor isn't getting his measurements right. Perhaps, but the tailor operates at his own peril in a free market, and if he neglects his measurements, the market will punish him.

It would seem unreasonable to put the onus on the manufacturer to ensure that all products it makes end up in the country for which they are originally intended. For large companies making untraceable, low value products in huge volumes that would be practically impossible. With respect to consumer product safety, in the US, the onus is typically on the manufacturer as well as the importer.

In fact, Costco selling Omega watches means that Omega's network is flawed. There is not mention of the watches being stolen or fake, which means they are original Omega watches that entered the official distribution chain before falling through the cracks along the way. Omega suing Costco has a whiff of the pot calling the kettle chromatically challenged. Agree!

Thanks for your thoughts, SJX!

Best,

CaliforniaJed

and they sell a product that is exactly from Omega's international catalogue and/or website that states its available in all/most countries. would that lawsuit be relevent?