Watch sales accounted for 20% of total sales at Harland Jewelers last year – more than twice the figure at a typical U.S. jewelry store. The Modesto, Cal., retailer also reported a 10% increase in watch sales, despite higher prices from Swiss manufacturers and a generally unmotivated consumer. That figure was higher than typical, as well.

Owner Harland Houghren has a secret weapon. He doesn’t wave a magic wand; instead, he waves a business card that next to the Rolex brand name includes the words “service” and “sales.”

“In-store service and brand names are critical,” he says. His brands range from Timex to Rolex, which he services with a full-time watchmaker.

Few jewelers who sell watches were able to duplicate Houghren’s success last year. In fact, 41% of jewelers polled saw no change in watch sales, and as many reported decreases as increases in watch sales nationwide, according to a poll of the JCK Retail Jewelers Panel.

Overall, jewelers credited watches with about 9.5% of their sales last year; up slightly from previous years. But there’s a shift in who is selling more watches – and why. Three years ago, a significant number of jewelers (about one in four) had a watch department that yielded less than 5% of store sales. Today, that group is smaller: about one in five.

That’s partly because fewer jewelers are selling watches; some of those with low sales have dropped out of the market entirely (more on this later). But other jewelers clearly have worked hard to boost watch sales in the past three years. For example, the next sales category (watches accounting for 5%-10% of total sales) grew from 28% to 44% of jewelers. And 31% of the jewelers say watches accounted for 11% of more of total sales.

Economics and watches: When the U.S. economy fell into recession in 1990, followed by a weak recovery, retailers were forced more than ever to rely on their biggest sellers and biggest profit centers. Diamond, colored stone and gold jewelry got more space in the showcase while watches got less. At the same time, many retailers became fed up with watch suppliers after a decade of manufacturer discounting, mass merchandising and uncontrolled distribution. Many jewelers either forgot about their watch department or let it stagnate.

Others did not. They continued to renew their watch departments and paid close attention to local markets. Their efforts have been rewarded. While these retailers – many of them independents – comprise a smaller group than three years ago (down 2%-3%), their sales increases may well give the group as a whole a larger share of watch sales.

They also may be reaping the benefits of tightened distribution by a few top brands. They often receive “registered dealer” status that customers like to see, and their advertising and promotion are generally grander than smaller watch sellers. Examples include Mayor’s in Coral Gables, Fla.; Lampert in Chicago, Ill.; Smart Jewelers in Lincolnwood, Ill.; Moyer & Co. in Carmel, Ind.; The Diamond Cellar in Columbus, Ohio; Mathis Fine Jewelry in Houston, Tex.; and Traditional Jewelers in Newport Beach, Cal.

The success of these larger stores can create a halo effect for smaller ones, generating a wider interest in watches among consumers – even those who can’t afford the top brands.

Add to this the growing number of watch-only stores. Healthy advertising budgets (in New York, watch retailer Tourneau Corner advertises nearly every day on page 2 of The New York Times) and assistance from watch vendors allow watch-only stores to promote the product to a greater extent than can many jewelers with a full product line. (Interestingly, most jewelers don’t perceive these watch-only stores as a major competitor – yet. But several of these stores are adding jewelry to their product mix.)

Product and promotion: Stores that reported a better-than-average increase in watch sales last year attracted and retained customers with tried-and-true methods:

• Service.

• The right product.

• Effective promotion.

At Lacy & Co. in El Paso, Tex., watch sales rose and accounted for 20% of sales last year. Owner Ellen Lacy credits new distribution policies by Rolex (she is one of two official Rolex retailers in town) and continued advertising support for the brand (including a year-round billboard and a large light board at the local airport). “We have become better known in the market as a store with fine watches.” Her store also sells watches from Tiffany, John Hardy and Ebel.

Ferrera Jewelers in East Hanover, N.J., was not known as a store with watches – until last year. Owner Richard Ferrera stopped selling timepieces six or seven years ago, but decided to reenter the market because he felt he was missing a growing segment of local buyer traffic.

Ferrera started with several brands that few local jewelers carried and parlayed one brand into a marketing coup that has helped sales storewide. “We brought in the Roven Dino line, which had a watch series called Equestrian,” he says. By coincidence, a steeplechase horse race in a nearby town draws thousands of visitors each year. “We were able to sign on as one of the major sponsors, and we tied in the watch with the event.” The resulting exposure drew a host of new customers. In fact, he expects 1995 watch sales to rise considerably from the 5% of total sales he recorded last year.

Decades of service: It’s a given at Herteen & Stocker, a third-generation jewelry store in Iowa City, Iowa, that customers need not worry about watch service.

“My father was a watchmaker; his partner, who just retired, is a watchmaker; and we have another full-time watchmaker,” says co-owner Terry Dickens. Though selection is important, he says, service is what drives his store’s success with watches. “We can repair about everything we sell, which is becoming a dying art.”

That watchmakers are rare today is not news. As jewelers stocked fewer and less-complicated watches in the past few decades, they squeezed out the formerly prominent role of watchmaker. Indeed, fewer retailers employed full-time watchmakers last year than ever before. In JCK’s 1994 salary survey (see JCK, November 1994, page 94), the number of watchmakers at stores grossing under $1 million was not even high enough to tabulate.

But this may be changing as growing sales of mechanical watches renew the demand for watchmakers. Large-scale programs are underway in Swit zerland to train a new generation of watchmakers. And in the U.S., member firms of the American Watch Association have backed increases in training programs at the Joseph Bulova School in New York.

However, the students who are taking advantage of this new support are not yet in stores. And it remains to be seen whether retailers will embrace a fully trained watchmaker’s talents in-store or as a contract service.

Contract services currently are far more important than ever as retail stores pare their overhead. But some jewelers polled see distinct advantages to employing a watchmaker. David Glover, owner of Caplan’s Jewelry Store in Weston, W.Va., says his ability to service every watch he sells keeps his watch sales strong. Last year, a good one for Glover, saw the category account for 27% of his store sales. “Customers are tired of watches that have to go back to the factory and with the lack of service at discount stores,” he says.

Watch out: Despite the success that some jewelers have had with watches, a growing number of them are giving up. The JCK poll shows that 8% of jewelers now stock no watches, up from 1%-2% three years ago. And unless the marketplace changes dramatically this year, that figure could grow.

“I’m going out of the watch business,” says Sidney Fey of Erickson Matthew Jewelers, Aurora, Ill. The company’s watch sales have dropped by half this past year, largely due to discount competition. “The watch companies have loaded up the large chains…it doesn’t pay,” he says.

That’s also true for J. DeLuca in Rancho Mirage, Cal. The company can’t compete with department stores that receive favorable terms from watch vendors, says comptroller A.A. DeLuca. “If we could get those terms, we would carry them also,” he says.

Jewelers are fairly evenly split on actions that some major watch brands have taken to address concerns about distribution and discounting. Some say they have already benefitted from new no-discount or tighter distribution policies. They frequently cite Rolex and Cartier for effective policies. “In large part, the credit can be given to watch firms,” says Ellen Lacy. “They are not giving us better margins, but we are having to discount the watches less. It gives you a different outlook on watch sales.”

Dan Moyer, owner of Moyer & Co., says he hears far fewer complaints about watch company distribution and service policies these days. “I don’t know if it’s because they heard retailers complain or because they had to be competitive with other companies that improved their policies,” he says.

Other retailers are not as enthused. They see little effect on retailers who have made discounting their standard practice. And tighter distribution raises the issue of exclusivity, which has rankled jewelers who say watch vendors dropped them suddenly and unfairly.

Growth in sports and gold: Retailers and manufacturers are expecting good watch sales this Christmas. Interest and orders at major trade shows were encouraging this year, significantly more lines were introduced than in recent years and watch manufacturers plan to boost advertising for the end of the year.

More than half (50.7%) of the retailers polled think sport watches will see the most growth as manufacturers widen their appeal by adding sport/dress styles. “Excessive introduction of new sports watches has created more interest in the preferred lines,” says Arthur Friedland of Tiffins Jewelers in Las Vegas, Nev. “People wear their sports pieces for prestige.”

Other watches that retailers think will gain sales momentum include dressy karat gold (mentioned by 22.1% of the respondents), automatic watches (12.9%) and chronographs (12.1%). The last two are growing increasingly popular, thanks to more selection and a wider price range (some retailing for less than $200), say jewelers.

FYI

A majority of jewelers polled said watch sales were flat in the past 12 months, with most of the sales concentrated among a small number of strong independent retailers. Jewelers also said higher prices and lower margins reduced their incentive to market vigorously. But many hope continued advertising, no-discount policies by manufacturers and stronger distribution controls will generate more sales for them this fall and during the Christmas selling season.

Source: JCK Retail Jewelers Panel

NOBLIA EXPERIMENT PAYS OFF

Larry Rickert, co-owner of Avenue Coins & Jewelry in Appleton, Wisc., agreed to stock the Citizen line in 1993 after two decades of not handling watches. “We realized we were sending too many people who were looking for a watch to the competition,” says Rickert. “That’s not a good idea in the long run.”

The store did well with the watches, particularly Citizen’s high-end nautical-themed Noblia line. It did so well, in fact, that Citizen chose it as one of 12 stores nationwide to receive a Noblia boutique.

Independent, chain and department stores have used watch boutiques for years, but fewer independents use them because of space limitations. Noblia’s boutique is 7.5 feet wide and has a 5-ft. wide, double-lighted showcase with enough room for 65 timepieces. Behind the counter is a large Noblia logo with built-in lighting and three more showcases. It’s trimmed in brass and chrome for an upscale look.

The contract with Citizen involves some exclusivity (Rickert agreed not to stock brands that compete with Noblia). But he is quite satisfied with the arrangement. In addition to broadening his store’s appeal to watch buyers, the boutique showed Rickert that his customers wanted styles in a higher price range than he thought. (Noblia retails for $495-$2,550.)

The boutique has even helped to increase jewelry sales. In August, for example, a customer who saw Avenue Coins & Jewelry listed in an ad as a Noblia dealer made his first visit to the store. “He bought a top-of-the-line Noblia [$2,550] and also bought a 3-ct. diamond ring for a Christmas present,” says Rickert.