As a boater and someone who loves being in the water, I love
my TAG watch. But over the last 4 years
I have watched TAG Heuer make market moves that puzzle me. Once considered a “premium product” found
only at higher-end stores and under lock and key, the company wanted growth and in 2008 they entered into online retailing; “Okay…”, I thought and
in the months and years that followed I then began to observe another shift in
TAG’s management behaviour and that was they then looked to their current
retailers and added to their volume requirements. “Okay…”, more products with the no change in
demand and guess what happens to price? “Down”,
you say, “Right”, it comes under pressure and retailers cut prices to make
their volume commitments. While back at
TAG Headquarters they haven't realized it at this early stage but retailers will
be silently annoyed at their dropping margins and arrogant OEM stance. This dismay is then conveyed to the territory
representative or distributor, who in turn relays it to upper management; meanwhile
more months go by. Fast forward another
year or two and the once higher-end retailers become fed-up because now prices
are dropping and they are left to compete with others who are in an overstock
position too and with the OEM and their online retailing presence!
What to do? Well, I
believe that a premium priced product needs to stay as such and so I first look to the
demand side of the equation. Either the OEM
finds new markets to fill their
increased production or reduce the amount produced and raise prices instead. No executive wants to hear that! But the OEM needs to keep their retailers
happy and that cannot be done if they can’t make money with a proper profit
margin.
Okay, so let’s change the
approach and look at the product side for a moment. Any OEM needs to ask themselves: "Where is innovation
with the product"? The new bands sure look
good but what about the technology or the product itself? My latest TAG is fairly new but as I look back
at all 3 that I have from the last decade I don’t see much change (except in the band); and
there lies an opportunity. Sorry to
pick on TAG, but I don’t wear a Rolex, and they too fall into this example,
like many more……
Regardless of which decision any OEM makes… standing still
isn’t one of them!
No comments:
Post a Comment