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Thread: Omega cutting dealer margins

  1. #1

    Omega cutting dealer margins

    So I have it on the very best authority that Omega have cut the margins for their dealers. This is aimed at solving the discounting problem and it will drive secondhand prices up by probably 5%

  2. #2
    What is the reason for Omega to desperately try to imitate Rolex bumping their prices up to match them while Rolex will always be well… Rolex and Tudor (sister company of Rolex) happily fill the void left by Omega. Rolex must be laughing themselves silly.

    Swatch on the other hand best just be hoping those Tissot and Hamilton watches keep selling.

  3. #3
    I think resale price maintenance remains illegal in the UK and EU (e.g.) so I wonder how Omega (or any other supplier, including the obvious one) can enforce this? "Cutting dealer margins" suggests specifying a specific gap between wholesale and retail price, which isn't permitted. Not an expert, just curious.

  4. #4
    Master Christian's Avatar
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    Quote Originally Posted by robert75 View Post
    What is the reason for Omega to desperately try to imitate Rolex bumping their prices up to match them while Rolex will always be well… Rolex and Tudor (sister company of Rolex) happily fill the void left by Omega. Rolex must be laughing themselves silly.

    Swatch on the other hand best just be hoping those Tissot and Hamilton watches keep selling.
    I don't fully understand the question. Omega want to be in the same market segment as Rolex and charge the same. They have price history to overcome which is why I think they have been busy improving movements over the whole range in order to justify price rises and get things levelled with Rolex. This latest ploy, if true, seems to be less about driving prices up but ensuring that discounts aren't seen as the norm. I'm pretty sure AD discounting from RRP devalues them as a luxury brand.

    Quote Originally Posted by Tokyo Tokei View Post
    I think resale price maintenance remains illegal in the UK and EU (e.g.) so I wonder how Omega (or any other supplier, including the obvious one) can enforce this? "Cutting dealer margins" suggests specifying a specific gap between wholesale and retail price, which isn't permitted. Not an expert, just curious.
    How has Rolex achieved this? I always assumed (maybe wrongly) it was through a condition of being an AD. I'm pretty sure Mappin & Webb told me years ago that Rolex didn't allow them to discount or allow finance on their watches.
    Last edited by Christian; 15th June 2021 at 16:09.

  5. #5
    I believe that a retailer isn't obligated to sell you anything at all. Even if it is in stock, you are in the store, cash in hand, and offering to buy it at sticker price.

    So perhaps this is how Rolex dealers behave. They don't need to discount, and are legally able to not sell you anything. But for the Omega example where it is suggested that the wholesaler (Omega) has reduced the retailers' margin, this would imply the wholesaler directing the retailers price, which isn't permitted. Just wondering.

    Edit to add the wording from the UK Gov doc linked before:

    If you are a supplier:
    • You must not dictate the price at which your products are sold, either online or through other sales channels.
    • Policies that set a minimum advertised price for online sales can equate to RPM and are usually illegal.
    • You must not use threats, financial incentives or take any other action, such as withholding supply or offering less favourable terms, to make resellers stick to recommended resale prices.
    • You cannot hide RPM agreements - restrictive pricing policies in business-to- business arrangements are illegal whether verbal or written. Equally you cannot try to use apparently legitimate policies (e.g. image licensing) to conceal RPM practices.

    If you are a reseller:
    • You are entitled to set the price of the products you sell, whether online or through other sales channels.
    • Suppliers are not usually allowed to dictate the prices at which you sell or at which you advertise their products online.
    • If you have agreed to sell at fixed or minimum prices with your supplier, you may both be found to be breaking competition law.
    • If a supplier asks you to comply with a restrictive pricing policy you should report this to the CMA.

    It seems clear
    Last edited by Tokyo Tokei; 15th June 2021 at 16:30.

  6. #6
    Craftsman
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    From my experience working with Apple (a few years ago now mind) we were a reseller and we bought at about 5% below the retail price
    If we provided marketing support and sales data we'd then get a rebate of 20% at the end of the month.

    This effectively stopped us selling below their RRP as we couldn't get the rebate if apple found out.
    I imagine that omega and other brands do something similar

    In the above scenario omega would reduce the rebate given to resellers effectively removing the discount available for them to give while remaining compliant with the law.

    I could be way off base but there is always more than one way to skin a cat

  7. #7
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    Assuming they aren't allowed to set the final sale price, even if they may strongly suggest its RRP or close to it, then they must have increased the wholesale price to reduce dealer margins???

  8. #8
    Quote Originally Posted by Tokyo Tokei View Post
    I believe that a retailer isn't obligated to sell you anything at all. Even if it is in stock, you are in the store, cash in hand, and offering to buy it at sticker price.

    So perhaps this is how Rolex dealers behave. They don't need to discount, and are legally able to not sell you anything. But for the Omega example where it is suggested that the wholesaler (Omega) has reduced the retailers' margin, this would imply the wholesaler directing the retailers price, which isn't permitted. Just wondering.

    Edit to add the wording from the UK Gov doc linked before:

    If you are a supplier:
    • You must not dictate the price at which your products are sold, either online or through other sales channels.
    • Policies that set a minimum advertised price for online sales can equate to RPM and are usually illegal.
    • You must not use threats, financial incentives or take any other action, such as withholding supply or offering less favourable terms, to make resellers stick to recommended resale prices.
    • You cannot hide RPM agreements - restrictive pricing policies in business-to- business arrangements are illegal whether verbal or written. Equally you cannot try to use apparently legitimate policies (e.g. image licensing) to conceal RPM practices.

    If you are a reseller:
    • You are entitled to set the price of the products you sell, whether online or through other sales channels.
    • Suppliers are not usually allowed to dictate the prices at which you sell or at which you advertise their products online.
    • If you have agreed to sell at fixed or minimum prices with your supplier, you may both be found to be breaking competition law.
    • If a supplier asks you to comply with a restrictive pricing policy you should report this to the CMA.

    It seems clear
    Seems fairly simple, just increase the wholesale price.

  9. #9
    Grand Master JasonM's Avatar
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    Do the retailers buy the watches, or do they get allocations that they sell then get paid on units sold?
    Cheers..
    Jase

  10. #10
    Craftsman ozzyb123's Avatar
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    Quote Originally Posted by vortex89 View Post
    From my experience working with Apple (a few years ago now mind) we were a reseller and we bought at about 5% below the retail price
    If we provided marketing support and sales data we'd then get a rebate of 20% at the end of the month.

    This effectively stopped us selling below their RRP as we couldn't get the rebate if apple found out.
    I imagine that omega and other brands do something similar

    In the above scenario omega would reduce the rebate given to resellers effectively removing the discount available for them to give while remaining compliant with the law.

    I could be way off base but there is always more than one way to skin a cat
    Sounds a lot like retail price manipulation


    Sent from my iPhone using Tapatalk

  11. #11
    Craftsman smashie's Avatar
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    Quote Originally Posted by JasonM View Post
    Do the retailers buy the watches, or do they get allocations that they sell then get paid on units sold?
    They buy them, with the exception of certain pieces supplied on approval (restricted to items outside the core range). Payment terms used to be fairly flexible though, 60, 90 or 120 days weren't uncommon.

    Quote Originally Posted by ozzyb123 View Post
    Sounds a lot like retail price manipulation


    Sent from my iPhone using Tapatalk
    Yup it is, but the retailers don't complain about it or discount without permission, that's a very quick way to lose your ability stock the brand of watches.

    A small caveat, I've been out of the industry for a few years now and although some things have changed, a lot hasn't.

    Mark

  12. #12
    Master
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    There must be very little doubt that the watch market is ripe for a competition law investigation. It always struck me as being full of potential RPM type practices.
    Last edited by Berty234; 16th June 2021 at 07:28.

  13. #13
    Master blackal's Avatar
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    Quote Originally Posted by Tokyo Tokei View Post
    I think resale price maintenance remains illegal in the UK and EU (e.g.) so I wonder how Omega (or any other supplier, including the obvious one) can enforce this? "Cutting dealer margins" suggests specifying a specific gap between wholesale and retail price, which isn't permitted. Not an expert, just curious.
    They simply increase the 'price to dealer' - effectively saying: "if you want to discount the price from rrp, then it will cost you a further x% in profit"

  14. #14
    Grand Master snowman's Avatar
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    Hard to see why people are struggling with this.

    Omega set a RRP and a cost to a seller, there's a margin OR the seller can TRY to sell over RRP.

    Assuming some retailers will sell at RRP then discounting below it will cost the retailer money and be unpopular.

    Some will probably do it, operating on a smaller margin, but as others have said the practice of general discounting will end and that will help the perception of desirability of Omega watches.

    It's not illegal and pretty much what was described as Apple doing or what Rolex do or Unilever with washing powder...

    M

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  15. #15
    Grand Master Saint-Just's Avatar
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    You forget that they usually must also shift a certain number of watches, including some specific and less popular models, in a set time.
    This is the main reason for the discount: they have more to lose if they don't sell their quota than a few percentage points on the sale.
    'Against stupidity, the gods themselves struggle in vain' - Schiller.

  16. #16
    Master Christian's Avatar
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    I'd imagine this applies to a lot of luxury goods and I can see why discounting is harmful to your brand as a luxury goods manufacturer. None of them will want to be seen as the "money in your pocket, not on your wrist" Klaus Kobec.

  17. #17
    Master animalone's Avatar
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    This is probably an unpopular opinion, but the reverse would also apply. If retailers were completely free to set prices then you would have almost zero chance of picking up that desirable Rolex profesional model (other models and brands are available) at a sensible price.
    On the plus side however it would almost instantly wipe out the grey market scalpers.

  18. #18
    Quote Originally Posted by Tokyo Tokei View Post
    I believe that a retailer isn't obligated to sell you anything at all. Even if it is in stock, you are in the store, cash in hand, and offering to buy it at sticker price.
    Advertisements and goods on display in shops are not an offer to sell. They are an invitation to treat.
    An offer to sell is a legally binding. Whereas an invitation to treat isn't it simply states that the seller is open to receive offers for their goods from the prospective buyer.

    When the buyer makes an offer to purchase, the vendor is free to accept or reject. This is very different to the vendor making an offer to sell and the buyer deciding to accept. In the latter case if the seller were to have cocked up the pricing, the buyer could accept before the vendor noticed and a contract would be formed.

    I was taught that there must be a notice somewhere in each shop to say that price tags are only invitations to treat and do not constitute offers to sell. But I have always suspected that to be baloney.

  19. #19
    Master
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    Omegas battle plan

    1) Increase advertising of the brand through judicious product placement
    2) Introduce precious metal versions of sport models.
    3) Hike prices and lower dealer margins.
    4) Halve production of popular stainless steel sports models.
    5) Supply dealers with precious metal and dress watches in abundance.
    6) Send dealers intermittent random stainless steel sport watches that everyone is now clamoring for because that's what the man wears in the films.
    7) goto 3
    8) change name to Romega for Omlex

  20. #20
    Master
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    Two-way sword. If retail goods are discounted, then used prices are correspondingly lower. That’s the strength of brands which are strong enough to hold retail prices. Discounting is weakness.

  21. #21
    Master mycroft's Avatar
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    Quote Originally Posted by paskinner View Post
    Two-way sword. If retail goods are discounted, then used prices are correspondingly lower. That’s the strength of brands which are strong enough to hold retail prices. Discounting is weakness.
    Completely agree. I train business people in professional negotiation skills and we always teach them that unnecessary discounting is the fastest way to destroy your own value proposition.

    Simon

  22. #22
    Craftsman Jaysagood's Avatar
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    Quote Originally Posted by julian2002 View Post
    Omegas battle plan

    1) Increase advertising of the brand through judicious product placement
    2) Introduce precious metal versions of sport models.
    3) Hike prices and lower dealer margins.
    4) Halve production of popular stainless steel sports models.
    5) Supply dealers with precious metal and dress watches in abundance.
    6) Send dealers intermittent random stainless steel sport watches that everyone is now clamoring for because that's what the man wears in the films.
    7) goto 3
    8) change name to Romega for Omlex
    Very funny and probably not far from the minutes of the marketing strategy meeting!

  23. #23
    Quote Originally Posted by julian2002 View Post
    Omegas battle plan

    1) Increase advertising of the brand through judicious product placement
    2) Introduce precious metal versions of sport models.
    3) Hike prices and lower dealer margins.
    4) Halve production of popular stainless steel sports models.
    5) Supply dealers with precious metal and dress watches in abundance.
    6) Send dealers intermittent random stainless steel sport watches that everyone is now clamoring for because that's what the man wears in the films.
    7) goto 3
    8) change name to Romega for Omlex
    You missed out 9

    Flood watch forums with dealers who push the brand at every opportunity to inflate interest

    Stand by for

    "Omega in the shop window" "Omega price increase when" "Please value my Omega" etc..........

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