FEATURE: Swiss Watch Group and timepiece logistics
The watch business is often referred to as being a ‘small’ industry by those in it, not because the multi-billion dollar a year watch sales market is insignificant, but rather because it is dominated by a few key players that control the global market.
Swiss Watch Group, part owned by the LVMH retail goliath, is one of these key players, it controls the majority of the MENA watch market, and has plans to consolidate its position across the luxury accessories sector with its new distribution centre in Dubai South. To be a successful watch company in modern times, a brand often needs help. Brands today are faced with a multitude of complex challenges ranging from getting the right parts from suppliers, to product distribution across many countries, and expensive advertising campaigns that take into account the varied tastes and traditions in dozens of major markets across the world.
This mammoth task is secondary to the even more complex and risky business of designing and producing interesting and appealing timepieces that consumers want. For this reason, since the 1980s and the “quartz crisis” which changed the way traditional watch companies do business, the wrist watch landscape is increasingly populated by “big brands” that are often part of a larger multinational group. Independently owned companies which can compete on an international level with the “big boys” are becoming increasingly rare. Swiss Watch Group offers timepiece brands a solution that has proven extremely popular and it has expanded its portfolio to include three market segments: watches, accessories and eyewear.
“Swiss Watch Group buys the license to major fashion and luxury brands for a specific period, during which we pay royalties based on sales turnover. We conceptualise, design, develop, manufacture and distribute the products,” explains Chavadi MS, chief operating officer, Swiss Watch Group. “We handle different types of brands across different market segments, but most of our business is in watches, which are considered a lifestyle product. We also handle various other accessories, writing instruments, sunglasses, cufflinks, and leather goods. Our luxury line includes Swiss made products from Aigner, Escada, Swiss Military Hanowa and Roamer and our fashion and lifestyle portfolio includes Cerruti 1881, Police, Kenneth Cole, Ted Bakers, Timberland and Gant.”
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Chavadi adds that while the lifestyle and fashion products account for the greater volume, the higher value comes in through luxury brands and their products. Wristwatches, cufflinks, writing instruments and sunglasses are Swiss Watch Group’s bread-and-butter, the largest products it sells are leather goods such as bags. This presents a particular logistics challenge, because it’s high-value, low volume products need to be accompanied to market by low-value, high-volume ‘collateral packaging’. This includes the box that the watch or sunglasses are bought it, the display case for the shop, the trays on which these high-end goods will be kept and a multitude of other consumer-end packaging.
To manage this, the warehouse is sectioned into two zones, one for products and the other for the ‘collateral’ packaging. The products themselves are kept in a four-level walkable caged section, while the majority of the 10,000sqm facility is taken up by the selective racking where the ‘collateral’ is stored in a palletised form accessible through reach trucks. Swiss Watch Group’s multi-level products area is operated in a similar fashion to an e-com operator.
“The four-level caged area is designed in what we call ‘Man to Product’ so it is walkable and the picker is able to go directly to the product or products, pick them up, and bring them to the sorting area,” explains Chavadi. “This system works for us because although we handle a high turnover of goods, each picking move involves a small number of products and each one is different – cufflinks, bags, sunglasses, watches and so on.”
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Swiss Watch Group currently has a throughflow of around 500,000 product units per year, but the warehouse is designed to handle 1.5-million and is expected to reach that number by the end of 2020 through both organic and inorganic growth and re-assignment of logistics worldwide for maximum efficiency. In the ‘collateral’ part of the warehouse, selective racking is used to store the consumer-end packaging for each product, with high-flow pallets on the lowest levels and low-flow higher. “Each pallet is barcoded according to what’s inside and our WMS tells us exactly where each item is in the warehouse, as well as its origin, and the frequency by which it is being shipped,” says Chavadi.
“High value, low volume is brought in and sent out by air, and low value high volume items such as the packaging and boxes is sent by truck or ship. We make this work by standardising the packaging for various product types irrespective of season or sales event. So the collateral packaging remains the same for more than a year.” Each product also needs to be packaged differently for transport and storage, so the area is divided according to the brand, and the sophisticated Navision WMS used by Swiss Watch Group ensures that the products are packaged correctly. “We’re able to sort, package and send to the exact requirements of our retail associates,” says Chavadi. “So if they want the product in a barcoded box ready to be displayed, we do that, others want the products stored for density and they do the packaging on their end. We also have the retail system of the client overlapping with our WMS, so that we’re able to barcode and package according to their requirements at any given time of the year.”
Chavadi says that this is helpful because prices and offers change based on special offers and seasonal offers. “In this scenario the product can be taken off the truck and placed directly in the shop on display. Typically, however, we send the product itself by courier as air cargo and the packaging by overland transport.” Although the Swiss Watch distribution hub in Dubai South serves the entire MENA region, the group is not shipping directly to its retailers from it. With more than 2,500 retail points across the region, the logistics would be hugely inefficient. “We don’t supply the shops directly from here, because each shipment would be quite small, making it inefficient, especially when you factor in the processing involved in moving goods out of a freezone. So instead we deal with around 100 associates who have their own retail and distribution channels.” says Chavadi.
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The specifics of this depend entirely on the particular brand and the country. For example, Swiss Watch Group has one local company for UAE distribution operations, but multiple retail partners for the Saudi Arabia market. In some cases where the markets are traditional and complex, countrywide sub-distributors are appointed to look into onward business development. Flexibility for retail is key. Swiss Watch Group is even able to customise products according to the specific requirements of different markets. When items are picked for sorting our WMS tells us the packaging and transport needs of each brand and retail customer.
For instance, all goods going into some GCC markets need to have the country of origin engraved on the product, so we also have facilities to make the products custom compliant” says Chavadi. “Having these facilities in-house saves a lot of time & effort” There is also a service centre where eight technicians are able to do quality control, as well as minor repairs or alterations. “So we can change the battery, change the colour of the strap based on a particular sales events such as Mother’s Day or Valentines, and also carry out aftersales support.” Chavadi says that this is important in the Middle East market, where buying patterns differ significantly, allowing the brands it works with to maximise the selling opportunity.
“Another thing we do differently in this region is that, if there is a need and an associated opportunity for business, we design and manufacture products to cater to the need. Classic example is that of ‘Police’ that is predominantly a men’s brand worldwide and we have successfully developed Police Ladies watches, jewellery and leather goods” Chavadi points out. By offering this level of flexibility Swiss Watch Group has cornered the logistics end of the luxury and lifestyle products sector. By buying the license to design, manufacture and distribute on a brand’s behalf, rather than buying the brand itself, it has also pursued a low-risk model that is paying dividends. Since Swiss Watch was founded in 1996, it has become an integral link in the International Luxury Group (ILG).