Watch supplier Tag Heuer has become the target of an angry backlash following a controversial decision to close the accounts of all Melbourne CBD stockists except one.
The strategy was designed to coincide with the opening of the brand’s own flagship store in Collins St, Melbourne and has directly affected The Hour Glass, Saleras Jewellmasters and Monards, as well as Angus & Coote – all of whom were informed in a letter from LVMH general manager Philip Richards on October 19, 2009 that their accounts with Tag Heuer would be closed.
The move prompted an angry backlash against Tag’s parent company LVMH after it was revealed that another Melbourne CBD stockist, Watches of Switzerland (WOS), would continue as normal, despite being the outlet closest store to Tag’s new flagship store.
In the October 19 letter that informed retailers of the forthcoming account closure, Richards justified the decision by stating that WOS had “a significant shop-in-shop”.
When contacted, Richards was guarded, refusing to answer questions and saying only, “It’s pretty clear what we’re doing with our flagship store, and we’ve spoken to all of the traders involved.”
Having confirmed that the WOS store’s account was not closed because of the shop-in-shop, Richards was asked, “If Angus & Coote had had a shop-in-shop would you (Richard’s) still have closed Angus & Coote?” Richards hesitated before answering, “No comment.”
Industry speculation suggested that Tag may have been committed to a lease on the shop-in-shop section of the WOS store when it was renovated and enlarged in 2007, a factor that might stop the company closing the account; however Richards again declined to comment when asked whether that was true.
While it was unlikely that Tag’s name would appear on any retail lease in which it was stocked, it is not unusual for a brand like Tag to pay rental costs for the floor space it occupies in such retail outlets, and therefore not out of the question that the WOS account was retained because Tag remained legally tied to the floor space.
Prominent chain store Angus & Coote has reacted angrily to the decision, dumping Tag Heuer from all 12 of its stores in Australia and seven Stewart Dawsons stores in New Zealand, thus ending a relationship dating back over a decade.
The decision followed lengthy negotiations between Angus & Coote and the brand that commenced with the arrival of Richards’ letter last October and concluded with the decision in April to remove the brand entirely.
Andrew Nock, General Manager, Angus & Coote said the decision to dump Tag was not one he took lightly.
“We need to be able to work with our supplier partners to back our brand so that we back theirs. It needs to be a win-win, and in doing so we must take into account our customers.
“It is not sensible for a retailer to have different product offerings in different stores. We need consistency, and not having Tag in our flagship store but available in our other, smaller stores is not something we view as sensible,” Nock said.
Other affected retailers have responded similarly with a representative of one, who asked to remain anonymous, saying he was investigating whether the decision could be a breach of the Australian Consumer and Competition Commission’s Trade Practices Act (TPA).
“We believe restricting stock to just two outlets could be a restrictive trade practice because it could have a detrimental effect on competitive pricing,” the retailer said.
He added that large Swiss watch brands were known to be ruthless, using retailers as short-term platforms to help boost the brand’s image.
“They will use you for the necessary cash flow to achieve their objective. Eventually they’ll find some excuse to close you down so that their own boutiques get greater strength,” said the retailer, adding that he believed many of the Swiss watch giants were following a similar path to Tag Heuer: “There is a global tendency for the Swiss brands to be opening their own boutiques, which may or may not be successful for them in the long run.”
In direct contrast to Angus & Coote’s bold decision, a third affected-retailer anonymously advised his peers to take a more pragmatic approach: “The type of heavy-handedness that exists amongst the Swiss brands, you can go two ways with it: you can dig in, or you can negotiate your way around it so there’s a win-win,” he said, adding, “At the end of the day, if we’re an important enough account to them and we do what they want, they’ll keep us. If they don’t, I don’t think anyone can control that.”
Tag’s decision to retain the Watches of Switzerland account has raised further eyebrows because the original Australian distributor of Tag Heuer in Australia is actually WOS founder Eric van der Griend.
Numerous attempts to seek comment from van der Griend were unsuccessful.
Richards has subsequently notified Sydney retailers of similar plans ahead of the opening of a flagship store in New South Wales.
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