Massive Swiss watch discounts revealed

A court case in the US has brought attention to Costco – a global retail chain with a growing Australian presence – and its practice of purchasing upmarket brands from overseas and retailing them at drastically reduced prices.

Swiss watch giant Omega is now fighting to stop its watches being sold at these massive discounts – reportedly up to a third less than less than US retail – in a case being monitored by all luxury brands.Omega’s parent company, Swatch Group, has a long history of closely guarding its prices, to the extent where it was accused of price fixing by its former Australian general manager.

It has been alleged that Swatch has closed the accounts of Australian retailers that discounted product, so news of Costco’s drastically discounted stock adds to the confusion over the setting of RRPs.

Costco’s Australian arm will be watching the Omega situation closely, and when contacted by Jeweller, Australian marketing manager, Josh Fearnley was aware of the US court case but refused to comment.

Indeed, Fearnley took the most unusual step of even refusing to confirm whether Costco stocked Omega watches in its Australia store. However a simple telephone call to the company’s Melbourne outlet revealed the company does, in fact, stock Omega in Australia as well as other Swiss brands, Tag Heuer and Tissot – all at discount prices. Costco also stocks Citizen and Skagen.

Jeweller paid a visit to Costco earlier this week finding an Omega Speedmaster watch on sale for $2,799.

The Speedmaster range is available at Omega’s boutique stores with a starting price of $4,100, $1,300 more than Costco’s price.

Costco is a US-based chain of discount warehouses and is the ninth-largest retailer in the world, and the third-largest in the US. It has operations in the UK, Canada and many parts of Asia and the company only recently entered the Australian market, with a store in Melbourne’s Docklands. A second store in Sydney is scheduled to open mid-2011.

The Associated Press (AP) reports that by bypassing official Omega distribution channels, Costco has been offering Omega watches in the US for up to a third less than the cost elsewhere.

Omega alleges that Costco buys product from overseas sources and argues that this practice is in breach of the brand’s US copyright.The battle that has now made its way to the US Supreme Court. At this stage, Omega has given no indication of whether it plans to pursue the case outside the US.

The case has important implications for luxury goods brands that want to maintain their prestigious image with high-end prices.

In the US, Costco lawyer Roy Englert said in court papers that there is no basis in law for "the distinction between goods made at home and those made abroad."

Omega, however, says copyright law is designed to “prevent the importation, without the authority of the US copyright holder, of genuine copies made and sold overseas.”

The Supreme Court case comes after Costco appealed an earlier ruling that sided with Omega. The case is due to be argued later this year.