Tag tries to plug $6 million hole

3.5 k views | Posted June 01, 2010 |

Tag Heuer management has gone into damage control, attempting to plug a $6 million hole created after Angus & Coote “sacked” the Swiss watchmaker.

Tag’s distributor, LVMH, has been forced to seek new accounts because of an angry backlash following a controversial decision to close the accounts of all Melbourne CBD stockists except one. The company has also announced plans to close accounts with Sydney CBD retailers later this year.

Tag’s 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. Each retailer was informed late last year that their accounts with Tag Heuer would be closed in a letter from LVMH general manager Philip Richards..

After being advised that the account of it’s Melbourne flagship store would be closed, prominent chain store Angus & Coote reacted angrily to the decision, dumping Tag Heuer from its stores in Australia and New Zealand, thus ending a relationship dating back over a decade.

Industry sources say that Tag’s annual sales with Angus & Coote (A&C) exceeded well over $6 million but the company’s general manager, Andrew Nock, refused to confirm the figure. If accurate, Tag’s loss of sales in Australia and New Zealand could be as much as $8 million.

Tag is now opening new accounts to replace the lost A&C sales and one approach has been to replace some of the A&C stores with Mazzucchelli’s stores.

Mazzucchelli’s is a medium-sized chain and is part of The Jewellery Group, which also owns the much larger 97-store Zamels chain. While Mazzucchelli’s has been a long-time stockist of Tag, it has been able to secure additional locations as a result of A&C quitting the brand.

Mazzucchelli’s has 25 stores – three in ACT, seven in SA and 15 in WA – whereas A&C has 128 stores nationally.

Interestingly, A&C and Mazzucchelli’s operate from many of the same shopping centres. Both retailers operate stores in the same six shopping centres in WA and four in SA.

Richards would offer no comment when asked to confirm that Tag had widened Mazzucchelli’s outlets since losing the A&C account. He also would not comment about A&C’s annual sales of Tag Heuer watches.

However his - and Tag’s - problems do not end there; existing Tag stockists now have to contend with huge discounting by A&C as they begin to move stock to meet Tag’s deadline.

What seemed like a good idea at the time – to open a Tag flagship store and quietly close a few surrounding accounts – has become a gigantic headache.

It is understood that Tag was caught completely by surprise when A&C decided to remove the brand from all its Australia and New Zealand stores. More surprises followed when A&C embarked on a national advertising campaign offering discounts on Tag watches.

Prominent, colour newspaper advertisements complimented A&C store signage at its Melbourne CBD flagship store offering customers “at least 20% off all Tag Heuer” in a “Tag sellout”.

The Tag sellout has been described a “price slaughter” by one Tag stockist and another said that it’s causing endless problems as consumers come into the store asking for a 40 per cent discount “because Angus & Coote is selling Tag at that.”

“A&C is wrecking the market at the moment (by discounting) and people are being acclimatised to 40 per cent off Tag. It’s causing problems with the other brands too because consumers think that if you can sell one watch at 40 per cent off, then you can sell all other watches at the same discount.

“People think that our stores are being greedy. Not 15 minutes ago I had to deal with an issue of someone wanting to know why our Tag watches weren’t 40 per cent off,” the retailer said.

But Nock defended his actions, saying that A&C is between a rock and hard place given that Tag has given them a deadline to clear stock.

“We had asked Tag to take back its own stock and they refused, but that would have been the cleanest way to do it,” Nock said.

He also confirmed that the Tag Sellout would last at least another two months given the level of stock that A&C had to clear.

A telephone call to four Mazzucchelli stores found that each one would offer up to 40 per cent discount on Tag watches to match A&C’s prices.

Another Melbourne retailer has been affected by A&C’s need to offer large discounts. Watches of Switzerland (WOS) is now offering discounts of between 35 and 60 per cent on Tag.

The trade backlash against LVMH was increased after it was revealed that WOS would continue as normal, despite being the outlet closest to Tag’s new flagship store.

The account of WOS store in Collins Street, Melbourne, was not closed because it has a “significant shop in shop” Richard’s letter advised.

At the time, Tag’s decision to retain the Watches of Switzerland account raised further eyebrows because the original Australian distributor of Tag Heuer in Australia is actually WOS founder Eric van der Griend.

More reading:
Tag Heuer closes accounts
Tag Heuer suffers heavy discounting

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