Ruling favors grey marketeers

Retailers can continue to sell name- brand goods bought on the international grey market to compete with “authorized” dealers. And if the manufacturer won’t guarantee the grey-market product, consumers can take legal action, the Supreme Court of Canada says.

Because of uneven pricing policies by multinational manufacturers, North American retailers, using a strong U.S. dollar, can buy directly – or through a grey marketeer – from overstocked overseas dealers and undercut the licenced domestic dealers and distributors.

The collapse of prices of Seiko quartz watches in Canada and the United States during the past several years is a result of grey-market buying by retailers such as Consumers Distributing Co. Ltd., the Woolco stores of F. W. Woolworth Co. Ltd., both of Toronto, and K mart Canada Ltd. of Brampton, Ont.

A Supreme Court decision in a drawn-out battle between Consumers and Seiko Time Canada Ltd. of Toronto, fits with one made by U.S. President Ronald Reagan after a similar U.S. case. It involved Toronto grey marketeer Continent-Wide Enterprises Ltd. and Duracell Inc., a U.S. unit of Dart and Kraft Inc. of Northbrook, Ill.

President Reagan rendered ineffectual the U.S. International Trade Commission’s ban on grey-market importing of Duracell batteries made by its Belgian subsidiary. Duracell has filed an appeal to reinstate the ITC ban.

Similarly, Seiko Canada, the authorized distributor of 250 quartz models, failed to stop Consumers from selling Seiko watches.

Although an authorized dealer, Seiko Canada is not a registered user of Seiko’s trademark rights. And even if it was, the Supreme Court said, “the distribution of a trademarked product lawfully acquired is not, by itself,” prohibited under Canadian trademark or common law.

Seiko Canada is an indirect marketing subsidiary of Japan’s K. Hattori and Co. Ltd. The Supreme Court noted that Hattori itself, owner of the trademark, did not try to stop the retailer. “Hattori launched these watches into world commerce with a warranty attached in its own name,” the Supreme Court said in overturning lower court decisions.

Consumers did not appeal a permanent order that made it post notices saying its watches are not covered by “international guaranty” through Seiko Canada. “Hattori is thereby freed from the obligation to perform, at least through Canadian facilities, its guaranty to repair during the warranty period,” the Supreme Court said.

Because Hattori and not Seiko Canada issued the guarantee, “Canadian purchasers should be left with their chances of forcing Hattori to perform this obligation.” The squabble started in 1978 when Consumers began importing 11 watch models from an unrevealed authorized overseas dealer. Seiko Canada service centres refused to accept Hattori’s guarantee for these watches and Seiko Canada sued Consumers in January, 1979, to stop it from selling the watches.

In April, 1980, the Supreme Court of Ontario said that public confusion “is likely” even after the notices were posted. Consumers Distributing was ordered to stop selling Seiko watches in Canada and pay $5,000 damages to Seiko Canada.

Consumers Distributing appealed – but only the order keeping it from advertising and selling Seikowatches.

Ontario’s Court of Appeal accepted the judge’s reasoning that Seiko’s authorized “product” included the instruction booklet, point-of-sales service, the guarantee and the after- sales services.

But the Supreme Court of Canada found no public confusion or deception after the notices were posted. It said “startling legal consequences would ensue” and “monopoly situations would exist” if such an extended package were limited to only authorized distributors.

Free competition “would be battered” because the extended package would recognize the right of one individual to control an identical product sold by another, even though the product is legitimately acquired. “Such a principle is foreign to our law,” the court said.

Some major U.S. grey marketeers, including Seiko importer Progress Trading Co. of New York, provide their own warranties. Chicago-based retailer Montgomery Ward and Co. switched to grey-market Seikos after 10 years of buying from authorized distributors. Its national merchandise manager for jewelry said he preferred the service, assortment and value offered by the grey marketeers.

Watches: a matter of novelties

Moderate and better watches take the spotlight. NEW YORK — The watch market has been flooded with novelty watches over the past several seasons. For those with the right item, it’s a hot area to be in, but it’s also becoming a very competitive market. Manufacturers feel their slightly different concepts will keep them from competing heavily with one another.

Colorful computer graphics give Art Watch by Gartel, based in Floral Park, N.Y., a unique look. Art Watch did $100,000 in its first year with the watches which wholesale for $75 to $125, according to owner, Lawrence Gartel. He said he expects to double that in the next year, partly because he entered the European market with an office in West Germany in December 1988. Art Watch is represented here by JHT.

I realized there was a place in the market for moderate to better-price novelty watches,” said Gartel, who has designed bathing suits and jewelry with computer graphics in the past. “Swatch opened up the fashion watch area a few years ago and many lower-price plastic watches have followed. But there are no watches with computer graphics, on leather bands, like mine.”

Holly Hardwick, vice president of marketing for Malibu Watches, said her firm sets itself apart with hand-painted reproductions of “Cezannes,” “Van Goghs” and other famous artwork on its watch faces. “We have exclusivity with the Chinese government on hand-painted watches and clocks,” Hardwick said, noting Malibu Watches has done $1,500,000 in sales in its first year in business. She projected second-year volume of $6 million, for the watches which wholesale from $25 to $50, based on new retail and catalog business.

American Indian looks make Cherokee watches different, according to Alan Bobin, vice president of sales and marketing for Cherokee, Sunland, Calif. “We have two groups which coordinate with the Southwestern theme of our clothing, and one which reflects the look of our swimwear, in neon brights. They’re in sync with our image and totally unique.” He projected $4 million in first-year volume for the 20 watch styles which wholesale for $18 to $24. The watches are made through a licensing agreement with Clox Time Fashion, Fallbrook, Calif.

Swatch Watch is not at all adverse to the presence of the new entries, according to Steve Rechtschaffner, vice president of corporate advertising and promotion.

Certainly any good fashion watch competes with us, because the consumer only has so much to spend,” he said. “But good competition is welcome. The more innovation there is out there, the more innovative we have to be.”

Rechtschaffner said Swatch is expecting healthy increases this summer, though he would not be specific. He said for summer, Swatch is concentrating on expanding its leather band and metal case groups and adding metal bracelet bands.

Watches keep time with fashion

The fashion watch market has evolved into a more sophisticated and fashion-forward classification with higher prices and a wider variety of offerings.

While the $30 retail plastic watch still has its place in the department, sales with watches retailing from $50 to $100 are seeing a surge in the marketplace, according to stores and makers.

Retailers and manufacturers agree that newness and a close connection to fashion trends is what is keeping the customer coming back to add to her watch collection.

Classic-looking watches with a retro feeling are key, and larger faces with textured leather straps are growing in important. Versions of bracelet watches are expected to be strong sellers for the holiday season.

The fashion watches have become more serious,” said Jane Tuma, vice president of fashion direction, at Saks Fifth Avenue, New York. “Everyone has a plastic, fun watch. Now they want new, more elegant watches.”

Tuma said a watch has to be special to perform at retail. Strong brands at Saks are Guess watchesand the Fossil watches, Tuma pointed out, adding that the bulk of sales are done between $50 and $100. “Big faces continue to be a strong trend, and all bracelet watches are good sellers.”

Doris Johanson, senior vice president of accessories at Bloomingdale’s, New York, said, “Fashionwatches are a hot area, and there is a lot of excitement in the department.” She added, “The look is serious, yet fun.”

Important watch trends at Bloomingdale’s include retro-looking watches, bracelets, double-face dials and ring watches. Johanson noted while the business appears to be getting away from plasticwatches, Swatch Watch is maintaining its business. “The consumer is looking for fashion in a watch because she is wearing her watch the way she wears fashion jewelry, changing it everyday.”

Mickey Callanen, owner of Callanen and Group, producers and distributors of the Guess watch line, said he is building his business with higher prices. “The trend is toward better-price fashion watches with more value.” He anticipates prices will continue to rise as the customer looks for more sophisticated watches.

The bulk of the Guess watch business is done between $19 and $27.50 wholesale. The firm also does a strong business with plastic watches, but Callanen noted sales in this area are geared toward the younger market. He projects his firm will see 50 percent increases in business this holiday.

The dominant themes in the new Guess watch collection are classic watches with ostrich, lizard and crocodile bands; western-looking watches and a group of watches with suede bands.

At Armitron Watches, producers of Anne Klein, Sutton and Peter Max watch brands, elegant, more sophisticated looks are dominating its new collection. “Initially, there was a tremendous explosion of colorful, fun watches,” said Jerry Dikowitz, director of advertising. “Now, the fun watches are just one segment of the business. It is a natural outgrowth of the fashion watch business. People now want elegant, more sophisticated watches.”

Dikowitz said his watches are in tune with the trends in apparel. Looks include dial treatments with enamel to simulate mother-of-pearl, tiger eye and lapis. Oversize dials continue to be strong, and stretch bands on watches are expected to be big business this holiday. Wholesale prices range from $15 to $95 at Armitron.

Jonathon Neetlefield, general manager, marketing and advertising for Pulsar Time, makers of Pulsar, Lorus and Jaz Time watch brands, said the market is moving away from what he calls “cheap chic.”

“Plastic watches still have a place in the market, primarily the younger customer, but ultimately the consumer is coming back to more serious watches,” he said. “However, the customer will not accept boring watches.”

Each Pulsar division is geared toward a different market segment: Pulsar, wholesaling from $25 to $100, is classic, fun watches; Lorus, which also offers the Mickey Mouse collection, wholesales from $10 to $30; and Jaz Time, a line designed in France, is high fashion, wholesaling from $35 to $100.

Different colored, textured leather watch bands are important at Pulsar, and Neettelfield anticipates the larger faces will continue to be a key trend.

Sandy Roland, executive vice president of Swatch Watch, U.S.A., expects strong sales from the new Pop Swatch this holiday market. It has a larger face and can be stuck onto almost anything. Also new are watches with designs on the band, and Roland said initial reaction to this has been strong. He projects 25 percent increases in the August market.

“The watch business is driven by important designs and key items,” said Roland. “To maintain the business, we need to distribute and stay in stock in these items.”

Roland said Swatch’s most recent designs are more mature. He said the customer is looking for a total look in a watch, and that is why they have added designs and details to the bands. Also new are holes and ribbing on the watch bands. Strong designs include animal prints, a tortoise look and a Vienna Deco design.

Amelia Kennedy, the fashion watch designer for Timex, also sees sales are slipping in the lower end of the watch business. “price is not as big a factor; the customer wants style and fashion and will spend more for it.”

Prices at Timex range from $10 to $50 wholesale, and Kennedy said the bulk of the business is done between $25 and $50 wholesale. Timex is offering a wide range of bracelet watches, which Kennedy believes will be the strongest trend this holiday.

Carol Dauplaise, fashion jewelry firm, started its watch division two years ago, and sales have been strong, surpassing the firm’s expectations. Diane McGowan, vice president said, “A lot of the important trends in the fashion watch business are initiated from the fine watch area.” An example of this, she noted, are the strong sales her firm has experienced with the chronographic watch, which she calls an updated version of the diver’s watch.

The Dauplaise collection wholesales from $35 to $50. Textured leather bands have been an important trend at the firm; however, McGowan anticipates textures will die down after holiday. Newness includes colored faces.

ON THE DIAL

Time Bandits

Cousins Philip Feng and Ryan Bonilla are causing quite a stir with Bellum Classics, a three-month-old collection of vintage timepieces that they engrave, tattoo and style with their own rock ‘n’ roll aesthetic. From their appointment-only studio in New York’s SoHo district, the pair have built an influential clientele of stylists and artists willing to shell out $800 to $14,000 for one of their subversive status symbols. Whether it’s an obscure military watch, a Rolex or a Patek Philippe, no timepiece is safe. And vintage sports cars may be next. “We’re going to re-gut the entire car, change the engine and make it perform like a new car,” Bonilla says. But first, he sat down with Caroline Tell to talk about Bellum’s particular way of managing time.

Bellum is borrowed from the Latin word for war, what’s that about?

The war theme is based on our personal war against the lack of creative freedom and in not getting to do what we wanted to do. We created Bellum not as a line to make money but as something we really love to do, our loves and hobbies.

How did you get involved with classic watches?

Both of us are big watch collectors – our fathers collect watches. We always had a taste for them and were always around them, and it came a time when I was into watches but not really psyched on what was out there. So we customized watches for ourselves.

Where do you source the timepieces?

We work directly with Aaron Faber – he’s one of the biggest vintage watch dealers in New York. We go to a lot of estate sales. We travel all over the country.

How do you fix them up?

First we get them checked out, make sure everything is right internally. I also wear the watch for about a month straight to make sure everything works. Within that time, I gain a sense for what I want to put on it.

Where do you find your inspiration?

Growing up in New York City, you’re never one thing. The whole aesthetic with Bellum is that we take from everything we grew up with and twist it up and make it our own, whether its punk rock, rap or hip-hop. We think of ourselves as punk elegance and punk luxury.

Why mess with the best?

We made the watches originally because everyone had the same watch. It was getting annoying. You couldn’t get over the brand name. So we said, ‘Screw it. Rolex will never put a skull on the back, so we will.’ They’re meant to be fun and kitschy. The watch world is so serious. They’re snobs and we’re skateboard-type kids.

Is there a rare watch you’d never touch?

No, I’ll do anything. If someone gives me a million-dollar watch to customize, I’ll do it. We’ve had some pretty big watches come in, and I’ll do it. Bellum designers Philip Feng and Ryan Bonilla. / A Bellum Classics Rolex.

An Uptick in Style

When looking for inspiration for its fall collection, Timex asked what makes women tick. The company answered with its first diamond collection and an updated Ironman-branded sports line, Hi-Ti.

“The diamond collection combines elegance and the aspirational quality of having diamonds, bringing everyday luxury to the jeans-and-heels consumer base,” says Kate Shevack, chief marketing officer of the Middlebury, Conn.-based company. With a combination of silver and gold stainless steel bracelets and leather straps, the styles feature up to 24 jewelry-grade diamonds each.

Representing the fusion of fashion and sport, Hi-Ti was designed primarily with women in mind. It uses lightweight titanium on resin straps with pared-down digital faces for a more modern look, in vibrant two-toned combinations and neutrals. “With sports watches, the trend is that they are not just worn for sporting occasions; it’s really a reflection of who you are, your lifestyle,” Shevack says.

The diamond collection will retail from $125 to $325; Hi-Ti is priced at $109.95. Both will be sold at midtier retailers, with Hi-Ti also selling at sports specialty stores.

Fashion for Less

In reviving its Caravelle brand, Bulova is reaching out to consumers who want a quality product but don’t want to spend a fortune.

“Research tells us that 75 percent of consumers don’t expect to pay more than $200 for their watch,” says Francie Abraham, senior vice president and chief marketing officer for the New York-based firm. “We are trying to follow the style trends that are prevalent in the jewelry market and incorporate them in a higher percentage of the watches in the Caravelle line.”

The initiative is starting with a 24-piece men’s and women’s diamond collection featuring silver and gold stainless steel bracelet and bangle styles with diamonds, which wholesale for $59.50 to $99.50. Bulova will also expand its regular line with an additional 34 styles. Wholesaling for $29.50 to $79.50, they will include stainless steel and leather straps and crystal accents on the case and bracelet, as well as more intricate detailing, finishing and technology.

“We talk about these watches as being more of an accessory because you have a range of products to select from under $200,” Abraham says.

C.G.

Biker Chic

Every Steve Soffa timepiece begins life as an original artwork. “I start with a 30-inch canvas and reduce it for a 2-inch dial. Each piece is serialized, signed and ultimately retired,” Soffa says.

With 15 years experience designing promotional watches, Soffa launched Hardcore Watch Co. in 2005, placing an emphasis on biker culture and imagery. At first, his client base was predominately male, but Soffa says women’s styles now make up 40 percent of the line.

The watches are divided into two tiers: Hardcore, an edgier biker group, wholesales from $75 to $250, and Artistry in Time features signed, numbered editions for $325 to $850 wholesale. The latest 65-piece collection took nearly two years to complete and features high-grade black and silver stainless steel bracelets or Italian leather or stingray straps, mother-of-pearl detailing and Swarovski crystal or stone accents.

Hardcore recently partnered with Los Angeles-based accessories distributor French Craft to expand distribution to high-end specialty stores and boutiques all over the U.S. “Soffa has the designcapability and we have the connections to distribute it to the right retailers,” says Andy Fox, president of French Craft.