Swiss Watchmaker Destroys £400M of Luxury Watches to Keep Prices Inflated

Richemont, the Swiss luxury company that owns Cartier and Montblanc, destroyed £400M of their own watches to prevent them from ending up on ‘non-riche’ wrists in past few years.

After shifting habits and new competitors caused a slump in the timekeeping market, the well-to-do watchmakers resorted to deluxe destruction — a common strategy to keep branded products off the “grey market” — to preserve their ‘prestige’.

For luxury producers like Hermès and Cartier, brand is everything — but these companies can only charge exorbitant markups when their products are as rare as the trust funds that can pay for them. Some brands like Burberry even BURN unsold stock rather than discount.

The range of watches have been piling up on retailer shelves across Europe, unsold and seemingly unwanted. With a large pile of watches in the hands of retailers, the next step is to drop the prices to get them out the store. A retail strategy that Richemont wanted to avoid.

Buying back €203m worth of unsold watches in 2017 and €278m worth of Cartier watches in 2016, the Swiss-based watchmaker has being strategically destroying them to avoid discounting and keep up exclusivity. This affected company profits says Richemont but they are positive that the trade is  worthwhile.

In regards to the decision, Chief Financial Officer, Burkhart Grund explained; “We don’t believe that having our inventory in the grey market will help long-term brand equity, so that’s why we bought it back,”.

The problem is: e-commerce loves discounts.
Even as Richemont destroys watches by the thousand, unlicensed 3rd parties continued to use e-commerce marketplaces to sell Cartier watches.

In the past Richemont has sued Amazon, Alibaba, and eBay for listing counterfeit watches.