The sports and their products are under attack, but baseball and softball innovation hums right along

Despite strong price points, good margins and steady participation numbers–especially for women’s fastpitch–many in the baseball and softball industries are glad 2002 is almost over. During the tumultuous year, Olympic organizers announced they may drop both sports from competition, and major league players and owners were embroiled in very public labor strife. Moreover, certain parties are seeking to bar aluminum bats from amateur competition, with the final vote on the first statewide ban likely to come in MA this month. But the discord did not slow innovation; 2003 products show that the two sports’ vitality remains strong.

Aluminum bats, which have seen price points triple in recent years, remain the category leader in innovation–and controversy. In the late ’90s, as research and development teams advanced performance, the price points of aluminum bats steadily rose. Consumer demand was in step with technology and pricing, but in ’02 the market leveled off and many experts predict it will remain stable for the foreseeable future.

The talk surrounding aluminum bats, however, is anything but stable. In October, the Massachusetts Interscholastic Athletic Association’s baseball committee recommended that metal bats be banned from all games. The committee voted to switch to wood bats for the state tournament, and a vote this month will completely phase out metal bats as the ban will be extended to regular season games. Although the state’s baseball coaches voted 17-1 to retain aluminum bats, their vote has no impact.

In New York, powerful city councilman James Oddo has been behind an initiative to ban “non-wood” mens softball bat from play in the city’s five boroughs and beyond. Oddo has said that if New York were to pass this legislation, a domino effect would ensue, and communities around the country would follow the city’s lead.

All this controversy, however, has not slowed R&D, and several companies plan new products for ’03. For example, DeMarini will introduce two fastpitch bats, the Doublewall Fastpitch and the Ultimate Fastpitch, as well as the F2 for slowpitch. The Doublewall uses two independent layers of metal separated by a layer of power fluid which creates a springboard effect. The Ultimate uses a profile that allows placement hitters to put the ball in play more often. The F2 is the first bat to combine an aluminum barrel with a light composite handle, allowing players to swing faster with less effort.

Innovative gloves have also caught their share of attention. Akadema’s Reptilian has a near-fingerless design with an air pocket that acts as a shock absorber during initial ball contact to speed up glove-to-hand transfer. The design allows for better scooping of ground balls and the snakeskin-like material reduces ball spin in the glove.

High-waist bikini is early winner

High-waist bikinis were a solid bright spot in a spring-summer swimwear season bogged down by cool rainy weather that lingered into mid-June in most of the country.

While strong sales very early – in March or April – provided a cushion against the soggy May and early June, many stores expected sales gains to be in the single digits for the year. “Retailers hate to say it, but the product is so seasonal that it it’s not warm, the consumer feels no need to buy,” said Beth Elliot, swimwear buyer at Thalhimers, Richmond, Va.

As Al Engleman, assistant buyer at Younkers, Des Moines, Iowa, put it, “If there’s a break in the weather, sales should really start taking off.”

In the meantime, stores decided not to wait for hot, sunny weather to boost sales. Despite plans, they broke their clearance promotions in early June – at the same time or earlier than last year.

Lord & Taylor in Dallas cut prices 25 to 50 percent on June 4. Macy’s and Rich’s in Atlanta dropped prices 20 to 50 percent on June 7. B. Altman, Bonwit Teller and Lord & Taylor in New York advertised markdowns June 8.

In Los Angeles, the markdown season opened a full week earlier than last year, with all the major retailers taking ads on June 15 except The Broadway, which was not expected to maintain its original break date of June 6.

The sale prices excluded preview suits. Many stores agreed with Missy A. LoMonaco, vice president and director of fashion merchandising at Bonwit’s that the sale ads served to “invite the customer to come into the stores to buy our preview `90 swimwear, which is being sold at regular price.”

As of June 16, stores in the Midwest were holding onto full-price policies, despite earlier price breaks from Bloomingdale’s Chicago unit.

Throughout the country, the high-waist bikini and two-piece suits in general turned into the surprise misses’ hit of the season. The new fashion-forward constructed suits were coming on strong in many areas, and both neon and neoprene showed more strength than expected, retailers said.

“There has been a huge success of the two-piece suit,” said Tracy Rasmussen, national swimwear buyer for J.C. lot of that is due to the higher waists and longer tops. A lot of customers who wouldn’t ordinarily wear a two-piece will wear the two-piece that provides a little more coverage.”

At Marshall Field’s, Chicago, bikinis account for 15 percent of total swimwear sales, compared with 12 percent last year. At Altman’s, “Bikinis used to generate 3 percent of our swimsuit business, but this year they are running at 10 percent,” said Ellen Kamowitz, divisional merchandise manager.

“The biggest surprise is the trend of the two-piece suit; it has been much stronger than originally planned,” said Paul Roth, senior vice president for merchandising at Macy’s South/Bullock’s in Atlanta. Two-piece suits, planned at 20 percent of the total, were 30 percent by early June.

“The two-piece business is now 21 percent of our total sales, which is remarkable since we are a traditional department store. That classification was more like 3 percent when I started, eight years ago,” said Elliot at Thalhimers.

At Bonwit’s, “bikinis were selling at the same rate as tanks, and they’re usually behind tanks,” LoMonaco said. “We purchased more bikinis this year, including several new resources like Half Moon.”

She stressed that the bikinis are selling to women older than the junior customer, noting, “Our tank business was big last summer, but even then we saw the bikini body guide business starting to take off.”

Nancy Pressman, swimwear buyer for Barneys New York, said she bought more bikinis than one-piece suits, with bikinis selling better at the beginning of the season and one-piece models catching up toward the end.

“Suits have gotten very sexy,” Pressman said. “Designers are using more sheer fabrics, and there is a lot more skin showing.”

Barneys was one of the stores that planned to hold off price promotions until early July. Pressman said she planned to do the most swimwear business in June, and planned to do it at full price.

With the exception of the English Liza Bruce line, all of Barneys’ swimwear comes from domestic sources. Pressman had to reorder from Bruce due to the popularity of the designer’s three-piece crinkle and lace bikini and skirt which, at $140, is the store’s most expensive.

But the season’s best-selling model was a windowpane tank from Body Glove. By the first week of June, 80 units had sold at $65, which was shaping up as the average price of the store’s suits this season. The store has also done well with Keiko, which Pressman described as “romantic, toned-down and not as sexy as some of the others,” and suits by Ellen Ann Dobrovir, especially a sexy one-piece halter loincloth in poppy.

Best-selling price points at Altman’s range from upper-moderate to better, but Kamowitz said the customer is giving less weight to price and more to whether a suit looks right, to its newness and it degree of prettiness.

The customer buying bikinis, Kamowitz said, is not a junior, but someone in her 30s or 40s. This same age range is also buying shape-builder suits from resources such as Robby Len and Jantzen. Other top-selling suits overall were La Blanca and Gottex.

At Bullock’s, Los Angeles, bikinis were about one-third of misses’ sales. The Broadway, Los Angeles,bikinis went from 21 percent of misses’ sales in 1988 to approximately 26 percent this year.

“Figure enhancement and camouflage was the name of the game this year,” commented Anne Eberhardt, misses’ swimwear buyer at The Broadway. “Anything with a tummy control panel or a soft cup did well.” She said the best gains have been with updated suits and moderate-price misses’ suits that enhance the figure.

Eberhardt narrowed her resource structure, intensifying with 16 vendors; the biggest volume line was Catalina. The fastest-turning line in misses’ was Too Hot Brazil.

The Broadway planned to hold off on price breaks until July 6. “Our feeling on breaking price is that it doesn’t do any good to have the sale if it isn’t summer weather yet, and that doesn’t come until late in the season,” said Eberhardt. “It doesn’t matter if you put a $4.99 price on all the suits if it’s 50 degrees and raining.”

Business at Bullock’s was dominated by the underwire suit in bikini and one-piece styles. Other important silhouettes were tank suits, bandeaus, the sarong and skirted suits. Ruffling at the hip and cummerbund treatments were also good sellers. Neoprene has jumped into misses’ as an accent and neon colors have been important in misses’. In juniors, suits in mango papaya have been explosive.

Bullock’s junior customer, a spokeswoman said, is buying two suits: a sparse, often high-cut suit for tanning and a second suit – often with a crop top and little pants – for beach volleyball or aerobics. In shape builders, Esther Williams had a successful debut.

At Splash & Flash, a four-store chain in Los Angeles, two-piece suits have been dominant, with Take SlimSuit, Too Hot Brazil and La Blanca all having good seasons, said Jean Zalkins, owner.

In the Southeast, volume was coming from the high-waist bikini and the updated constructed suit, with most suits retailing at $40 to $60.

At Macy’s South, said Roth, top performers are Cole, Rose Marie Reid, Catalina, Jantzen and Bill Blass.

Because they offer more coverage and represent a trend toward more fashion styling, the two-piece suits have made a “decent” showing with more mature customers, Roth said.

At Rich’s, Carol Greer, general merchandise manager of women’s ready-to-wear, called the season “tough for two reasons: one – we’ve had no warm summer weather normal to Atlanta [through mid-June], and two – there hasn’t been a new silhouette.

“The skirted bikini has been good and we’ve done well with the figure-flattering constructed suit, but overall there’s been no hot breakthrough item. Cotton-Lycra [spandex] has been very disappointing,” she said.

She cited Catalina, La Blanca, Rose Marie Reid and Anne Cole as top vendors, with intense brights, florals and dots the hot color stories.

At Hess’s, Allentown, Pa., the “one-piece was leading the pack,” said Cindy Schneider, general merchandise manager of women’s ready-to-wear.

“We do unbelievable business in swimwear,” she said. “The two-piece is stronger than it was last year and it currently represents about 27 percent of our business.”

Schneider said cotton-Lycra was holding its own against its extraordinary growth last year. She named Rose Marie Reid, Jantzen, Mainstream, La Blanca and Bill Blass as strong resources, while black accented with neons and brights was making the strongest color impression.

At McRae’s, Jackson, Miss., “The key silhouette has been the bikini, with the new St. Tropez styling – a short tank top – being a real strong item for us,” said Pat Priebe, director of fashion information.

“The customer seems to be reacting to the newsness and excitement in the updated silhouettes in the body-shaping suits as well,” Priebe said.

The constructed suit, she said, was selling well to a wide age range of women. McRae’s is doing best with Catalina, La Blanca and Bill Blass, with blacks, brights and neons hot.

At Thalhimers, Elliot attributed the growth of high-waist bikini sales to 30- to 35-year-old women who look better and feel better about themselves than their counterparts from a few years ago. Top vendors include Jantzen, Rose Marie Reid, La Blanca, Catalina and Mainstream.

“We’ve definitely seen growth in structured suits. About 31 percent of our business is constructed suits and 35 percent is unconstructed,” Priebe said.

At Penney’s, prices range from $20 to $62, and major resources are Wior Corp., Catalina, A&H Sportswear, Daffy Beach Patrol and Jantzen. The largest percentage of Penney’s swimwear is private label, Rasmussen said.

Along with the high-waist bikini, a private label tank suit in eight colors, retailing for $20, is popular. “Anything with zipper treatment has also been phenomenal,” she added.

In the misses’ market, she said, “Whether it is inner paneling or shirring or underwire bras, customers are looking for something to enhance the figure. We’re even starting to see inner paneling in some high-waist bikinis.”

Neon lime, hot pink, orange and lemon punched up the palette this season, but there was still a market for popped-up pastels and basic solids like black, royal and purple, she said.

In fabrics, “the whole Body Glove influence, with Lycra combined with neoprene, created a real surfer type of look that was strong.”

Ron McCullars, president of Just Add Water, Dallas, planned his price break for the July 4 weekend. “June is our best month at regular price,” he said. “Unfortunately, some stupid competitors started too early. But breaking their prices early doesn’t hurt our business at all.”

The bikini, which rang up 15 percent more sales this summer, is the best-selling category in his eight specialty stores, he said. High-waist styles are particularly important.

“An awful lot of women have gone from the unconstructed maillot into the high-waist bikini in the last couple of years,” he said. The average price of a bikini is $50, and major resources include La Blanca, Half Moon and Body Glove.

Classic maillots and T-back tanks, with an average price of $50, still have strong appeal. Bestsellers include suits by La Blanca, Too Hot Brazil and YSL.

Shape-builder suits gained in sales, primarily because manufacturers offered more styles, said McCullars. Catalina, Sirena and Rose Marie Reid are major resources for the constructed suits.

At Sakowitz, Houston, unconstructed silhouettes with higher-cut legs did better this year, while the market for constructed suits diminished, said Donna Keeney, buyer of weekend leisure apparel.

“I think the reason is primarily the remodeling of our flagship store. Swimwear now hangs in the contemporary sportswear department, and probably has a more contemporary customer than when it was upstairs in an area that catered to the more conservative, traditional customer.”

Suits by Gottex, YSL and Cole in the $55 to $75 price range were bestsellers.

Bikini sales jumped 7 percent over last year. Prices range from $45 to $75 from resources such as Hot Coles, La Blanca and Ann Coles.

In the Midwest, one-piece suits that camouflaged problem areas were early winners while the two-piece waist-riders attracted baby boomers looking for extra coverage. Best-selling colors included bright colorblocks, florals, polkadots and basic black.

At Field’s, waist-rider bikinis were fueling strong two-piece sales. Mariella Holoubek, buyer, said, “Skimpy bikinis don’t sell well. This is the Midwest. The customer wants the feel of a two-piece suit, but wants the coverage.”

Prices range from $39 to $80 with suits around $50 selling best.

At Halls Swansons in Kansas City, Barb Elcock, vice president and merchandise manager, said, “We reanalyzed our vendor structure this year and brought in more mature suits for the average customer base. A lot of our growth is due to that.”

One of the retailer’s new resources, Body I.D., has been a strong seller, with some styles getting a 53 percent sell-through. “The suits have a 4-by-6 inch hang-tag that says what type of body looks good in that suit,” Elcock said. “The customer finds it easy to shop that way.”

Other top-volume vendors include Bill Blass, Sun Club and Catalina. Adrienne Vittadini suits at $60 to $70 also had a high sell-through.

Popular styles include two-piece “tankinis” while brights on black are hot colors. Prices averaged between $50 and $55.

“We had a better bikini business this year,” Elcock said. “Last year everything was French cut. The tankini made that volume grow again.”

Two-piece suits account for 35 percent of swimwear sales this year, up from 20 percent a year ago.

At the Dayton Hudson Department Store Co., Minneapolis, trends driving designer swimwear include florals and dots, said Valerie Mathison, buyer. Lemon-lime was the best-selling color early in the season, followed by fuchsia and mango.

Sales of two-piece high-waist suits have more than tripled since last year, Mathison said, with tank bottoms and bandeau tops the bestsellers. “Bikinis remained constant with last year, while tanks took somewhat of a dip,” she added. “And the cutouts are virtually nonexistent this year.”

Dayton Hudson planned to break price on July 6, its first sales promotion this year.

At Younkers, according to Engleman, constructed one-piece suits sold best, followed by high-waistbikinis, polkadot suits by Jantzen, colorblocking and black. Best-selling resources included Catalina, Robby Len and Mainstream with $40 to $45 the most popular prices.

These jewelers love to sell watches

Discounting and other horrors, contrary to some outspoken opinions, have not killed off jewelry storewatch sales.

True, discounting has hurt them. But jewelers across the country are doing good to excellent business at the watch counter. they’re selling brands that retail from $30 to $10,000-plus. Here are some of their stories.

Rolex Tourneau Inc. New York City robert J. wexler, managing director

Number/location of stores: Two. One at 500 Madison Ave., a busy intersection in New York City, the other in Bal Harbour, Fla. There’s also a Tourneau department in Bonwit Teller, Trump Tower, New York City.

Type of store: Watch specialist. Watches comprise 90% of business, jewelry 10%.

Watch selling philosophy: “To sell watches successfully you need a large selection, an excellent service department, a knowledgeable sales force and strong advertising and display.

“Rolex is a very sellable high-profit line that’s also a traffic builder. Its high recognizability and great selection give it wide customer appeal and an international cliente.”

Principal brans in stock: More than 40 major brands including Concord, Baume & Mercier, Corum, Piaget, Ebel, Omega, Audemars-Piguet, Cartier, Movado, Rado, Raymond Weil, Hublot, Universal Geneve, Longines-Wittnauer, Vacheron & Constantin. Tourneau also sells its own collection.

Rolex inventory: Extensive, including specialty models. Tourneau also stocks and displays loose dials, and does a lot of on-the-spot dial changes.

Prices range from a $650 stainless steel model to a $60,000, diamond-studded President. Rolex raised prices about 16% in 1984, mainly in the Oyster steel and gold series. Improved movements and crystals also contributed to price increases.

Best Rolex sellers: Men’s and women’s steel and gold and the all-gold President. “Last year was our strongest yet with Rolex,” says Wexler. Sales were up 25%.

Sales training: Monthly in-house sales meetings to go over products and technique. Rolex and other suppliers conduct seasonal seminars to review features and technology of items to be advertised or model changes.

Typical store/Rolex customer: A cosmopolitan clientee including affluent international and American tourists, plus local business executives. (Tourneau also has a corporate sales division.)

Many Tourneau service customers turn into purchasers. Those who start with stainless steel often move up to steel and gold or all gold. “Rolex customers are like collectors. They tend to have several.”

Service and repair: Tourneau services a watch whether purchased in the store or not. Wexler claims to have the most complete service department anywhere. “It’s the cornerstone of our business.” 90% of all servicing is done on premises; it is guaranteed within 48 hours.

Advertising and promotion: Considerable national print advertising focusing on Rolex variety and selection. Full-page ads showing 25 models ran last November and December in the New York Times national edition. Full-page color ads also appear monthly in magazines such as Town & Country, New Yorker and M.

Rolex also recently launched a successful pioneer campaign on public television (Channel 13). The spot stressed the brand’s artistic craftsmanship and achievement, as well as its selection.

Tourneau does numberous PR campaigns…such as last year’s fundraiser with Sloane-Kettering Memorial Cancer Center, New York City. Customers donated old watches, for which they received a tax deductible receipt and an allowance toward the purchase price of a new watch (based on size of contribution).

Sales/discounting: Tourneau usually avoids sales other than its once-a-year (March and April) sale by mail to private customers only.

Display techniques: More than 3500 watches are on display. The Rolex area is divided into specialtywatches, regular Oysters and dress goods.

Speical problems: Historically Rolex is one of the tightest brands on delivery (“you order 10 and get 6”). Tourneau, which schedules ad campaigns two months ahead, must be careful there will be no inventory or model shortages.

Swatch Shane’s Jewelry Los Angeles, Cal. Stanley Rogers, manager

Number/location of stores: One, in West Los Angeles.

Type of store: Ten-year-old independent fine jeweler. Shane’s is an upbeat, young-at-heart jewelry store with a relaxed atmosphere and an English-style decore in the heart of West Los Angeles.Watches comprise 20% of total sales.

Watch selling philosophy: To provide a large selection at reasonable prices and give customers exactly what they want. “Four years ago we didn’t carry many watches. But people kept asking for them. Since we perceive this market, we’ve carried many more watches.” They’re viewed both as traffic builders and profit makers.

Swatch possesses most of the qualities people want–low price, durability and reliability, water-resistance, a strong fashion look and a wide style selection. “It’s just exciting and fun.”

Principal brands in stock: Everything from the $30 Swatch to $6000 Concords. Others include Pulsar (under $150), Raymond Weil ($200-$300), Seiko ($100-$300), Lassale Seiko ($250-$3500) and Porsche ($550-$600). Average retail price is $150.

Swatch inventory: Normally all popular Swatch models. Key Swatch styles include the Aspen, Graffiti, Hi-Tech and Savoy collections. Prices range from $25-$35, with most at $30. Shane’s tries to carry all Swatch colors.

Best Swatch sellers: White ladies’ models with checkered grid patterns, especially during the spring, summer and fall. Ladies’ anthracite black Swatches with chanel-striped dials are hot wintertime sellers. Also popular for warm weather wear are men’s matching white grid styles. Men’s models in a wide selection of black shades sell well in fall and winter.

Sales training: Mostly on-the-job.

Typical store/Swatch customers: Most customers are high school and college age ranging from 15 to 25. “Generally Swatch wearers are very young, active and style conscious…people who want awatch for the Jacuzzi, Disco, swimming, other sports or even all-around use.” More women than men buy Swatch…often as a fashion accessory.

Service and repair: Sizing, band replacements and minor adjustments are handled in-house. SwatchWatch, U.S.A., offers a one-year warranty. Shane’s will exchange unworn merchandise within 30 days.

Advertising and promotion: Shane’s advertises in local dailies once a week and ran radio spots twice last year (the weeks before Mother’s Day and christmas). Swatch was mentioned in summer jewelry and general watch ads. Word of mouth on Swatch has been very important, too.

Sales/discounting: Occasional watch sales tied to special occasions like Valentine’s Day Swatches, though, are never on sale or discounted.

Display techniques: Swatch is displayed in Shane’s front window along with other major brands.Watches are shown in a separate window from jewelry. Inside the store Swatch shares a case with other (non-competitive) sports-related brands such as Pulsar. Displays are changed frequently.

Special problems: “We can’t get enough Swatches. We’re a high volume store and just can’t keep them in stock.”

Pulsar Littman Jewelers Highland Park, N.J. Harvey I. Lipson, senior vice president

Number/location of stores: 42, in Maryland, Delaware, Pennsylvania, New Jersey, New York and Massachusetts. All except one are situated in malls.

Type of store: Founded in 1885, this guild to semi-guild chain has an annual volume approaching $50 million. Watches comprised 16% of sales in 1984.

Watch selling philosophy: “Watches are the only familiar items …especially as we open in completely new locales. So when a customer sees Rolex, Seiko, Pulsar and other watches, he’s seeing familiar faces.”

Littman likes watches, but is trying to de-emphasize them as a percentage of sales, hoping to reduce them to 14% this year. Lipson’s reason: The average square footage of Littman stores has gone down due to high rent and other expenses stemming from mall store size. “Unfortunatelywatches take up a lot of room…so the return/sq. ft. is worse than for other merchandise.”

He feels this and other problems (i.e., discounting, service, supply), which are generic to the watchbusiness, can be controlled much better in purely jewelry areas. “Gold chains don’t stop running. With watches you’re often at the mercy of the manufacturer.”

Lipson notes that customers generally have expectations about watches like no other product in the world. “A man may buy a $20,000 car and if it stalls, he won’t mind too much. But if a watch loses five minutes, he’ll return it. Customers are less tolerant of watches as it’s a more personal item than a car or washing machine.”

Principal brands in stock: Pulsar, Seiko, Cartier, Concord, Rolex, Raymond Weil and a select group of Hamiltons. In addition, Littman’s exclusive Barclay outlets carry Piaget and Corum. The average retail price is $200.

Pulsar inventory: Pulsar comprises 15% of watch sales. Average Pulsar price is $120. Littman carries about 60 styles, which vary by size and volume of outlet. In general the ratio of men’s to ladies’ stock is 40:60.

Best Pulsar sellers: The line’s strength at Littman lies in black dial and black diamond dial watches, as well as in black and gold finish pieces ranging from $130 to $180. “The black dress quartz has been hottest for ladies. The $79.50 black water-resistant model has proved a perfect price point for men.”

Sales training: Beginners start by selling less expensive merchandise under the supervision of a senior salesperson. Usually it takes several months before a novice becomes proficient.

Last year the firm conducted a concentrated program in conjunction with an outside training service. The program was generic–not just watches–and designed to teach sales staff how to change their approach to customers and to sell anything in the store.

Typical store/Pulsar customers: Littman customers range from middle to upper income. “In most major malls except the ‘Tiffany-type’ ones, just about anyone walking by is a potential Pulsar customer due to the brand’s wide spectrum of styles and prices.”

Service and repair: Littman has a 90-day refund policy. Pulsar offers a one-year warranty. “In general watch service is still a sore spot with us. Suppliers like Pulsar are trying hard to improve service, But an overhaul is still needed.”

Littman has watch-makers at several stores. All Pulsar products, however, go back to Coserv for repairs, which takes about three weeks. The store also replaces batteries and straps, but tries to avoid servicing watches of brands it doesn’t carry.

Advertising and promotion: Promotions have included special discounts at Grand Openings andwatches given to a Good Citizen Award winner and the top graduate of a local retailing school. The chain produces its own 30-page Christmas catalog and conducts an extensive radio campaign, mostly in the fall, for both watches and jewelry. Pulsar offers a co-op program as well as its own numerous TV spots. “We get our best results via magazines and radio. Newspaper ads usually aren’t worth the trouble.”

Sales/discounts: Littman will discount a watch down to 20%-30% off. “But almost every watch we carry is discounted throughout the year. We don’t try to get full price for watches and we don’t like to bargain. Our discounts are usually in line with our competition. Not to discount is like burying your head in the sand. You can’t survive.

“We could sell watches at full markup. But if a customer sees a watch at 20% off somewhere else, we’ve lost him. So we’d rather go with the going competitive price and keep the customer.”

Display techniques: Littman displays all watches loose in the cases with no identification other than a small brass plaque inscribed with the brand name.

One advantage of blending brands: Littman can try out a small quantity of something new without a display looking small. Rolex is the only isolated brand (“We feel it has a very distinct identity and deserves its own display”).

Special problems: Warranty service.

Movado Marcus Jewelers Rutherford, N.J. Ronald D. Block, manager

Number/location of stores: 11. Seven in New Jersey; also single outlets in Connecticut, White Plains, N.Y., Pittsburgh and Manhattan.

*Type of store: 57-year-old guild chain operation. Watches comprise 25%-35% of total sales.

Watch selling philosophy: “Watches and inhouse repairs are traffic builders for us. We hope for a profit, but mainly watches serve to create new customers.”

Principal brands in stock: Seiko ($150-$600), Pulsar ($75-$150), Rolex ($600-$9000), Baume & Mercier ($600-$4000), Piaget ($2800-$13,500), Concord ($395-$6000) and Movado ($195-$3400). “It’s important to make each store’s inventory fit customer needs and wants.”

Movado inventory: Introduced at Marcus in 1983, Movado soon rivaled Concord as the store’s fastest moving North American product. “On a piece-by-piece basis we did better with Movado since more people can afford it. Concord is more of a step up the ladder for customers.”

Marcus offers up to 35 men’s and ladies’ Movado styles including a gold plated Museum watch at $285 and $295; a 14k gold version with strap at $790 and $1090 and a gold bracelet model at $2800 and $3500. There also are stainless steel and sports Movados.

Best Movado seller: The Museum watch. It comes in gold or black face with contrasting black or gold dots.

Sales training: Conducted mostly through small informal meetings and on-the-job experience. Beginners are restricted to less expensive lines under supervision. North American sales reps visit the store on request to review mechandise changes with sales staff.

Typical store/Movado customers: People impressed by the Museum aspect and who want Swiss technology. “The average consumer still prefers Swiss over Japanese watches. Swiss watches have a mystique . . . a name that will take the Japanese a long time to duplicate.”

Marcus clientele in Rutherford generally is white middle/upper middle income–a mixture of both blue collar and professional types.

Service and repair: The Rutherford store has one in-house watchmaker, with three more serving the chain’s other outlets. The store has a 10-day refund policy on undamaged new watches with proof of purchase. Minor problems are repaired in-house. Major defects are corrected by North American and other suppliers within two to three weeks, depending on problem and volume. North American offers the first battery change for free.

Marcus services watches it hasn’t sold.

Advertising and promotion: “Any time you carry a product, you’ve got to make a commitment to carry it in depth. You can’t expect a shallow line to move. Likewise, you should take advantage of all the co-op money there is and advertise whenever possible.”

All of Marcus’s North American Watch products finished strong last year. The store ran 12 weeks of full-page “double truck” ads in the New York Times and the Bergen Record for the Christmas season.

The store also has run a continual year-long co-op campaign in Business Week, Newsweek, Sports Illustrated, as well as Prevue (the cable magazine), Connecticut and Pittsburgh Magazines. Variety if important, with a different brand advertised each month. North American TV ads tag all Marcus stores in the New York metro area. All ad saturation peaks around major holidays.

Sales/discounting: Sporadic sales–mainly on selected merchandise and tied to specific events like Washington’s Birthday or Grand Openings. Some sales may not be discounts so much as promotional giveaways. “We don’t subscribe to sales for the sake of them, but occasionally we do have to meet the competition.”

The cut-off on discounts is about 20%. “If a customer comes in and says he can get a Movado or any other brand down the street for 40% off, I’ll tell him to go right ahead. Why sell a watch if you can’t get a reasonable markup?”

Display techniques: Each brand occupies a separate showcase and place in the front window. All Stuhrling watches are removed from boxes and shown on pedestals and pads. North American provides little signs and watch stands and has redone display cases for Marcus.

Special problems: None. “North American is always cooperative.”

Citizen Krigel’s Jewelers Kansas City, Mo. Scott Krigel, merchandise manager

Number/location of stores: Six in the greater Kansas City area. There are one downtown and five mall outlets.

Type of store: A “middle-of-the-road” chain. Watches comprise 12% of sales.

Watch selling philosophy: “We think watches are very important. Customers can identify them as name brands and associate Krigel’s in their minds with Longines, Citizen, whatever. In other words,watches are essential for the recognition of Krigel’s and its image in the marketplace.”

Principal brands in stock: Krigel’s number one line is Longines-Wittnauer ($300-$4000/$100-$400), then Citizen $80-$550). Krigel’s also stocks a smaller number of Morvants ($350-$3000), as well as a few Piagets ($10,000-plus) and Concords ($500-$2000). Krigel’s carries no off-brands or private label.

Citizen inventory: Each Krigel’s outlet carries the same basic styles, averaging 100 styles per shore. “They don’t glamorize any particular model. Instead they give us a new look throughout the year. They’re very much up on styling. Everything has a high-tech look.” Krigel’s tells customers looking for Seiko or Pulsar that Citizen has the same styling and price points but, watch for watch is cheaper. “We’ve been very successful converting customers to Citizen. If we weren’t good at this, we’d be selling Seiko, too.”

Best Citizen, sellers: Ladies’ dress bracelet watches; men’s dressy sport watches.

Sales training: Sales trainees are taught the difference between brands, as well as between quality and regular watches; quartz and digital pieces; mineral and sapphire crystals, etc. They learn enough to give customers useful information. “Salespeople shouldn’t have too much knowledge. . .there’s an ideal amount that enables them to descirbe the benefits of a watch without confusing a customer.” Training is over-the-shoulder; there’s no formal manual. Vendors help with training when they come into the store every six weeks to take inventory and orders.

Typical store/Citizen customers: Middle to upper-middle income. Citizen appeals to a wide variety of people because of its wide price range $($80-$500). Krigel cites a Citizen study showing that watchbuyers are predominantly male. “A man will come in with a woman to buy her a watch, but he’ll buy his own watch alone.”

Service and repair: “Our service and repair volume is so small it’s really insignificant.” Krigel adds that shopping mall space is too valuable to retain a watchmaker in-house. Anything other than minor servicing goes to supplier service centers or watchmakers in town (the stores uses three outside shops). Citizen warranty work takes about four weeks; in-town repairs about 10 days.

The store offers refunds. “But they’re usually not necessary. Quartz watches are very reliable. Still, we’ll do anything to satisfy a customer.”

Advertising and promotion: the Key medium is radio. Krigel’s runs radio spots 30 weeks a year on 12-15 local stations. Citizen coop ads run 12 weeks a year via 60-second radio spots. Krigel’s also does 30-second TV commercials twice a day on one station. “In the spring when our budget is low, we’ll use Citizen advertising with a Krigel’s voice over. But in the fall our budget is bigger. Then we’ll produce our own ads.”

Krigel’s doesn’t believe newspapers are the right medium for watch advertising in general. “They go to so many different types of homes, it’s hard to target your market.”

The store runs many promotions. A Kansas City Royals “Player of the Week” received a Citizenwatch. Citizens also have been given away during pre-game interviews and at auction on public TV. In addition, winners of a “Citizen of the Month” radio contest received a free watch. “Radio stations are very receptive to this all the time.”

Sales/discounting: Krigel’s has never advertised a sale. The store is opposed to sales on name brand watches. “It wouldn’t set well with Citizen or Longines. It’s different with diamond companies.”

Krigel’s reply to customers who want discounts: “Our Citizens are already priced fairer than Seiko or Pulsar before any discount. So there’s little reason to discount.”

Display techniques: Most Krigel’s outlets have a circular center island with showcases on either side.Watches are displayed at the front of the center island (“They are very prominent because we really believe in them”). 25% of display space is devoted to watches even though they account for 12% of sales.

Watches are separated by sex and brand. “It’s a big mistake not to separate watches by sex. One of the first questions you ask is whether the customer wants a men’s or ladies’ watch.”

Krigel says Citizen comes up with “great” moving window displays. One revolving motion display had rings that twirled around clusters of watches creating an optical illusion.

Special problems: “Citizen has made a tremendous turnaround. Less than two years ago they were fading. Then they made some big changes, sinking a ton of money into advertising, increasing the size of the line, lowering some prices and raising others. Today, too, shipping is great…they don’t hold over orders. The company’s future looks really bright.”

Bulova Green’s Jewelers Corpus Christi, Tex. Marc A. Foster, marketing/sales manager

Number/location of stores: Three, all in Corpus Christi. Green’s has a downtown store, a strip center store and a mall store.

Type of store: Family-owned fine jewelry independent. Watches comprised 32% of business in 1984, up from 27% in 1983.

Watch selling philosophy: “If you can sell diamonds and gold, you certainly can sell watches. In fact they’re easier to sell than jewelry. The price points are lower; watches are more functional than jewelry and everyone’s got to have one.”

When Foster came to Green’s from Bulova two years ago, Corpus Christi lacked a profitable watchmarket. His assignment: To make the store competitive in watches. He claims the chain has since taken over watch sales most other local jewelers didn’t want. “When others dropped watches or cut back, we increased our business. Today we’re known as Corpus Christi’s watch center.”

Green’s concentrates on the popular-priced watch market since luxury inventory had too little turnover. Its emphasis is on depth in styles that sell well rather than a broad selection. Green’s needs a four-time turn yearly (once per season) to achieve profit.

“But if it’s a good style I can turn it 20 times a season. All I’m concerned about is turnover. I eat, sleep and drink turnover.”

Principal brands in stock: Bulova ($39.95-$275) and Citizen ($59.95-$175) comprise 45% and 40% respectively of total inventory (“We sold 5000 watches in 1984. About 2500 were Bulovas”). Pulsar ($90-$150) and Seiko ($90-$150) are secondary brands. Green’s also sells a limited number of Concord, Croton and private label.

“This goes against the common wisdom that Seiko and Pulsar are the biggest sellers. People do want them, but they’re footballed so much it’s hard to make money on them. Often we’ll point Seiko and Pulsar customers in the direction of Bulova and Citizen. This gives us a chance to avoid blanket discounting.”

Bulova inventory: 90 styles on hand in Bulova up to $275; 30 in Caravelle at $39.95, with 360 styles available from the supplier overall. Principal models include the men’s and ladies’ two-tone or gold “Rolex” look ($195-$225) and the ladies’ “Diamond Romantic Series” ($135-$165) with diamonds on dial or bezel. “Bulova puts diamonds on ladies’ watches like nobody else. This is a good bread and butter item for the independent jeweler.”

Best Bulova sellers: By far, the “Rolex” look. Others include the Romantic series (“We get calls in January for Valentine’s Day”) and Caravelles with full figure dials, Arabic numerals and sweep hands (“A good starter watch for boys”).

Sales training: Trainees are expected to just observe for the first 30 days and study warranty info, technical bulletins, instruction manuals and supplier catalogs. “We want sales staffers to be walking advertisements for us…so customers will say, ‘I got my watch at Green’s. That guy there really took his time with me.'”

Suppliers give store personnel special 25%-off wholesale discounts to encourage them to wear newwatches. “Customers often ask, ‘What kind of watch do you wear?’ This has helped close a lot of sales.”

When supplier reps introduce new lines, they’ll conduct inventory, tag the catalogs and review details with sales staff. Foster considers reps “our partners in the overall success of watch lines.”

Typical store/Bulova customers: “People concerned about tradition and quality.” In general Green’s customers fall within age categories 18-45 or 65-plus.

Service and repair: “Watch repairs are an opportunity, not a problem…but only if approached with that attitude.” Green’s has turned this weakness among local jewelers into its own strength.

Green’s motto: “Give the customer what he wants.” If anyone is dissatisfied the store will give him/her another watch, no questions asked. “We may even do it with watches three to four years old. Our very integrity is at stake.”

Green’s advertises free batteries with all new purchases. After six months customers are notified by mail to bring new watches in for free servicing. (“We may get to sell them something else when they come back.”)

Bulova offers a two-year factory warranty, which includes everything but the crystal. Bulova also has a trade-in sale program whereby a customer can bring in a watch requiring, say, a $50 repair and get this amount as a credit toward a new Bulova. “This is better for us than offering a 50% discount.”

Green’s fixes old trade-ins, selling them at 25% over repair costs as second watches. Typical turnaround on repairs is one week for local jobs, three weeks by mail. Sales staff, however, never makes promises. “We always estimate a four- to six-week delivery. It’s better to be early than late.” Green’s gives customers loaners while they wait.

Advertising and promotion: Separate ads for each brand in local newspapers (the sports section yields best results). A repair service ad runs weekly in the local Sunday TV supplement. Bulova produces some of Green’s ads.

Green’s runs radio time signals on three stations 25 times a month (“This is Radio 302 brought to you by Bulova and Green’s Jewelers, your Bulova headquarters”). There also are 30-second co-op TV spots 25 times a month.

“We keep hammering away with our sales and service message. Consistency is the main thing. Don’t advertise two weeks before a big holiday, but rather each and every month.”

Green’s also offers promotions backed by co-op newspaper ads and radio scripts. Recently it gave the mayor of Corpus Christi a Bulova for outstanding service and donated a $100 Bulova to the winner of a local marathon race.

Sales/discounting: “You’ve got to use discounting to your advantage. I’ll go as low as 40% off.” Even so, the store has abandoned across-the-board discounting (too little profit) in favor of periodically using it as a way to “get rid of the dogs.” Bulova offers a special co-op sale twice a year to help stores clean house.

“If a style is still around after three seasons, we’ll discount it. If we can make a 10% gross profit we’re happy since we won’t have stagnant inventory.” Only 15% of inventory, however, is discounted and Foster wants to reduce that to 5%.

Display techniques: Watches aren’t segmented by brands–just by men’s or ladies’ styles. Since ladies’ watches sell best, they’re displayed up front. Before each new watch is placed in a case, it’s set on time and running.

Special problems: None with Bulova except in getting goods shipped early and fast enough. Green’s has learned to live with delays and shortages with Bulova as with other suppliers. “In general, though, Bulova takes real good care of us.”

Stores: One, located at the high traffic intersection of State and Madison Sts., downtown Chicago.

Type of store: 40-year-old fine jewelry independent with a $2 million-plus annual volume. Watches comprise 30% of sales.

Watch selling philosophy: “We know our market. The average person can’t afford a $1000 watch. To ask someone earning $200-$300 a week to spend more than that is too big a sacrifice. So we appeal mainly to the 80% who fall in this category rather than the high-ticket customer.

“That’s why Wittnauer is so important to us. It’s the store’s best seller, comprising 50% of total watchsales. Its styling and features–such as numerous diamond models–make it an unbeatable value in the $125-$200 range. In our downtown locale, Wittnauers pretty much sell themselves.”

Principal brands in stock: Mid-market lines from $75 to $700 catering to cash customers. These include Bulova, Pulsar, Longines, Wittnauer and Seiko. There’s a limited inventory of more expensive Longines ($350-$700) and Lassale Seiko ($275-$695).

Wittnauer inventory: Carter carries about 230 styles. Men’s models include the “Diamond Premier” ($125-$175) and the top-end “Diamond Award” ($295-$550). Women’s models include the “Diamond Romance” ($125-$200) and “Diamond Bolero” ($200-$400).” Because women buy 65% of all watches in the store, Carter carries more women’s styles than men’s.

Best Wittnauer sellers: The “Diamond Romance” and “Diamond Premier” series because of their styling and price.

Sales training: “We have all professionals on the floor here … no clerks. And they’re paid accordingly.” There are no formal classes or seminars. More experienced sales-people work with trainees until they can do well on their own.

Typical customers: As a downtown store, Carter gets secretaries, executives, lawyers, everyday working people. About 70% of Wittnauer customers are black, blue collar or lower-middle income white collar with a $12,000-$20,000 average income.

Service and repair: Carter offers a one-year store warranty in addition to standard one-year factory warranties. Minor problems are corrected in-house within two days; more serious warranty repairs go to Longines’ New York service center, which has a two- to Three-week turn-around. Customers with defective new purchases not quickly correctible get replacement watches.

Carter offers free batteries for the lifetime of a new watch. Routine cleaning, dial changes and overhauls are jobbed out to a watchmaker down the street. Overhauls are guaranteed back within 10 days and warranted for one year.

Advertising and promotion: Conducted in May/June and (most extensively) in December when the store does up to 75% of its annual watch business. Carter uses king-size posters on the sides of buses. The store also advertises on radio and in the Chicago Sun Times.

Sales/discounting: Generally none. May run a sale during slower months like September, January or February. “We offer a legitimate 20% discount.”

Ticketed mark-up is full keystone but Sider says, “20% off is common practice. That’s the maximum we can afford.”

Display techniques: CArter’s corner site gives it lots of window display space (30 ft. by 20 ft.) so Sider puts lots of merchandise in the window. Wittnauer occupies a key position both in the window and inside the store. The brand gets 25% more space than any other. “It also gets the best space … where the heavier traffic is. You go with a winner.”

Special problems: Wittnauer had an inventory problem one to two years ago, when production was cut back to balance previous overruns. But last year Longines-Wittnauer carried substantial inventory and Carter always had needed styles and price points.

Number/location of stores: Nine in Greater Minneapolis; one in Rochester, Minn., and one in Omaha, Neb. Headquarters is the Nicollet Mall store in downtown Minneapolis.

Type of store: A division of the 55-store Henry Birks chain. Annual divisional sales volume is $6 million-plus ($3 million-plus at the Nicollet Mall outlet alone). Watches comprise about 18% of total sales.

Watch selling philosophy: Watches bring in people who hopefully will also buy jewelry and become loyal customers. “It’s necessary to carry brand name items that give us an identity. But we also certainly want a customer to have the right, quality watch.

“If a customer–whether a man buying a gift, or a couple–wants an under-$5000 watch, I’d reach for a Baume & Mercier. They make many attractive models in this price category.”

Principal brands in stock: Most important is Rolex at $1000-$9000 (“It’s the most identifiable watch in the country”). Others include Baume & Mercier ($450-$4000); Seiko ($75-$375); Omega ($395-$4000), and–in a few stores–Cartier and Ebel ($895).

Baume & Mercier inventory: About 25 styles in stock at Nicollet Mall. Certain downtown store items don’t appear in other outlets. “We try to cover as much ground as possible with the line and not put it all into one store.” Principal Baume & Mercier models include all-gold bracelet styles for ladies and all-gold leather strap models for men.

Best Baume & Mercier sellers: An all-gold bracelet model at $1500 for ladies, $2900 for men and the $2900 Avant Garde.

Sales training: Trainees work with the watch specialist who personally trains them. They listen to customer questions and her answers. “We give new hires vendor catalogs, product information brochures and handouts. It takes several months before they’re proficient.” Baume & Mercier and other suppliers will come in to conduct sales seminars.

Typical store/Baume & Mercier customers: “Yuppie types. That’s the B & M customer. People from about 28 to 45 … a young, successful group.”

Service and repair: The Nicollet Mall store has two factory-trained in-house watchmakers. None of the other outlets do. They handle only minor repairs, sending major out-of-warranty jobs to the downtown store. J.B. Hudson offers a one-year warantee in addition to standard one-year supplier warranties. Turnaround is one to two weeks for in-house work, three weeks average for Baume & Mercier. “We’ll also service an off-the-street watch if it’s a legitimate brand name piece.”

Refunds and exchanges: Within 90 days, no questions asked, accompanied by proof of purchase and a piece returned in good shape. J.B. Hudson features free engraving on all new watches.

Advertising and promotion: About one watch ad per month appears in the Minneapolis Star and Tribune. Typically ads single out one brand.

Recent promotions include a 14K gold Baume & Mercier giveaway at the grand reopening of J.B. Hudson’s Southdale Mall store in Edina, Minn., last September.

Sales/discounting: Baume & Mercier watches are never on sale. The stores try for keystone onwatches “but because the watch business is competitive, we’ll meet legitimate competition on a particualr model with an individual customer up to 25% off.”

Display techniques: Watches are displayed by brand. Baume & Mercier and other better watches are not segregated by sex. The B & M display–situated at the center of the watch area–is organized into men’s/ladies’ matched sets, ladies’ straps, ladies’ bracelets, men’s bracelets and men’s straps. “Our displays are conservative and straightforward.”

Special problems: “In the years I’ve dealt with Baume & Mercier, I’ve never had unresolved problems of any kind. Their service is among the best in the watch industry. That’s one of the reasons I wear one myself.”

Number/location of stores: One, in the heart of Manhattan’s Garment District.

Type of store: Privately-owned independent, 36 years old, with a $2.5 million-plus annual volume.Watches comprise 20% of total sales. One of New York City’s original Omega dealers.

Watch selling philosophy: “We slowly moved into watches, trying to create a full-service store in the Garment Center. We already were the largest jeweler in this part of town, but felt a full-service image would help us grow. The goal was to give customers wider selection … so they wouldn’t go anywhere else.”

Cohen sees potential in watches and keeps a representative inventory of each brand, “though not the huge stock I had” because of lower-than-expected profits and high costs of stocking inventory. Over the past six months, Stanley & Son has gone from 900 to 300 pieces.

Principal brands in stock: Concord ($500-$5000), Corum ($1000-$10,000), Movado ($100-$1000), Daniel Mink ($250-$500), Philipe Charriol ($350-$500), Pulsar ($50-$150), Citizen ($75-$200), Cartier ($675-$10,000), Audemars Piguet ($1000-$25,000) and Omega ($350-$6000). Average retail is $500.

Omega inventory: Carries 75-100 models (out of several hundred available), which compete mainly, with North American’s Concord. Principal styles in both men’s and ladies’ versions include the Manhattan at $1850 and $1750; the 14k gold Phoenix at $5000 and $3500 and the black Calypso at $795 and $695. There also are gold bracelet Omegas–mostly for ladies–from $695 to $2200 (with or without diamonds) and the men’s Seamaster at $795.

Best Omega sellers: By far the Manhattan, followed by the Phoenix.

Sales training: Managers go over watch lines with staff at sales meetings every other Saturday morning. They also review policies, gripes and problems. In addition, Omega reps conduct seminars at the store’s request, but Stanley & Son didn’t call them in last year.

Typical store/Omega customers: In general, Stanley & Son gets a fast-paced watch clientele–businessmen and women who have little time to shop (“They’re often in and out in 15 minutes”). They require quick service. “They also have enough cash not to be concerned about every penny. It’s a typical Garment Center crowd.”

Men buy more watches than ladies. Still, the store sells more ladies’ watches (“We get more men buying watches as gifts for women than vice versa”). Cohen has not yet observed a typical Omega buyer.

Service and repair: The store has a 14-day refund/30-day exchange policy; Omega offers a one-year warranty. Turnaround on factory repairs is three to four weeks. Stanley has an in-house watchmaker.

Other services include loaners to service customers, watch strap replacements (“This is a big business for us”) and free lifetime battery replacement on private-label watches.

Advertising and promotion: The store is a strong advertiser in New York Magazine. Omega also co-oped ads in the New York Times, as well as Women’s Wear Daily last Christmas season. The store does no radio or TV advertising (“In New York we can’t afford it”).

Sales/discounting: Every watch in the store is ticketed 30% off, with some older models 40%-50% off. “Our watches show two tags–the one from the factory and our own showing the percent off and net selling price.” Cohen insists keystone “is not a realistic markup in my area.” After Valentine’s Day and during the summer, the store runs a sale section in the window to get rid of old merchandise.

Display techniques: Stanley & Son features a nine-section front window. Three sections displaywatches, all brands mixed together. Inside the store, near the front, watches are displayed in four out of 17 floor showcases. Omega is in the middle of the watch area. Men’s and Ladies’ models are separate, though sets are kept together. Styles are segmented into straps, steel and gold.

The store relies heavily on Omega promotional materials such as thank you envelops and props. The supplier custom-designed an entire window display last Christmas complete with background, Omega signs and stands.

Special problems: None.

Number/location of stores: Four, all in Richmond. One (main) downtown shop, two mall stores and a strip shopping center outlet.

Type of store: Schwarzschild is now part of the Henry Birks chain. This multi-million dollar guild operation is the largest jeweler in Richmond; watches comprise 15% of total sales.

Akribos watch selling philosophy: “We go for the higher-end market. There’s no sense selling junk or cheapwatches since we want customers to be satisfied.” Watches are considered a profit center as much as a traffic builder. The watch department is still expanding (“We see a lot more growth potential here”).

Seiko is a significant part of the watch department, accounting for the bulk of watch sales. “It offers great style and value for the money. Seikos are priced at what most people want to spend on awatch.”

Sheehan stresses turnover. “Don’t get everything … just what customers like. Replenish popular models as soon as they’re sold. Be ruthless and delete lines that aren’t working. Try something else. We try to keep a close eye on this.”

Principal brands in stock: Inventory includes Rolex ($900-$8850); Seiko ($100-$650); Baume & Mercier ($700-$5000) and Rado ($795-$1500). Rolex and Seiko are the store’s two strongest brands.

Seiko inventory: Concentration on the regular Seiko line, but also carries the 14k Lassale Seiko at up to $3500. Schwarzschild carries an extensive selection–about 85% of available styles during the Christmas season–and does best with more traditional designs.

Best Seiko sellers: Men’s strap models and ladies’ tank models.

Sales training: Managers are responsible. Employes build expertise by reviewing catalogs, technical bulletins and warranty information. Once a year Seiko offers a special training brunch during which a supplier rep goes over new lines and models.

Typical store/Seiko customers: People looking for a jeweler they can trust and rely on. Overall, customers are middle-class.

Service and repair: Each outlet has its own service facility and a factory-trained watchmaker. “We try to stress that we really do service what we sell.” The chain can handle most warranty repairs in-house. Depending on the problem, repairs are done while a customer waits or within a week. Turnaround on watches sent to Seiko’s Coserv repair center under the one-year warranty is about a month.

The store has a 30-day refund policy and offers free batteries within a year of purchase. It repairswatches not bought at the store, even brands the store doesn’t carry. Some loaners are available.

Advertising and promotion: Most ads are print via Richmond’s two local dailies. The heaviest and most effective advertising is around Christmas. Watch brands are advertised individually (out of fourwatch ads runs last January, Seiko was advertised twice). Seiko, says Sheehan, is generous with co-op dollars.

TV and radio advertising are used more for jewelry that watches. One exception: Last Christmas the store ran a Rado TV ad. Sometimes, too, Seiko will do TV spots that tag the store.

Sales/discounting: “Schwarzschild shoots for keystone markups.” Sales are infrequent–mainly to reduce old inventory. It’s store policy not to discount.

Display techniques: One section of the downtown

Award-winner helps create watch lines

Natico Originals Inc., a New York City importer, has introduced three lines of high-fashion, high-quality wristwatches coordinated by the winner of a coveted European design award. The designer, Anne-Marie Cheifel, won the 1982 “Le Prix de L’Excellence European,” the equivalent of America’s Coty award.

The watch lines–Cacharel, Paris; Ted Lapidus, Paris, and Cheifel, Paris–are available for the first time in this country. Men’s and women’s models are signed and numbered. They’re plated to 10 microns of 18K gold and incorporate the latest Swiss quartz movements.

Also available are coordinated leather accessories, pen and pencil sets and shaving accoutrements.

The lines are as different as their designers: Cacharel, Ted Lapidus and Chiefel. Chiefel maintains tight control over materials, quality and workmanship, and holds the worldwide license for distribution of the designs.

“This concept is critical and seems unique in the U.S.A.,” says Natico President Murray H. Kowalsky. “It means that the products which Natico distributes are in fact designed by the person whose name is on the dial, as opposed to having Natico put a designer’s name on any watch we wish.”

Natico, a 35-year-old firm, has had strong ties to Europe since World War II. The company works in the high-end, high-quality range, primarily in internationally-designed, private label and top brandclocks, watches and boutique articles.

The Ted Lapidus line for men and women retails in the $200 to $500 range. Sporty models include a striking hexagonal case with ivory dial and burgundy index, which can be matched to either a burgundy or ivory crocodile strap. On the dress side, an assortment of unusual dial treatments includes metallic stripes, mirrors, a classic white enamel, and the “Lapidus anchor” logo with coordinated two-tone metal or leather French-made straps.

Among the unusual looks designed by Cacharel ($175 retail and up) is an antique dial with 1/4-in.-diameter sweep hand, a high-tech tactile (dotted) face in two styles, and a mod look in gray, gold or matte black.

White is the main color for Cheifel’s own line, though men’s watches can be fitted with black straps. Kowalsky points out that all-white men’s watches are quite popular in Europe now; “perhaps it will be the next trend here.”

Each line features unique accessories, packaging and individual showcase displays. Contact Natico, 225 Fifth Ave., New York, N.Y.; (212) 685-5307.

A new Swiss watch is born

First came the plastic Swatch, Switzerland’s stylish entry into the budget-priced leisure watchmarket. Then the Swiss unleashed M-Watch on young and trendy consumers. Now there’s the TIQ, an all-metal, water-tight quartz analog fashion accessory.

Early last year Konstantin Theile, former marketing manager of Swatch, left the ETA Group to establish Time Inter Corp. in Zug, Switzerland. His first TIQ collection was launched in Switzerland in November, with exports scheduled to start early in 1985. Initial markets will include Europe, then North and Latin America later in the spring, followed by the Far East. Distribution will be to better department stores, mail-order houses and jewelry stores, as well as fashion houses and boutiques. The low-cost TIQ will be packaged in gray velvet and merchandised as an impulse purchase item.

At a recent press conference, Theile explained that his “collection addresses cheerful men and women who like to coordinate their watch with their leisure wear and activities.” Theile wanted a non-throwaway watch “accessible to everyone,” that harmonizes with other fashion accessories he claims to be developing.

The timepiece features a mineral dial glass, metal case and a plastic or leather strap; it can be repaired in about five days. Each unit is equipped with a Ronda Harley quartz movement, accurate to within one second per day. TIQ is guaranteed for one year and, according to Theile, “costs less than a meal for two in a medium priced restaurant.”

Among 10 unisex models in the 1984-’85 winter collection are three traditional styles in black, gray and blue, plus seven fashionable models in white, yellow and bordeaux. TIQ plans to offer a distinct summer collection later.

Hattori Seiko buys into French Matra

Hattori Seiko Co., Tokyo, announced it has invested in France’s top watchmaker, Matra Horlogerie of Paris.

The Tokyo firm markets watches and clocks made by the Seiko Group, Japan’s largest timepiece producer. The paris company belongs to the Matra Group, a major manufacturer of munitions and electronic equipment. Matra currently claims a 30% share of France’s domestic timepiece market.

Matra Horlogerie recently increased its capital to 186 million francs (roughly $20 million). Hattori Seiko footed about 10%, or 20 million francs ($1.2 million) of that.

The two firms have had technological and marketing ties since 1981. This latest financial link is a bid to eliminate trade friction before it can occur. Hattori plans to import cases and faces from its French partner for use in Seiko timepieces.

According to The Japan Economic Journal, Matra Horlogerie has been suffering from slow growth in domestic demand and the rapid advance of foreign-made products. Its fiscal 1983 deficits reached 320 million francs ($34.5 million).

Helbros expands St. Croix plant

Helbros Watches–through its Virgin Island subsidiary, Master Time Co. Ltd.–has launched what it terms the largest watch expansion program in the history of St. Croix.

A new 12,000-sq.-ft. facility near its former plant has more than tripled the size of the Master Time Factory. Among the many operations to be performed there are movement assembly, casing and dialing via an automated “line” in a dust-free, air-conditioned and temperature-controlled environment.

In addition to increasing production, the new facility will permit a number of new operations including service and repairs. A computer-controlled system uses eight computer terminals that store information for instant retrieval; a word processing system automates correspondence. Close liaison with Helbros’ New York facility makes the system more efficient.

The new facility, says Helbros president Alan Turin, will provide “greater capacity to respond to our requirements and the needs of the marketplace.”

Timex more sensitive to market segments

Timex Corp., Waterbury, Conn., launched a number of models at the New York JA show that demonstrate its extreme sensitivity to market segmentation.

“This year we’re making a greater conscious effort than ever in catalogs, trade and consumer advertising to segment our line,” says David Rahilly, director of marketing and sales. “We want to show our strong assortment of sport watches, elegant dress products, casual/everyday designs, specialty and technology items.”

Among new models to be seen in stores starting this April:

* A group of thin fashion digitals for women and children priced from $9.95-$11.95 in new copper, light blue and gray, which the Color Association of the U.S. has determined will be the hot colors for ’85. There’s also an all-gray model for men at $9.95 featuring large, legible digits.

* 90 new pewter or gray styles on the QA and combo side.

A new men’s gray SportsQuartz calendar model coordinated with gold-tone stick markers, hour, minute and sweep-second retails for $27.95. A men’s gray Marathon SportsQuartz features ana/digi display, alarm, chronograph, timer and dual time zone at $39.95.

* New Black resin sports watches for women at $29.95. Rahilly says women “prefer scaled down models, so we’ve come out with a small, water resistant three-hand sport series with white arabic numerals or stick marker dials.” Spring TV commercials will tout Black Max watches for men and women.

* Toward the higher end, a classic tank style with white face, roman numerals and leather strap at $44.95, and three gold-tone designs with stick markers and block or mesh bands from $64.95 to $69.95.

* Four new women’s watches in the solid state quartz Illusion collection. They feature a thin (4.1 mm), more rectangular gold-tone case and leather-like straps. The three-hand women’s models retail from $19.95 to $34.95. For setting, there’s a push-button in the case back, with no protruding crown or button on the side.

* Two new “his and hers” watches in the bi-metallic (two-tone) sports line. Both feature a round gold-tone bezel and face, and silver-tone integrated band with gold-tone highlights. Suggested retails: men’s $54.95; women’s $44.95.

Watchbands on videotape

Regal/Kreisler Watchband Co., Philadelphia, Pa., a leading watchband manufacturer and importer, has introduced what it terms the watch industry’s first instructional videotape on watch band attachment, sizing and reordering procedures. The videotape was produced under the direction of Louis A. Zanoni of Zantech Inc., Trenton, N.J., a noted author and instructor of quartz watch training programs.

The video is intended to familiarize all jewelry and watch sales personnel with the methods and procedures of selecting, sizing and attaching watch bands. It is available in VHS, Beta and 3/4-in. U.-matic. Contact Regal Industries, 606-622 Spring Garden St., Philadelphia, Pa. 19123; (215) 923-6835.

Revitalizing Bulova

This venerable watch firm heads into the ’90s with a diversified product line and a new stress on quality, styling and service

Bulova isn’t Bulova anymore.

At least it isn’t the inventory-fat firm that stumbled wheezing and gasping for fiscal breath into the 1980s. Today, it’s a lean and innovative corporate machine.

A tip-off to the change is its new name: Bulova Corp., not Bulova Watch Co. The name change represents a new Bulova with first-class customer service; improved product quality, styling and technology; and diversified product lines, including jewelry, watches by artists and trendy beach bags with attached clocks. The commitment to this better Bulova is backed by a new logo, new headquarters and even a new address.

The changes cap a 10-year effort by owner Loews Corp. to rescue and rebuild the reputation of the 114-year-old firm. It’s all part of the “revitalization of one of the great names in American products, a name that got tarnished,” says Andrew H. Tisch, a director and former president of Bulova.

In the process, Bulova has grown into a $160 million concern (double its 1979 value) and, say Bulova officials, is at least No. 2 in all major price points where its watches compete, with much of the business in the $150 + category.

Potential: The future didn’t look so cheery in 1979, when Loews paid some $30 million to buy Bulovafrom majority shareholder C.P. Wong, managing director of Hong Kong watchmaker SteluxManufacturing Co., and other shareholders, who had owned it since 1976. Bulova was on the financial ropes, pummeled by losses of $48 million in the three previous years, lackluster sales and loan restrictions that gave its bankers extensive control over assets and operations.

Still, Loews saw Bulova as an investment with good potential. One reason was the firm’s “strong name,” says Herbert C. Hofmann, Bulova president and former chief operating officer.

When Loews actually took over, it discovered how bad things really were. “We found Bulova was within 30 days of bankruptcy,” says Tisch.

Adds Hofmann, “The numbers were scary. Our initial investment [for purchase and make-over] was $36 million. By the time we fully valued everything, it was $100 million.”

Not only was Bulova belly deep in red ink, but product quality was “questionable” and styling was “staid, stodgy and lackluster,” says Tisch. Indeed, recalls Tom Hickerson, a 15-year employee who now is controller and a corporate vice president, “a major obstacle was regaining customer confidence in our quality and service.” It was lost, he says, largely due to the former owner’s absentee management and the Far East firm’s habit of “flooding us with product not up to our standards.”

Downsizing: After months of learning the business and reviewing operations, inventory and finances, Tisch and Hofmann laid Bulova’s woes squarely before Loews officials. Instead of a quick fix or sell-off, Tisch and Hofmann wanted to restructure the firm, turn it around financially and restore confidence in its product.

“But we said that first we’d lose $30 million the first year and $20 million the next,” recalls Hofmann. Loews officials weren’t happy. But instead of pulling the plug, they gave Tisch and Hofmann the go-ahead to reorganize and downsize.

Most of Bulova’s top management went into early retirement, replaced by Loews executives. Overall, the staff was trimmed from 2,500 in 1980 to about 550 now. The firm winnowed accounts from 17,000 in 1979 to about 12,000, dropping those that were too small, geographically remote or not economically viable for salespeople to service in those years of rising gas prices.

Bulova stopped making watch movements, cases and crystals and shut down manufacturing operations in Bienne, Switzerland and Providence, R.I., and at Bulova Park headquarters in Queens, N.Y. (The only survivors: production of dials for corporate award watches and the five-person design-and-model shop in Providence, where “we do our own design…to stay unique,” says Hofmann.) Now, components are made to order by select high-quality suppliers around the world that adhere to Bulova specifications.

Shedding those operations saved money and allowed Bulova to react quickly to market changes. “When Loews came in, the watch industry was moving from [emphasis on] technology to fashion,” says Tisch. “Instead of large volume in a few single styles, we needed a lot of styles, with less volume of each. We needed flexibility to work with various designers, suppliers and case manufacturers. We couldn’t be locked in [to the old manufacturing operation].”

Because of the changes, says Robert Webber, vice president of operations and a 24-year employee, Bulova now is a “very lean and mean” company. “We went from a structured manufacturing firm to a marketing and distribution firm by using aspects of the watch industry overseas,” he says. “This made us much more price competitive than when we manufactured in the U.S.”

Big bucks: At the same time, Bulova’s new bosses spent big bucks–thanks to Loews–to restore product quality and reliability. “In those days, no money went into marketing,” recalls Tisch. “It was all going to clean up the operation.”

Bulova paid $10 million to buy back old inventory from retailers and scrap it. It conducted a $200,000 survey of jewelers, consumers and even Bulova employees for opinions of Bulova and its products. It spent $1 million on quality control advisers and inspectors to evaluate Bulova inventory and set stricter specifications.

“We looked at every single component and tested it,” says Webber. “If it didn’t work, we didn’t ship it. We still stick to that rule religiously.”

That caused problems with some suppliers, says Webber. There were sizable back orders in 1982 and 1983 as Bulova educated suppliers to its new, stricter quality controls, replacing firms that couldn’t or wouldn’t adapt. “But we felt it was better to pay the price in-house than get into the horror [of product and service problems] in the field,” he says.

The resulting improvements are reflected in statistics from Bulova’s repair and service department. Ten years ago, Bulova’s net service costs totaled $6 million. By 1988, despite inflation and higher labor costs, the figure had dropped to $2 million. Some shrinkage came with the industry shift to quartz movements. But most of it is due to tougher quality control.

`Bad years’: Not surprisingly, the first few years — which Hofmann calls “the bad years” — were rough. Says Tisch, “We were trying to survive and convince the industry, and ourselves, that Bulova wasn’t going out of business.”

That wasn’t easy, and Bulova officials admit they underestimated how long the recovery would take.

They also faced other challenges, including technological advances. When Loews bought Bulova, 80% of its watches had mechanical movements. But the industry and marketplace were shifting to the new, rapidly changing quartz technology. At first, Bulova had trouble keeping up. Indeed, one reason for the failure of its Swiss Accutron — one of the first introductions under Loews — was the firm’s inability to make movements thin enough to fit the styling of the times.

Another problem was holding on to people. In the first few years, salespeople and executives left due to “rumors and worry,” says Hofmann. A few others were hired away.

Turnabout: But the changes — and Loews’ gamble — began to pay off. In 1985, Bulova announced a net 1984 profit of $7.7 million, its first after a decade of losses.

That reflected renewed consumer confidence and freed Bulova from what Tisch calls “years of damage control.” Hofmann says the firm became “proactive instead of reactive.”

Bulova officials cite three reasons for the turnaround:

* People. Hofmann and Tisch say the success isn’t due to strategy or genius, rather to the hard work of “our team.” Some of the workers were there when Loews took over. “Bulova had very strong second-line managers” handling the day-to-day operations, says Hofmann. “So we put them in positions where they could run things and turn the company around.”

Company employees were “very, very protective and interested in making [the company] work. Even security guards would ask how sales were doing,” recalls Hofmann. “That gave us needed incentive.”

The firm also benefited from members of the management team who came from outside the watch industry. “We aren’t traditional in our ideas of what a watch company can or should do,” says Paul S. Sayegh, a former Loews assistant controller who came with Hofmann and Tisch in 1979 and now is executive vice president and chief financial officer. “In the past, people concentrated just on watches. But this management has a broader vision. If opportunities arise that aren’t traditional but fit with our watch business — such as our [artist-designed] Classic Moments watches and our 14k jewelry — we’re willing to consider them.”

* Corporate support. Loews’ moral and financial support has been another plus. “As long as we told them what we were doing and had a plausible reason, they supported us,” says Hofmann. “Once we had their approval, all they said was `How are you doing with your plan?’ and `Don’t give us any surprises.”

Loews’ one requirement is that Bulova reinvest profits to help the business grow. “The Loews concept isn’t profit and loss, it’s asset valuation,” says Tisch. “As long as we show the value of assets will grow at a substantial rate, Loews doesn’t need the dividends they would otherwise get from Bulova.”

Loews is pleased with the results. In April, in appreciation for a job well-done, Loews held 10th anniversary celebrations for Bulova employees. Then in August, it announced Tisch would move to chairman of its Lorillard tobacco division, with Hofmann becoming president of Bulova.

* Service. Efficient, effective customer service (including accounts receivable, customer queries, shipping and repair) is another key to success, says Hofmann. Eighteen percent of Bulova employees — more than twice the average for most manufacturers — are involved. “Efficiency experts might say we’re overstaffed,” he says. “But we see ourselves as a service organization. We really do need this many people to service accounts, handle inquiries and follow up on anything customers ask for.”

One service that has improved markedly in recent years is turnaround on orders. (“We have a responsibility to manage the retailer’s inventory,” says Hofmann.) Thanks in part to semiboxed merchandise and extensive on-hand inventory, orders usually are shipped within three days of receipt.

Image changes: Bulova has taken a number of other steps in the past three years to change its image, including:

* New name. The company moniker was changed last year from Bulova Watch Co. to Bulova Corp. “We saw we’re much more than a watch company,” says Tisch. “We make clocks. We make artillery fuzes [in its Bulova Systems subsidiary]. We’re exploring new markets and products. Now we can expand outward whout our name limiting us to watches.”

* New home. The firm left Bulova Park — its impressive four-story, 400,000-sq.-ft. headquarters in Queens, N.Y. — for a spartan two-level, 100,000-sq.-ft. office building and 90,000-sq.-ft. warehouse a few blocks away. With much less staff and almost no on-site manufacturing, the old site (which it now rents to other businesses) was no longer cost-efficient, says Hofmann.

* New logo. Bulova dropped its almost-20-year-old emblem (a stylized tuning fork adopted after the debut of Accutron, which used an electronic tuning fork oscillator). “It was a great logo, but research found people perceived it, and tuning forks, as outmoded,” says Tisch.

The new logo is a bold redesign of “Bulova” with the “o” resembling a sunrise. Actually, Bulova officials worried it looked too much like a sunrise and would remind viewers of Japan, known as the land of the rising sun and a major watch competitor like Citizen watches. But research found most people related it to Bulova’s “rebirth and growth,” says Hofmann.

* New address. In 1988, the firm persuaded Queens Borough to rename the short street adjoining its headquarters as Bulova Way in memory of Arde Bulova, the chairman who built Bulova into an international firm before he died in 1958.

New products: But the most apparent changes at Bulova are in product. Bulova debuted some watches in the early ’80s, but not until after the turnaround did it give full attention to creating new products. In 1985, it hired David A. Winkler from Longines-Wittnauer as vice president of merchandising and product development. Patricia Pepe Clark became the first full-time manager of merchandising and design for the firm’s clock division.

In 1986, Bulova unveiled Benetton, its first line of trendy designer name fashion watches. In 1987, the firm debuted its popular collectible clock miniatures, and last year added Benetton for Kids for the growing children’s watch market. This year, Bulova has premiered a major product almost every month since January, including:

* The 14k Ultime jewelry collection, an extension of its upscale Ultime 14k watches, primarily for jewelry stores.

* Buly, a new category of accessories — including beach bags and backpacks — in trendy styles and colors with attached clocks. Second-generation fall-color models are now in department stores.

* Harley-Davidson watches, licensed by the U.S. motorcycle manufacturer of the same name and aimed at buyers ranging from hard-core bike enthusiasts to people who consider “biker chic” fashionable.

* Fine Art Timepieces, from Classic Moments Co., [TM] a joint venture–Bulova’s first–with Chicago’s Circle Fine Arts Corp., a publisher of limited-edition fine art. The line includes The Artist’s Watch [TM] (limited editions designed by famous living artists), the Masterpiece Collection (featuring art by great masters), watches by sports artist Leroy Neiman and clocks with art by Norman Rockwell.

* Accutron. This well-known name left U.S. jewelry stores in the mid-’80s when its tuning fork mechanism grew outmoded (the watch remained part of Bulova’s corporate awards program). This spring, Bulova got good response to a market test (direct mail ads in national magazines) of consumer reaction to the new Accutron (quartz analog 23k micron stainless steel). Accutron will again be carried by Bulova salesmen.

* Tuxedo, a new line of dress watches whose case and sapphire crystal blend into a single mirror-finish unit.

* Antique Galerie, a new line of quartz analog wall clocks made in West Germany with frames from wood of old Bavarian farmhouses and folksy dial illustrations by a leading West German illustrator.

* Collectible miniature clocks with moon phases.

“Our goal,” says Robert Ryan, vice president of marketing, “is to find pieces of the market where opportunities exist for Bulova to create demand and become a major factor.”

Response to most of the new products has been good, say Bulova officials. Just as important, says Hofmann, is the “change in retailers’ perception of Bulova.” Instead of complaints about merchandise common at the start of the ’80s, “retailers now come in [at trade shows] to see what’s new from Bulova.”

Looking ahead: Bulova’s goals and operations won’t likely change under Hofmann, who replaced Tisch Sept. 5. He’s lower key and more of a hands-on administrator than Tisch. But the two men had worked together closely for almost 10 years setting Bulova’s direction. “We are in complete concurrence,” says Hofmann.

For 1990, Bulova plans to expand in markets opened this year. New products will include a line of fashion watches, perhaps miniature clocks in materials such as malachite, additions to Buly (probably umbrellas and ski jackets) and more Ultime jewelry.

Plans for the next few years call for continued heavy investment in brand-name support and products to increase Bulova’s share of watch, clock and other markets.

The future also may include some corporate acquisitions. Bulova Systems & Instruments, a subsidiary, recently bought Hamilton Technology Inc. (Both firms make electronic precision fuzes used by the military). Bulova Corp. itself has looked at possible acquisitions among jewelry, watch and clock firms. “But we won’t expand for expansion’s sake,” says Hofmann. “It must complement Bulova and enhance the name. Our core business will remain watches and clocks.”

U.S. decides to penalize some imports

The U.S. International Trade Commission has issued rulings that could damage Canadian industry in three markets – raspberries, codfish and shoes.

Ending many months of investigation, the commission voted to impose anti- dumping duties on Canadian dried and salted codfish, worth more than $20-million last year, and on Canadian raspberries, worth more than $6- million.

In a separate case, the commission recommended President Ronald Reagan impose a global quota on footwear imports. This is aimed primarily at cheap shoe suppliers in such countries as Taiwan, but footwear imports from Canada, worth $33.5-million last year, could be caught too.

The five-member commission ruled unanimously that Canadian imports are injuring the domestic raspberry industry and should be subject to a penalty duty that ranges from 0.3 per cent to 25.8 per cent of the border value, depending on the individual company.

It was a victory for raspberry growers in such northwestern U.S. states as Oregon and Washington, who have spent more than $100,000 pressing federal trade law enforcement agencies to penalize their Canadian competitors, most of whom are based in British Columbia.

In a four-to-one vote, the commission found Canadian exporters, primarily Crown- owned Canadian Salt- fish Corp. of St. John’s, have injured the industry in Puerto Rico, a century-old market for Canada.

Codfish Corp. of Ponce, Puerto Rico, had charged that Canadian exporters were selling their product at less than fair value, which was retarding its ability to establish a viable business.

The anti-dumping duties in that case range from 20.75 per cent of the value of the St. John’s company’s shipments to a low of 1.27 per cent for National Sea Products Ltd. of Halifax. The final duty orders for raspberries and codfish are scheduled for July, but importers have been paying deposits equal to the duty since preliminary rulings were made months ago.

In the case of footwear, the commission recommended that Mr. Reagan curb imports with a five-year global quota to give the U.S. industry some breathing space to modernize.

Imports to Canada from Europe spurred by currency slide

Silent but powerful, a Gulf Stream of Canadian cash is wending its way eastward across the Atlantic to take advantage of European bargains.

For Canadian exporters, the European market has been languishing behind the eruption of interest in a new trade deal with the United States and the tantalizing potentials of the Far East.

But importers have not missed the sharp slide in the value of European currencies against both the U.S. and Canadian dollars, and have been snapping up bargains at a record pace.

In 1984, exports to Canada from the member-states of the European Community jumped 38 per cent over those of a year earlier, an increase of $2.3-billion.

Although Canadian exports rose slightly, they remained below their 1982 levels, pushing Canada into a $1.3-billion trade deficit, the first time Canada has failed to report a surplus in its trade with Europe since the Second World War.

Such a dramatic turnaround has not been without its problems. The past year has seen well-publicized disputes over trade in major products including newsprint, footwear, beef, fish and liquor.

Diplomats on both sides insist that with $15-billion in two-way trade, such irritants are inevitable and what is important is that they be resolved.

And that indeed is what has been happening. The squabble over newsprint, created when the EC changed its quotas after Scandinavian countries gained duty-free access to its market, was resolved in December when Canada agreed to a new duty-free quota of 600,000 tonnes a year.

That month, Canada kicked off a new controversy when it responded to surging imports of beef by slapping on quotas that squeezed European exporters hardest, knocking them back to a small fraction of total imports.

The Europeans were already upset by Canada’s extension of footwear quotas until November, 1985, and decided to retaliate by raising duties on $170-million worth of Canadian exports unless a deal was worked out.

At the last minute, Canadian and European negotiators agreed to a deal under which Canada could keep its footwear quotas in place, but lower its import duties on $150- million worth of other European goods, a concession expected to cost the Canadian Treasury about $7.7-million this year.

Similarly, with the threat of retaliatory duties on another $70-million worth of Canadian exports hanging over their heads, the diplomats eventually struck a deal on the beef issue by raising the European quota substantially.

Before that dust had settled, the EC had demanded international arbitration over the pricing practices of provincial liquor boards, which add much higher mark-ups to imported wine and liquor than they do to domestic brands.

That one is stalled over the selection of members and the terms of reference for the arbitration panel, partly because it raises the interesting but touchy issue of whether provinces can be bound to follow international agreements signed by the federal Government on matters solely within provincial jurisdiction.

Then came the stories of overfishing by European vessels and the use of bribes to get Canadianfisheries officers to look the other way. Fish has been a particularly touchy subject ever since Europe banned the import of Canadian seal pelts.

Specialists may handle the negotiations for each dispute, but there is plenty of work for the 20 people in the EC’s Ottawa delegation and the 14 foreign service officers who look after Canadian interests at EC headquarters in Brussels.

Even the beef and footwear issues have only been resolved for 1985. “What happens next year remains to be seen,” said one Canadian official. “There won’t be any shortage of issues, but the mechanisms and the will are there to try and resolve them.” In the meantime, Prime Minister Brian Mulroney, Trade Minister James Kelleher, Industry Minister Sinclair Stevens and Treasury Board president Robert Rene de Cotret have all been to Europe, pushing the message that Canada will eagerly welcome European investors even if it has doubts about some of the community’s goods.

That welcome mat is already being put to the test, with the proposed purchase by British Telecommunications PLC of a 51 per cent interest in Mitel Corp. of Kanata, Ont.

But if nationalists are worried about the fate of domestic jobs and technology, Canadian companies are out shopping for European technology, and Canadian trade officials are putting an increased emphasis on industrial co-operation. “Europe is one of the few sources of high technology that is reasonably accessible,” said one official.

On the other side of the Atlantic, one of the biggest concerns of European officials is Canada’s relationship with the United States. They are watching carefully as Canada ponders a major bilateral trade deal, and their worries go beyond the basic fear that such a pact might create a North American trade fortress, with barriers raised high against all outsiders.

Dietrich Hammer, head of the permanent EC delegation in Ottawa, said he thinks Canada might lose interest in pushing for more liberal international trade rules if it can solve most of its own trade problems with a single deal with the United States.

Trade with the United States makes up three-quarters of Canada’s total. “There is at least a danger that if you go bilateral, the multilateral approach will lose its attractiveness.” The EC’s top trading partners include such diverse countries as the United States, the Soviet Union, Saudi Arabia andJapan, and as a result, it is more interested in reaching a multilateral trade deal.

Ireland learns to adjust to reduced EC benefits

The Irish are beginning to find out that they are not, perhaps, as good Europeans as they thought they were. In the first 10 years after membership in 1973, funds from the European Community rolled in, especially to the agricultural sector, giving a substantial boost to the economy and transforming rural life.

This phase is now over, with Irish farm prices adjusted to EC levels and the effects of the stricter attitude to agricultural spending becoming all too obvious. In retrospect, the 1984 negotiations on curbing milk production may be seen as a turning-point when Ireland came uncomfortably of age as a community member.

Milk is more important to the Irish economy than that of any other member-state, accounting for 15 per cent of gross domestic product, and Prime Minister Garret FitzGerald was determined that Ireland should not bear a disportionate economic loss by accepting the same production quotas as other countries.

Even though Mr. FitzGerald is an old European hand, it still took a walkout before the other leaders would agree to special treatment for Ireland. The Irish won that battle but realized that they had used a lot of ammunition and that life was going to be tougher in the future than in the past.

One senior opposition politician went so far as to suggest that Ireland should consider associate membership in the community. His remarks were not taken up because most people know there is no alternative to full membership, but Ray McSharry, as a member of the European Parliament and a former agriculture spokesman, knows better than most that in the long term, the proportion of community spending going to agriculture is likely to decline.

Irish Foreign Minister Peter Barry sounded a different warning recently, when talking about moves to integrate the EC into something more like the founding fathers’ ideal of European union. He said that such a development could not be countenanced within the present financial resources of the community.

Ireland benefits more from EC membership, proportionately, than any other member-state, so Irish concern is understandable. It is estimated that transfers from the community represented over 10 per cent of gross national product in 1978-79 mostly to agriculture. The proportion has declined since then but still represents about 6 per cent of GNP.

Irish membership in the community has also contributed substantially to the influx of foreign industry, which is so marked a feature of the economy. Foreign firms, mostly from the United States, now account for roughly a third of manufacturing employment and two- thirds of manufactured exports. The Irish must compete for such investment with other EC states but very few of these firms would have located in Ireland if the republic were not a member.

Over-all numbers employed in manufacturing have declined since membership and a new problem has emerged. The fact is that the linkages between the foreign companies and the national economy are much less than with native firms. Ireland is in the peculiar position of recording spectacular growth in exports (averaging 11 per cent per year in recent years) and industrial output (up 70 per cent since membership) while having a general decline in employment.

Analysts increasingly separate out the foreign firms when examining the Irish economy and find that the indigenous sector has not coped well with EC membership. It displays poor productivity, indifferent marketing and export sales, and an over-all decline in output and employment. Government polices are turning more toward the correction of these problems, rather than luring ever more high- technology foreign companies, although the latter will never be turned away.

Over-optimism about the prospects for the Irish economy may have been one of the reasons governments in the 1970s engaged in the spate of foreign borrowing which is now causing such problems for Ireland. The heavy debt repayments now amount to over 1 per cent of gross national product. The combination of debt repayments and a rising population means that living standards have been stagnant for the past three years, while unemployment has risen steadily and to 17 per cent of the work force. It is estimated that the Irish labor force is growing by about 4 per cent a year, a situation which is unique in the EC.

The economy has been growing, by an estimated 3.8 per cent last year and an expected 4 per cent this year. However, when debt servicing and the repatriation of profits by foreign firms are taken into account, these figures fall to 1.7 per cent and 2.7 per cent increases, respectively, in GNP. This level of growth is not sufficient to give rising living standards or reduced unemployment to a growing Irish population.

The outlook is for little change. Net investment is expected to rise by a little under 4 per cent this year but this hides sharp falls in some sectors with the highest labor content, particularly construction. Consumer spending shows a marked reluctance to grow, despite the hopes of economists that people might start spending again after three years of recession.

The high taxation imposed on incomes and goods in an attempt to correct the public finances has undoubtedly dampened retail spending. Finance Minister Alan Dukes reduced some rates of value added tax in the January budget and abolished the top rate of 35 per cent. This was partly to reduce cross-border purchases in Northern Ireland and partly to boost the economy, but the net effect of the budget was still mildly deflationary.

The Government has had most success in bringing down inflation and the balance of payments deficit. Inflation this year should be about 6 per cent, having reached 20 per cent just three years ago. Ireland showed a record trading surplus in the month of April and, even when debt payments are included, the balance of payments deficit should be about 500 million punt or less than 4 per cent of GNP.

This combination of economic circumstances has made it difficult to produce any marked improvement in the public finances.

Italy wins commendation for handling of presidency

Italy is now two- thirds of the way through its six-month- long presidency of the European Community’s Council of Ministers, a position which rotates among all the community’s members. Already the Government of Prime Minister Bettino Craxi has won high marks for its successful handling of some highly contentious issues.

In some ways it is appropriate that it should be Italy that solves the EC’s problems over the admission of Spain and Portugal to the community, and the latest emanation of the controversy over the budget. Not only is Italy probably the major EC country with the fewest reservations about being a member of the community, but it is also a country that is riding high in Europe at the moment in terms of economic growth, success of Italian industrial companies and political calm.

Italy is not a country that doubts for a moment that it ought to be in the community. The political parties vie with each other to be the most European of all, and it has a strong commitment to the somewhat nebulous goal of European unity. The leaders of Italy in the early postwar period were convinced that only in a wider entity such as the EC could Italy’s serious internal political differences and the great disparities of wealth between north and south be overcome.

They also hoped that the community would bring them financial resources and economic advantages that they would otherwise lose – a hope that has on the whole been justified.

Yet despite this commitment to the ideals of the community, Italy’s membership has been characterized by the ambiguity so common to things Italian. As Francesco Forte, Italy’s Minister for European Affairs, said at the start of the Italian presidency: “Most of our politicians and bureaucrats think and operate in a basically un-European way.” The fact is that alongside its commitment to the aims of the community Italy has sturdily protected its own interests – in some cases claiming that to enforce community regulations may be impossible, either for political or bureaucratic reasons.

Lately, however, Italy has been on its best behavior. Shortly before it assumed the presidency of the EC it accepted a community policy on wine production that hardly squares with its interests since it is the community’s biggest wine producer. It also backed down from the nit- picking interpretation of import regulations that were holding up the import of Scotch whisky into Italy at a time when Italians are gradually moving away from a preference for national brandies toward the British product.

Partly, no doubt, the change of attitude was politically necessary if Italy was to carry any conviction as president of the EC. Partly, however, it seemed to reflect a more orderly attitude to relations with other EC partners, a clearer view of what Italy ought to be able to obtain from them and of the concessions it ought to be prepared to make. One reason for this was the arrival at the head of the Foreign Ministry of Renato Ruggiero, a civil servant with an unusually broad grasp of Italy’s needs in economic relations and the drive to get the sluggish Italian bureaucratic machine to go for it.

If the Italians are now getting their act together better, as reflected in the skilful handling of the presidency, it may reflect a greater self- confidence in the country as a whole. Italy has since the Second World War been a country of political stability – the same Christian Democrat Party has been in power all that time – but of governmental instability: more than 40 governments over that period.

But for the past 21 months Italy has had the same Government, led by Mr. Craxi, the country’s first Socialist prime minister. It has tackled some serious problems, thought about other ones and provided a degree of continuity that had not existed for years.

That continuity is complemented by the realization, both in Italy and abroad, that Italian industry is now among the most impressive in Europe. Fiat, the privately owned conglomerate, is the first or second- biggest- selling car producer in Europe. Olivetti, the data processing equipment maker, is virtually the largest European- owned company in its field, and probably the most profitable. Pirelli, the tire and cables maker, is an obvious survivor in the tire industry and a company that produces respectable though not glittering financial results. One has only to compare these companies with their European rivals to see just how far Italian industry has progressed in the past few years in rationalization, investment and labor relations. Only West Germany matches or exceeds Italy in industrial prowess and confidence.

The performance of these leading private sector Italian companies is matched by that of other concerns, including several in the state industrial sector, which is gradually being reformed and slimmed down.

Unfortunately, Italy’s industrial success does not of itself ensure that the usual indicators for the Italian economy all point in the right direction. Because of governmental instability Italy reacted very late to both the 1974 and 1979 oil shocks. Only by 1983 had the Italian authorities put their balance of payments current account back into equilibrium, thanks to stern restrictions on monetary expansion rather than to fiscal measures. Only in 1984 did inflation finally drop below 10 per cent, having been over 20 per cent at the beginning of the decade.

The Italian economy is resilient and enjoys considerable vitality, taking the form of fast spurts of growth. This is due in part to the hard- working nature and imagination of many Italians, and to the fact that many less- developed parts of the country are still catching up with the rest of Europe.

But it also suffers major defects. It is prone to balance of payments difficulties because of its near total lack of raw materials and indigenous energy supplies. Governments can rarely take unpopular economic action and the inefficiency of the civil service administration, local government and the state industrial sector means that government expenditure is always rising – far above taxation.

When the Craxi Government came to power in August, 1983, the economy was at last able to resume expansion, the balance of payments registering a current account surplus of over one trillion lire that year. Although gross domestic product declined in 1983 by 1.2 per cent, it grew by nearly 3 per cent in 1984. Bold action to cut wage indexation helped bring down inflation in 1984, which closed the year at about 8.5 per cent. The Government also managed to keep the public sector borrowing requirement to about the same level as the year before, about 93 trillion lire. This, however, is still more than 15 per cent of GDP, far above the level registered by almost all other industrial countries.

Yet 1984 closed with a current account deficit far above the original estimates – it exceeded five trillion lire. This was due in part to Italy’s traditionally high propensity to import, but also to disappointing export growth. Italy’s major European markets, led by West Germany, grew disappointingly slowly and the strength of the lira weakened Italian competitiveness. A series of setbacks prevented Italy from winning its due share of contracts in the Soviet Union, Eastern Europe, and in Algeria, a major energy supplier.

The same problems seem to be persisting this year, for which the semi- official forecasting agency Isco is predicting a current account deficit of 8.5 trillion lire and rather slower growth of about 2.3 per cent.

The same forecast also put this year’s average inflation rate at 8.5 per cent, instead of the Government’s target of 7 per cent, and with last year’s average of 10.5 per cent. The fact that inflation is no longer declining is attributed in large part to the fact that the Government is not succeeding in cutting its spending. The deficit is expected to go on rising in money terms and to continue to account for at least 15 per cent of GDP. National debt – the accumulated borrowing by the Government from the economy – will this year exceed national income.

The Government has not been able to hold down spending partly because of the sheer difficulty of finding items to trim, and partly because of the strong pre-electoral pressure for extra spending, notably a carefully timed rise in pensions. And the Government faces a further threat in June in the form of a referendum on wage indexation that could lead to a partial restoration of the cuts made last year and thus to a further boost in labor costs.

In this month’s local elections, voters seem to have signalled that they want the present coalition of Christian Democrats, Socialists, Republicans, Social Democrats and Liberals to continue. The opposition Communist Party lost support and the share of the vote won by the coalition rose, surpassing the results of the 1983 elections, after which it came to power.

In late June the Italian Parliament will have to elect a new president of the republic. That event and the local elections should determine whether Mr. Craxi continues as Prime Minister, or whether he gives way to a representative of the Christian Democrat Party.

Whoever governs the country will have an extraordinary advantage: a lull of three years before any more major elections are due.

More sweets from Spielberg

Gremlins was grim and Poltergeist paltry, but with Back to the Future executive producer Steven Spielberg presents relentlessly cheery entertainment. He’s called the film “the greatest Leave It to Beaver episode ever produced,” an achievement Spielberg pursued by putting Romancing the Stone director Robert Zemeckis in charge.

Is Back to the Future cute, sly, always in a little danger of turning smarmy? Will it be big this summer? Does a beaver bear fur? Zemeckis has made a very clean-looking, savory confection out of three cups of sugar and a palette of food coloring. In Back to the Future, young Marty McFly (Michael J. Fox) has unique family problems when a time machine made out of a DeLorean sports car accidentally transports him back to 1955. “Doc,” a charmingly crazy older scientist pal (Christopher Lloyd) , has invented a vehicle that can go from zero to 55 in seconds – but can it return Marty to the era of Calvin Klein underwear again? Unhappily stranded in a past barren of diet colas, Marty seeks out the Doc in 1955, somehow persuades him of the charmingly crazy thing that’s happened, and the pair start working on sending Marty back to 1985.

Meanwhile, Marty’s still in his own small, California town, hobnobbing with his parents – the warp is that they’re the same age as he. It appears that Dad (Crispin Glover) was always a meek bumbler being preyed upon by beefy Biff Tannen (Thomas F. Wilson), a local lunkhead who became Dad’s boss in later life. Mom (Lea Thompson), however, is different.

Rather than the reproving puritan of 1985 which she became, Mom is, well, forward. Call it unknowing narcissism or bio-genetic conceit, but she falls for Marty in a big way. This makes Marty understandably nervous.

Worse yet, the local high school’s Enchantment Under the Sea dance is fast approaching. Because Marty has disruptively popped up several years before he was supposed to be born, history is not following its proper course (Mom and Dad are supposed to go to the dance together and fall in love there).

Marty must coach his inept young father on winning over his mother – otherwise, Marty will not be born. Don’t think about this too much, or the fun spoils faster than whipped cream at a picnic.

Zemeckis has the Spielberg athleticism down pat. He knows how to use shots of moving feet to suggest action, action to suggest romance, romance to suggest ideals and ideals to suggest new ways to use sporty footwear. The trick is keeping the audience enjoyably winded but not hyperventilating.

What best sustains the momentum is the bounce and humor in the acting. Glover, as Dad, is absolutely winning as the stumbler who nearly misses his minor rendezvous with destiny, and Vancouver-born Fox, as Marty, can seduce a camera lens from twenty paces. Lloyd, as the Doc, produces entertaining mischief with his darting eyes, although his fruity scientist is occasionally over-ripe.

The most impressive contribution comes from production designer Lawrence G. Paull, who concocted that visual cornucopia called Bladerunner. One knows it’s 1955 by the fact that four uniformed attendants are seen servicing a single car at the local gas station, but there are less humorous touches, too; Paull’s work here has a consciously bittersweet quality. Between the eras, the oak trees give way to the fast- food restaurants and small-town America is seen to have decayed by the time it reaches 1985. We are brought back to a contemporary terrain which Back to the Future cautiously concedes is losing its appeal.

Predictably, however, Spielberg and Zemeckis have kept all the homespun values intact. They look patronizingly back at 1955 as a time of smug complacency, but 1985 doesn’t find them very anxious either. And with Back to the Future, Spielberg restores his plastered-on grin of boyish goodness; his screen world is never so messy that it can’t be fixed by the good intentions of people who have freckles.