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GLau's original post offers a rare glimpse into Patek Philippe's distribution philosophy, directly informed by a conversation with Patek management. This article synthesizes GLau's insights with community discussion, providing a comprehensive understanding of Patek Philippe's strategy to prioritize long-term loyal clients over 'flippers.' It explores the complexities of allocation, the role of Authorized Dealers (ADs), and the challenges collectors face in acquiring highly sought-after references.
INTRODUCTION
With recent threads describing the difficulties of purchasing a Patek watch, I reached out and had an informal chat with Patek management to understand more about their objectives and policies. Perhaps some of the bad feelings experienced by our forum members could be eased if clarification be provided on how their distribution system currently works and how final allocations to customers are done. Below is my understanding on the overall system.
DISTRIBUTION STRATEGY
Patek sells to their 100% owned distributors who cover much of the world, and to chosen independents elsewhere. Owned: China, Hong Kong, Japan, Singapore [covering Indonesia, Malaysia, Singapore, Thailand, Philippines and Vietnam], Spain, UK, the rest of Europe, and USA. Independents: Mexico and Taiwan. This distribution network is a strategic choice, enabling Patek HQ to focus on research, development, production and support rather than managing every country’s different business dynamics.
PRODUCTION STRATEGY
Patek prepares forecasts and decides about yearly production. For 2024, they aim to increase production by 2-3% more than 2023. Naturally the existing situation and predicted future market conditions will help to formulate production plans.
DISTRIBUTION NETWORK
Distributors will manage local allocations with respective ADs because retailers can better understand local cultures and practices better than a team back in Switzerland. The distributors are responsible for local logistics, marketing and branding for their own regions.
RETAILERS (what they SHOULD do)
Authorized Dealers manage and incentivize their sales teams which has an effect on how the sales team in turn behaves with customers. ADs are expected to sell to customers in their region (to maintain territorial fairness) and to prioritize customers who can become long-term loyal clients, not flippers. ADs have the final say on customer allocations, thus their respective sales training and sales management may achieve different business outcomes and customer satisfaction levels. Given the high desirability of Patek, AD Management should want to allocate pieces in a way that will maximize a salesperson’s earnings and promotions for the short to medium term, while maintaining professionalism and protecting the brand. AD Sales should aim to please existing customers (newer vs older, bigger purchases vs smaller amounts, etc.) and strike a balance satisfying wants from new vs existing clients.
ADs are expected to “play by the rules” which do not allow for bundling and other forms of customer “blackmail”. Patek management was kind enough to allow me to share with our forum the attached letter that Thierry Stern had written to ADs on bundling.
ADs might not behave as above in all instances as we know. So what are we to do when we are treated in a manner contrary to expectations?
CUSTOMER FEEDBACK
Patek is a family business that focuses on the long term, and Thierry/upper management have expressed their concern for fairness and accessibility for both existing and new customers. FYI, In 2023 around 25% of sales went to first time customers buying ladies' and men's non-complication watches.
Patek encourages customers to write to them about legitimate grievances resulting from interactions with Authorized Dealers. The company engages in direct discussions with ADs found behaving badly such as bundling, and takes "corrective actions” when warranted, such as revoking agreements of ADs that violate Patek guidelines. Of all the recent ADs that got their licenses revoked, the % related to bundling was not an insignificant amount.
IDEAS FOR IMPROVEMENT
Perhaps Patek could directly contact each buyer to ask for feedback on his/her experience with the salesperson and AD, or provide a response mechanism with each product. Based on buyers’ comments, Patek could then help ADs to improve unfortunate situations and also congratulate or reward exceptional service.
What are your thoughts on this subject and suggestions to ensure more fair allocations?
Patek will definitely welcome your comments.
...what about asking a customer to purchase a Patek they don't really want to get the Patek watch they actually want?
We know how difficult it is, nowadays to establish a new relationship with a new AD. How can they take care of existing clients who were abandoned? Should they give the names of those to another nearby AD and asked that the AD take care of them? PS: I’m one of them, so my only channel is buy from grey or flippers lol. Isn’t it ironic?
I do not have all the answers but have made some suggestions on improvement for more fair allocation policies. What do you suggest ?
My friend was in the same situation. He was introduced to another AD in his location. Starting a new relationship with an AD is always challenging. Other suggestions ?
...so I can see them asking about a customer's history with buying Patek in the past. But I am totally against the practice of 'You may want to consider a Calatrava or two before you can have the perpetual you really want.'
which part(s) you do not believe it and why. Also I would appreciate if you could reply in a more friendly way such as “I strongly disagree because …”. Would this way of engagement be possible ?
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