Results 1 to 13 of 13
  1. #1
    Newbie
    Join Date
    June 4th, 2007
    Posts
    11
    High End Watches
    I have a client interested in extending their marketing efforts into the online/affiliate channel. I have a few concerns and would appreciate any feedback.

    1. The retail price for the inventory ranges from $5,000 to over $20,000

    2. There isn't a very big profit margin for my client for most of the watches in his inventory. Therefore the commission structure for such a high cost product for the affiliates would be a low percentage of the sale price (approx $200-$300 per sale). Based on my research (aff forums and Geno's book)related to commission structure for affiliates this may be a point on contention for the very expensive watches which will drop the commissions to 3% or less.

    3. The reality that high end watches and a subsequent aff program is a viable sales/marketing channel.

    Looking forward to everyone's feedback.

  2. #2
    Analytics Dude Kevin's Avatar
    Join Date
    January 18th, 2005
    Location
    Rochester, NY
    Posts
    5,904
    I guess the first two questions are:

    1.) Does the website convert well? Do people make that kind of purchase online now at the site?

    2.) Can you support taking phone orders (via SAS)?

    Even though the percentage is low for a commission, the amount is decent. So it is viable (to my way of thinking). But the conversion rate is going to be the key.
    Kevin Webster
    twitter: levelanalytics

    Kayak Fishing
    Web Analytics and Affiliate Marketing

  3. #3
    SEO: A Specialty - Web Design: Slow or outsourced andbeyond's Avatar
    Join Date
    June 18th, 2006
    Location
    The Call is coming from Inside the House!
    Posts
    1,332
    Ya what Noth said.

    Affiliates are used to less percentage on high end items. I dont think it is a big problem as long as the site converts and the rest of the program is in order.

    Some people like myself might want a datafeed if that is possible.

    And I am not sure what you do, but if you are not an affiliate manager exactly, you might want to consider an Outsourced Program Manager at least for consulting and to get the program started. Consultants save money in the long run almost always.

  4. #4
    AM Navigator Geno Prussakov's Avatar
    Join Date
    May 10th, 2005
    Location
    Washington D.C. Metro Area
    Posts
    11,798
    Quote Originally Posted by cic
    1. The retail price for the inventory ranges from $5,000 to over $20,000

    2. ...Therefore the commission structure for such a high cost product for the affiliates would be a low percentage of the sale price (approx $200-$300 per sale). ...this may be a point on contention for the very expensive watches which will drop the commissions to 3% or less.
    and

    Quote Originally Posted by Noth
    Even though the percentage is low for a commission, the amount is decent. So it is viable (to my way of thinking)...
    If their prices start from $5,000, on 3% we'd be talking $150.00 in commissions, while on 2.5% we'd be looking at paying affiliates $125.00 on the lowest priced item... In the book I did talk about insulting an affiliate with low commission rate. 2.5-3% is not a low commission in this case. Why? Because affiliates that would promote your "high end watches" would be the same affiliates that sell diamonds and other expensive jewelry. What are the common commission rates in expensive jewelry affiliate programs? Anything from 2% to 7% (but more often in the range of 3-4%) depending on general price competitiveness. If your prices are competitive and the product does sell online (see Kevin's post above), go with your 3% (or so) without hesitation.

    ...and, of course, do not hesitate to e-mail me should you need any help.

    Geno

  5. #5
    The "other" left wing davidh's Avatar
    Join Date
    January 18th, 2005
    Location
    Boston
    Posts
    3,492
    Well since the subject of "insulting the affiliate" has already been breached.....

    Anybody who tells you that they don't realize much of a profit margin on high-end wristwatches is either lying, or there are too many middle-men in his supply chain.
    CUSTOM BANNERS by GRAPHICS CANDY ~ Banner Sets and Website Graphics ~ Professional design, reasonable rates
    DESIGNER DOG CHECKS ~ We double-dog dare ya to write one!

  6. #6
    Analytics Dude Kevin's Avatar
    Join Date
    January 18th, 2005
    Location
    Rochester, NY
    Posts
    5,904
    That's an interesting thought Davidh. Guess I'm not familiar enough with that industry to comment on it.
    Kevin Webster
    twitter: levelanalytics

    Kayak Fishing
    Web Analytics and Affiliate Marketing

  7. #7
    .
    Join Date
    January 18th, 2005
    Posts
    2,973
    David wrote: > "Anybody who tells you that they don't realize much of a profit margin on high-end wristwatches is either lying, or there are too many middle-men in his supply chain." <

    I think it's a bit more complex than that. Return and exchange policies, phone support for sales, guarantees, and of course "price competitiveness" are going to be factors, also. If the site provides extensive product details and original photos, that's also a cost factor to add.

    But certainly, it's impossible to fairly evaluate a merchant without actually seeing the specific pricing for specific products. And ultimately, when a consumer purchases a high-ticket item online, price and return policy are huge factors, but only AFTER the merchant has first established credibility.

  8. #8
    Moderator MichaelColey's Avatar
    Join Date
    January 18th, 2005
    Location
    Mansfield, TX
    Posts
    16,232
    I would have to agree with David. If a watch merchant doesn't have the margins to pay more than 3%, I really have to question their supply chain and/or dedication to their affiliate channel. There's a ton of profit in some jewelry. High end watches might not be as insane as some other jewelry, but they still should have decent margins.

    What is your typical gross margin on your high end watches, if you don't mind sharing that number? Most affiliate-friendly merchants typically pay commissions equivalent to 25-50% (or more) of the gross margin of their products.
    Michael Coley
    Amazing-Bargains.com
     Affiliate Tips | Merchant Best Practices | Affiliate Friendly? | Couponing | CPA Networks? | ABW Tips | Activating Affiliates
    "Education is the most powerful weapon which you can use to change the world." Nelson Mandela

  9. #9
    AM Navigator Geno Prussakov's Avatar
    Join Date
    May 10th, 2005
    Location
    Washington D.C. Metro Area
    Posts
    11,798
    Quote Originally Posted by MichaelColey
    What is your typical gross margin on your high end watches, if you don't mind sharing that number?
    Good question to start from.

    I know sterling silver jewelry (and such) merchants often have huge profit margins (150-250%), while diamond merchants, for instance, do not show such impressive percentages yet earn enough to pay nice commissions... I also wonder what gross profit margin we're talking about with these watches.

    Geno

  10. #10
    Newbie
    Join Date
    June 4th, 2007
    Posts
    11
    Thanks everyone for your input and questions. Please see responses to each of your questions/concerns/comments:

    Noth:
    1.Site Conversion: I am waiting for details regarding any historical conversion data my client may have available, both offline and online.

    2.Most sales (certainly not all) will be phone orders, therefore, I will most likely go with SAS phone tracking and make it an exclusive program

    DavidH/MichaelColey
    1. Profit Margins - It is my understanding that time pieces do not have anywhere near the profit margins that jewelry has. I have asked my client for gross margin information which I would be more than happy to share with everyone.

    2. DavidH wrote: "Anybody who tells you that they don't realize much of a profit margin on high-end wristwatches is either lying, or there are too many middle-men in his supply chain."

    Do you have any examples of merchants in the wristwatch industry that has margin information I can refer to? I would be interested in comparing what my client says versus other merchants within the same industry.

    andbeyond
    1. Yes, we will be providing a datafeed

    2. I have been doing PPC, affiliate management and lead application development for mortgage companies (generating leads) for the past 5 years. Now that I am getting into new verticals (consumer goods, other) and the fact that the affiliate industry has matured and become very competitive I am spending a lot of time doing research including, but not limited to joining abestweb and reading Geno's book.

  11. #11
    .
    Join Date
    January 18th, 2005
    Posts
    2,973
    Geno wrote: > "huge profit margins (150-250%)" <

    I suppose this is a "pet peeve" of mine, but this is a distracting misuse of statistics.

    You can't have a "profit margin" greater than 100% because "profit margin" is defined as the portion of the purchase price that represents profit; by definition, a portion of something cannot exceed the whole, so you can't have a portion that represents more than 100%.*

    I think you're referring to "markup," which is the gross profit divided by the wholesale price (so that if you buy a watch for $1,000 and sell it for $1,500, you would have a 50% markup; if you bought it for $1,000 and sold it for $3,500, you would have a 250% markup).

    A long, long time ago (while in college), I sold costume jewelry at flea markets, and my wholesale cost was usually about 1/4 to 1/3 of the retail price that I charged (for example, I might pay $3-per-dozen for items that I sold for $1 each), so I had a "markup" of 200% to 300%, and a "gross profit margin" of 66% to 75%, although my net profit margin after other expenses was much lower. At that time, most retail stores paid much less than I did for the same products ($1 to $2 per dozen, for example) and sold them for much more ($3 to $5, for example), and thus they had immense markups -- far above 1,000%.


    * In theory, it is possible to have a "profit margin" that is higher than 100%, if there is some "incentive" on top of the purchase price. (Certainly this doesn't make any sense for products like "high-end watches," which are likely to be one-time purchases.)
    • For example, a web hosting company may set a commission rate at 200% of the first month's subscription price, which arguably represents a 200% profit margin for the affiliate, but usually the payment is contingent on the customer paying for multiple months, so if the requirement for payment is 3 months paid, then the gross profit margin for the affiliate is actually 66%.
    • Another example might be a retailer who is actually paid fees to distribute an item with a nominal list price, usually where the item is either a "demo" or a "loss leader" intended to entice future transactions; a razor manufacturer might theoretically pay a retailer $5 for each razor that is sold to a consumer for $2, because the manufacturer expects to sell lots of razor blades.
    • Some magazine publishers pay to have low-cover-price magazines sold at retail stores, so that if Safeway sells 1,000 copies of a magazine at $2.99 each, it might receive the magazines for free plus receive a $200 payment, so it would have a 166% profit margin.
    Last edited by markwelch; September 4th, 2007 at 10:23 AM.

  12. #12
    AM Navigator Geno Prussakov's Avatar
    Join Date
    May 10th, 2005
    Location
    Washington D.C. Metro Area
    Posts
    11,798
    I know, Mark. I did mean a markup... Thanks anyway.

    Geno

  13. #13
    Member
    Join Date
    June 28th, 2007
    Location
    Seattle, WA
    Posts
    75
    From a personal aspect, if I was going to drop $5-$20k on a watch, I would be 1 of 2 types of buyers...

    1. Very wealthy and would definately purchase from a known and trusted local jewler who I already have a prior relationship with...

    2. Not very wealthy and either spending money I didn't have or saving up for a while and thus would be shopping for price. i would frequent the local (and mroe expensive) stores, and then find the lowest price online and save on tax.

    The second of which will be your target market.

    Phil

  14. Newsletter Signup

+ Reply to Thread

Similar Threads

  1. High End Goods
    By RyanBarr in forum Starting an Affiliate Program & Merchant Q&A
    Replies: 3
    Last Post: June 29th, 2010, 10:47 PM
  2. Anniversary - High End
    By gaill in forum ShareASale - SAS
    Replies: 1
    Last Post: May 30th, 2005, 01:58 AM

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •