On the face of it Swatch and Tiffany look like unlikely bedfellows and they have now come to blows in an acrimonious law suit over their brand partnership. This is when partnership marketing goes wrong.
Luxury-goods maker Tiffany & Co. has launched a counterclaim against Swiss watchmaker Swatch Group AG for damages related to a failed partnership between the two companies woth 541.9 million Swiss francs (US$590 million) from Swatch after the Swiss company and its affiliate, Tiffany Watch Co., claimed 3.8 billion francs in damages from Tiffany & Co. in December.
Swatch said the counterclaim has "no factual or legal basis" and that it will be "vigorously contested."
"I think we all know in the watch business there was an opportunity for a brand like Tiffany to have a big success," Ms. Hayek from Swatch said. "If you look at the [sales] numbers of Chopard, or Cartier, there is a big business. It's not jewelry business, but watches from a jewelry brand."
This may have been where things went wrong.....
Swatch are a mass market watch brand not in the luxury sector. Tiffany are an
aspirational luxury brand and were looking for a jewelry watch not a mass consumer watch. Why they ever got together is beyond me....
The two companies formed an alliance in late 2007 to spur the development, production and global distribution of Tiffany brand watches. The alliance, which included setting up Tiffany Watch Co., ended last September.
At the time, Swatch said it terminated the accord following Tiffany's "systematic efforts to block and delay development of the business." Swatch cited a material breach of contract and said the company would file for damages.
I can imagine that this is related to designs that Swatch thought would sell and which Tiffany thought would damage their brand. A classic case of mismatched brand partners.
In a statement made last year, Tiffany blamed Swatch for failing "to provide appropriate distribution for Tiffany's brand watches." Read this as being, not in mass market shopping malls.
Tiffany watches in a normal Swatch store wouldn’t work, there would have had to be either Tiffany branded outlets in luxury malls or a more premium Swatch outlet designed in a very luxurious way to communicate the Tiffany brand appropriately.
Despite being hailed by both companies as a historic agreement, the alliance never really took off.
The original intention was to reach sales of about 300 million francs to 400 million francs—on a par with Italian luxury company Bulgari SpA's watch sales, said analyst Rene Weber at Bank Vontobel in Zurich. "In the end it only had sales of around 20 million francs," Mr. Weber said.
Analysts said that Swatch will probably seek fresh partnerships to broaden its portfolio, but this was ruled out by Ms. Hayek, the company's chairwoman. "We are not looking at new partnerships," she said.
"At the moment we have no new partnerships in mind." Once bitten twice shy shows the necessity to form a brand alliance of match goals, brand values and company values.