9.  Competition

There are basically two types of online operation that will directly compete with -ZiWatches:

A.     Existing online watch shops

There are hundreds of shops that are selling Swatches watches can be find in the search engines. Most of the existing online watch shops are not only selling fashionable watches, they are also carrying products in totally different style and in extremely different price range such as Rolex, Jewelry Rado and some even Patek Phillippe and Vacheron Constantin. This arrangement will often confuse customers and hard to create individual identity to the shop. Because they carry a lot of brands in their shops, the choice of Swatch watches is very limited, and customers will always find difficult to search for their favorite items in the shop.

ZiWatches will clearly position itself on selling fashionable watches at medium to low price range in the market. Its core brand is Swatch watches at the early stage and will carry more brands of the similar styles at the expansion stage. People looking for stylish watches will definitely recognize that ZiWatches is the right place to shop. Among those existing online watches shops, some Web sites are too complicated to use, some may take quite a long time to load the image and some don’t even show the prices of the watches. The Website design of ZiWatches will be clear, simple and user-friendly. People visit its site can search for what they want in a very short time.

Although there are so many online watch shops, only a few of them have clubs for their customers, not to mention any other value-added services. ZiWatches hopes to maintain a long-term relationship with customers through its club. There is a large database to record each member details including their background (eg. age group, profession, country of origin, type and amount of purchase, any special request etc.) All these are valuable information for market analysis and strategic planning.

The sales terms and conditions for new entrant in the watch industry is quite harsh because the discount offers from the distributors are mainly depend on the sales volume or previous connection. Normally, a start-up watch shop can only obtain around 20% discount from its distributor. By observation, at present, most of the existing online watch shops can only offer 5%-10% discount to their customers. Since there is no import tax for watches, the list prices of watches in Hong Kong are already 10%-20% lower than many other countries. Obviously there is enough room for ZiWatches to undercut its rivals with a very low cost strategy. However, this may arouse unhealthy competition in the marketplace and it will be difficult to raise the prices again if there is any adverse conditions occur. Therefore, ZiWatches decided to offer discount to its customers in a subtle way through membership schemes.

A.     Hobbyist Websites

There are hundreds of hobbyists Web sites for Swatch watches, amateur collectors run most of them. Some are purely intend to display their favorite items and share experience while the others would like to sell or seek for the exchange of their collections. However, they are mainly selling second hand models and the Websites are often loosely layout and sometimes filled with the owners’ personal photos. There may not cast a direct threat to ZiWatches’ business. Instead, ZiWatches plan to select some interesting Web sites and invite them to join its link exchange program. This will increase the exposure of both parties.

B.         Parallel Imports

It is the marketing strategy of Swatch Inc. to distribute different design of Swatch watches to different countries. Swatch sends each store Swatches on its own prerogative and it runs only a limited of each design, sometimes only 100-300 for the entire world. If the collectors wanted the full collection, they have to search out every Swatch outlet for a list of their inventory. People have their own stories to start collecting Swatch watches, whether it is for matching different clothes, mood and occasions, as memory reminder, for trading or for sentimental reasons, consumers add their own social value to the Swatch. Because of the high demand in the marketplace, it encourages the parallel imports of Swatch watches over the world. These activities to a certain extent affect our strategy of providing Asian Swatch models to other countries. However, Ziwatches can still undercut these parallel imports in terms of price.

C. Physical Watch Shops

Normal "bricks and mortar" watch shops offer many advantages to customers. Not least because the customer can see and feel the product, and there is a physical shop for them to take the product back should there be any problems. However, the overhead costs of normal watch shops are much higher than online operation.