In the watch world, small companies like Redwood (also called micro-brands) have become a popular choice for watch enthusiasts over the last decade.
Without the huge overhead of a large company or the burden of corporate constraints, we are able to create unique and high-quality watches, while keeping prices affordable.
However, there are several challenges that we encounter. In this post, we want to give you a glimpse of what goes on behind the scene at Redwood and discuss the biggest difficulties that we face as a small independent watchmaker - how we manage them, and how it affects you.
Predicting demand is one of the biggest challenges that micro-brands face. When we release a new model, we never know how many watches we are going to sell. We try to get a feel for the popularity of a model but it remains a difficult exercise.
The other problem is that it takes a very long time to make watches. At a minimum 10-12 weeks (but up to 16+ weeks) from a production-ready design to quality control. On top of that, supply chains have been affected by the pandemic, sometimes creating unpredictable delays. Sourcing and coordinating the production of many different parts takes months. If any one step goes wrong, it creates more delays before being able to restock.
This means that we can easily end up with too much or too little inventory. This leads us to the next challenges below.
Too Much Inventory - Financing Issues
This is a big challenge for micro-brands. We have to pay for our inventory upfront, which can be difficult to afford. Watches are very expensive products compared to clothing or food. Our most affordable watch is the Field v3, ringing in at $159.
With a batch size of a few hundred watches, we are looking at serious money for just one series. Multiply this for different series (we currently have 7 in the works) and increase the price to $269 for a Tactical v2 Automatic and we are staring at massive inventory values.
If we don't sell enough watches, we're stuck with a lot of inventory that we can't afford to pay for.
Not Enough Inventory - Running out of stock
Although it sounds like a good situation to encounter, running out of stock is a huge problem for micro-brands. We often sell out of our most popular models, and it can take months to produce more. This can be very frustrating for customers that are waiting for a restock or were planning on ordering a specific watch they wanted. It is also a lot of lost revenue that we could have been used to finance the production of new models.
How we Mitigate the Risks
Since predicting demand more precisely can help us avoid having too much or too little inventory, we spend a lot of effort doing trying to get it right. Our strategy looks like this:
Looking at past sales
When a specific model was popular in the past, we can generally make conclusions about the popularity of a new model with similar characteristics or similar specs.
Customer feedback and surveys
We send out surveys about once a year to our customers and subscribers. We try to get a feel for which new model will be popular, which trend is strong among our audience and specific features that appeal to the friends of Redwood. Your feedback is invaluable to us and we are always happy to hear from you.
We sometimes run pre-orders for new models. This allows us to gauge the popularity of a series before production is complete. We can then adjust the production size early on without creating delays and minimize the risk of too much or too little inventory.
For our customers, there is the benefit of knowing you will not miss out on the exact model you want. We also always include a special gift for our pre-order customers.
We hope that this post has given you some insight into the challenges we face - and how we manage them. Thank you for reading!
The Redwood Brothers