All-In - The Rise and Fall of a Microbrand

It’s Sunday afternoon, May 27^th, shortly past 1pm. I was just sitting down to do some work on my company’s new website when I spotted the email from James Henderson, the industry persona non grata behind TempusFugit.watch, the blog which I’d describe as “lots of inconvenient truth about the industry, plus the occasional watch review.”

If you’re interested in the watch industry, you should subscribe to it. James is irredeemably candid in his scorching assessments and analysis.

It was the subject line which grabbed my attention. Succinctly – “Niall is Kaput”. Niall, for those of you who don’t know, is (or was) a Kansas City-based “microbrand” launched within the last decade.

If you know microbrands but don’t know of Niall, you can be forgiven. The brand’s luxury pricing put it well outside the peak of the microbrand pricing bell curve, where the focus is mostly on affordability, and the brand’s management never saw fit to participate much in online forums or Facebook groups, where most emerging microbrands find their core support.

Most of Niall’s social media seemed to be focused on Instagram in a two-prong attack, comprised of the official Niall IG account, “niallluxury”, and founder Michael Wilson’s personal account, “wilsonspeaking”. Skimming both IG accounts could give one the impression that the brand valued associating itself with semi-celebrities more than engagement with its target customer.

If you do know of Niall, it may be due to the company’s embroilment in a recent spate of warnings issued by the FTC to brands playing too fast and loose with the “made in USA” labels. Niall was one of three notable brands involved, the other two being Weiss and Shinola.

Disclaimer, I don’t know Mr. Wilson, and have no feelings, good or ill, about him or his now defunct brand. What I know of them is gleaned from observation and secondhand accounts. The picture I have is incomplete, and as such, any post-mortem on Niall could easily be mistaken. If James Henderson, with his knowledge of the industry won't do one, I probably shouldn't attempt one either.

I’m not psychic. I can’t see the future, or peer into other people’s thoughts. That said, I am observant, and an avid student of both human nature and historical patterns, as well as a meticulous researcher and data hound.

Instead of trying to explain what happened with Niall, and why, I think it’s better to make a few general observations, about Wilson/Niall to some extent, but more about the state of this business, and let them stand on their own.

LUXURY’S LAST BREATHS

Prior to starting my business making and selling watches, I did some research online.

I read the Fossil Brands report to shareholders cover to cover, as well as the company’s history going back to its founding. I read the Swiss Watch Federation’s annual industry reports going back five years. I read analysis from independent consulting firm Digital Luxury Group. 

I read up on the history leading up to and following the quartz crisis, including the rise of Nick Hayek and Swatch Group, and the industry consolidation which followed.

I found my way, repeatedly, to online watch forums, where I was able to get an unfiltered view into the statements, if not thoughts and feelings, of the enthusiasts who would seem to best represent the tastes and desires of the market.

It may be the case that my personal reading of the tea leaves was colored by my recent past – wherein I’d seen my income drop, a lot, during the prolonged global recession. But nevertheless, my conclusion after all that reading was that the luxury industry had painted itself into a corner by steadily raising the prices of their products faster than people’s incomes could keep up.

As of DLG's 2014 report, interest in luxury brands was on the rise globally, but almost all of that growth was due to China, whereas the rest of the world largely saw declining interest in luxury brands.

 

And while the fortunes of the wealthy may be increasing, and emerging markets may be minting new millionaires each year, the gap between the have’s and have-not’s is steadily growing, and the have’s seem to prefer brands with very strong market recognition, or brands with pricing so high as to make them unobtainium.

 

 

 

Those preferences seemed, and still seem to be taking their toll on the “luxury” brands which don’t fit either description. Thus we continue to see many “heritage” brands gasping what look to be their last breaths, while brands focused on the under-served mid-market (the nebulous segment between entry-level and “luxury”) seem to be doing better by comparison.

Against that backdrop, it’s always interesting to see new brands with luxury aspirations emerge. If the rule is that the wealthy prefer widely-recognized brands, or uber-expensive brands, the test of that rule is to see how well these upstart luxury brands fare.

Whether or not Niall represented true luxury is a subject open for debate, but what cannot be debated is the brand’s luxury ambitions, clearly demonstrated by both their Instragram handle and website URL – “nialluxury”.

THE GREAT EQUALIZER

Twenty years ago, at the dawn of the internet age, the world was riding a wave of prosperity which began with the boom-times of the 80’s, followed with the dot-com craze of the mid- to late-90’s. Social media and streaming media were not yet a force majeure.

This was probably the peak of the mainstream mass media’s power, when people were still subject to lots and lots of advertising messages, purchased at great expense by deep-pocketed large corporations.

But over the last 20 years, we’ve seen the fragmentation of media, concurrent with emerging technologies, and emerging movements, such as “buy local”, and the so-called “maker movement”.

If it isn’t painfully obvious already, advertising has mostly gone digital, and advertisers are able to effectively target small segments of the market, thanks largely to social media and internet analytics.

Many people of Generation X and Generation Y (i.e., “millennials”) are mistrustful of big business and the media. They’ve been the early adopters of technologies which limit their exposure to advertising messages. They’re more resistant to conspicuous consumption, and often embrace smaller brands with counter-cultural brand identities.

Baby Boomers may still have control over more money, but they’re getting up there in years, and not spending on luxury goods the way they used to. Luxury brands haven’t been effective in courting the next age cohort, due to their slow adoption of social media, low engagement, and apparent inability to notice the fundamental shift in the landscape around them.

Meanwhile, smaller upstarts have made very effective use of social media, and “engagement” is the new currency in brand-building. With Niall, despite the large following they had, there didn’t seem to be much engagement, and “wilsonspeaking” seems somewhat tell-tale in how unilateral it indicates the communication likely was.

WELCOME TO THE WORLD

The last time I counted, I found I had customers in over 50 countries of the world, and on every continent save Antarctica. It’s a global economy, and while I still have a sense of patriotism for the United States, the country of my birth (and where 2/3 of my sales still come from), I have friends all over the globe, many of whom don’t give a hoot about the words “American Made”.

As interesting as it is to see new “luxury” brands popping up, it’s just as interesting to see the machinations involved in brands attempting to drape themselves in the Stars and Stripes.

As spurious as many “Swiss Made” claims truly are, the Swiss Made label is at least realistically achievable for many brands. But the “American Made” label requires all or virtually all of the components to be made in America.

Clearing such a high hurdle has made it all but impossible for any brand to credibly make that claim. RGM, of Lancaster, PA, is likely the closest thing America has to a truly “American” brand, and even RGM shies away from using “Made in the USA”.

While I admire RGM’s founder Roland Murphy, and often think of him as “the last of the Mohicans”, he and his business are extreme outliers in many ways, not least of which is RGM’s ability to command five-figure prices. Despite being a small, non-Swiss brand with little to no advertising of any form, RGM is a legitimate “luxury” brand.

But what claim do the other so-called “American” brands have to their luxury pretenses, and prices? The truth seems to be – not much of one.

Most other “American” brands attempt to thread the needle by harping on that sliver of production they do domestically – be it assembly, or manufacturing of one or a handful of components – and/or talking up the high quality of their components or finishing, but those are components made and finishing done outside the USA.

What I recall of Niall’s watches is that the movements were “Swiss”, from Eterna (Eterna Movements having been owned by a Chinese company for a few years now), and they claimed their cases were made in the USA. 

Whether there was more done domestically, I’m not aware. In fact, whether or not the cases were actually made in the USA, I can’t say. What I can say is, no one seemed to care very much.

That’s the consequence of a global market – “Made in the USA” doesn’t hold much value outside the USA, and even within the USA, there’s a steadily growing acceptance that America’s status as the leader in manufacturing is long gone. People are more interested in getting good bang for their buck than they are in paying higher prices to support American jobs.

THE ENEMY IN OUR FUTURE IS US

Like most other microbrands – and like many “luxury” brands, for that matter - a lot of our components are made in China. I went there recently with the specific purpose of touring factories, to get a better understanding of the processes involved.

All the debate about “sweat shops” aside, labor rates in China’s manufacturing areas are steadily rising, and a new middle class is emerging there. My guide in China predicted that in ten years, all that production would move to other parts of Asia, like Vietnam or Thailand. 

When I asked what the Chinese people would do then, the response both sickened and scared me – “some of them are going to start microbrands, like yours.” No one likes to be confronted with the specter of their own future obsolescence.

The march of progress is unstoppable. Those who attempt to stand in its way will be trampled underneath it. The reality, whether we like it or not, is that this point we occupy in time is just one moment along a continuum. “American Made” is being re-valued. “Luxury” is being redefined. Those who cling to the old values and definitions will increasingly find them – if not themselves – obsolete.

The meta-tag on Niall’s website reads “All-In – Niall”. It appears they went all-in with the wrong hand, at the wrong time, so now they're now all-out. It's a cautionary tale poker players know well - the best hand at the start can quickly become second-best, and you lose.

Chris Vail is the founder and lead designer of Janis Trading Company, L&H and NTH watches, as well as the primary instigator of Janis-related trouble on social media.