MSRP’s on consumer goods from nearly all product categories have been ingrained into the landscape of American enterprise going all the way back to the period of the Industrial Revolution.  This common practice has become just as much a part of the marketing of a product as has the manufacturing of the product itself.

For many years, the chain of how a product reached the end-consumer was pretty much the same whereby the product began with being manufactured by a company (Manufacturer) and ended up being sold to the consumer in a retail store (Retailer).  While there may be different layers of distribution involved between the Manufacturer and Retailer, the MSRP has always been and continues to be based upon accepted principles of manufacturing cost within its own category within its own industry.  For example, in some product categories every dollar of manufacturing cost may equal three dollars at the retail level; and yet in other categories one dollar of manufacturing cost could equal as much as thirty dollars at retail.  There are so many variables that go into these formulas, including (but not limited to) capital investment to manufacture, patents, difficulty in manufacturing, waste, rarity of source materials, and on and on. 

The one constant pretty much across the board in nearly all consumer related products sold at the retail level was that they were being offered by the Retailer in a store.  Nowadays, we refer to these “stores” as brick-and-mortar stores; meaning that they were and are actual buildings that a consumer could go into and see and touch the product and then buy it.  These brick-and-mortar Retailers have expenses for their stores and their business; and for many years it was considered very normal for a Retailer to get double his cost (wholesale) for any product sold.  This practice came to be known as “keystoning.”  When a Retailer gets “keystone” he gets double his cost.  And in the higher-end environments like nicer neighborhoods with higher rents, it is not uncommon for Retailers to get “triple-key” (triple cost).  So when manufacturers would create their MSRP’s (regardless of their particular category) they would always allow for at least a keystone markup at the retail level and then back out their margins from there.  In the jewelry and watch industry, triple key markups for high-end retailers can be traced back to the 1950’s! 

In the mid 1980’s, the birth of home-shopping television or Direct Response TV (DRTV) ultimately impacted the way that consumers would buy their goods.  At first, the impact was negligible and limited to only a few categories.  By the late 90’s however, the impact was felt all across the landscape of independent store owners.  But that was only the first part of what has now become known as Non-Traditional Retail (NTR).  In the mid-90’s the Internet become known publicly and although there were many skeptics, goods were being sold online!  Companies were able to sell goods without a physical brick-and-mortar store. 

These two avenues of distribution (DRTV and the Internet) are now referred to as “electronic retailing.”  In 2007, tens of billions of dollars have been spent by consumers via electronic retailing.  For the brick-and mortar Retailers the impact has been heavily felt.  The big fish are gobbling up the little fish and it is increasingly more difficult for the independent brick-and-mortar Retailers to survive.  Due to the impact of electronic retailing, the brick-and-mortar’s are selling less goods, so they must get larger margins; in most cases at least triple-key.  However larger margins make it tougher to compete with electronic retailers who are working on unprecedented tight margins (in some cases less than 20% Gross Profit Margin). 

From a manufacturing standpoint there are other price-determining factors within the “terms” of doing business with these two very different avenues of distribution, particularly in the jewelry industry.  The jewelry industry has forever been handled on a “memorandum” basis; retail jewelers will take goods on “memo” and if the goods sell, then the Retailer will pay the Manufacturer for the goods.  If the goods do not sell, then the Retailer can return the unsold goods to the Manufacturer.  As a result, memo’d goods are priced higher to the Retailer than if the Retailer were actually paying the wholesale price.  And subsequently, the retail selling price to the end customer is also higher.  In the watch segment of the jewelry industry, the higher-end brands will put watches in a jewelry Retailer’s store on a program.  This is where the watch Manufacturer will come in every quarter and “refresh” the Retailer’s goods with new product and take back stale goods that are not moving.  On these types of programs, where the Manufacturer must wait for his money (and even take back unsold goods) the wholesale prices are considerably higher than what they might be if the Manufacturer could just sell his goods for cash; but that’s the brick-and-mortar retail jewelry and watch business. 

As a consequence, when you add the triple-key (or more) factor to the “terms” factor, the MSRP’s on watches in stores are considerably higher than they really need to be in comparison to the Manufacturer's cost of actually producing the product.  However, these MSRP’s are all perfectly acceptable and even laudable when examining the methodology of those Manufacturers who choose the brick-and-mortar avenue of distribution…because there is nothing else to compare the product pricing to.  It doesn’t matter if the MSRP is thirty times manufacturing cost because there is nowhere else to buy the product.  

With today’s environment of price-conscious comparative shoppers, the brick-and-mortar Retailers must focus on specific products that are not available via electronic retailing.  For the brick-and-mortar’s to offer goods that are available at a fraction of the price (via electronic retailing), would be to risk alienating their loyal customers.

As a Manufacturer, it is almost a necessity to choose one avenue or the other; either brick-and-mortar or electronic.  In order to do both, it is practically essential to have two completely different lines of product, so that the brick-and-mortars will not be put in the unenviable position of gouging their customers for the same product available at a fraction of the price.  So there are many Manufacturers that will not sell their product through electronic retailing in order to protect the integrity of their Retailers; and conversely there are now manufacturers that have chosen the route of electronic retailing and do not offer their product via traditional retail channels.

The mission and vision for Stührling Original has been to deliver fine Swiss engineered timepieces to a broader audience than traditionally had been purchasing them.  In striving to achieve this vision (on the distribution side of things) it has been and remains the direction of Stührling Original to specialize in electronic retailing.  This means that Stührling Original timepieces will be found online (on the Internet), home-shopping television, and direct mail catalogs; and conversely you will not find Stührling Original timepieces in traditional brick-and-mortar retail jewelry stores.

So for those watch companies that are distributing their product via traditional channels on programs with triple-key (or more) margins built-in for their Retailers, their MSRP’s have been accepted as rote for many years.  However, what about manufacturers like Stührling Original who choose to distribute their products through electronic retailing exclusively? 

Just because a product is not available through traditional avenues of retailing, does that mean that the product is worth less than if it were offered in brick-and-mortar stores?  For a hundred years Manufacturers have been making their MSRP’s based upon accepted principles of manufacturing costs for their products to sell in traditional retail outlets.  Since the 1950’s high-end jewelry stores have been triple-keying their goods.  If Stührling Original were to market its product to brick-and-mortar jewelry stores, they too would be engaged in the same pricing practices as all of the other watch Manufacturers who distribute through traditional retail channels.

By distributing their watches via electronic retailing, Stührling Original is able to sell their watches at a lower cost to its resellers; and those electronic resellers are working on super tight margins and are thereby able to offer the watches at very reasonable pricing to their customers and obviously this is good for the consumer. 

So in order to compare apples to apples, it would be unfair for a Manufacturer who distributes their product via non-traditional retail channels to calculate its MSRP’s on what the watch actually sells for in comparison to the MSRP’s of the watches of all those other Manufacturers who distribute their product through traditional Retailers.

Please know that while the fair market value of the Stührling Original timepieces are noticeably less than the “suggested retail price” (MSRP) listed for each Stührling Original model, (for purposes of a fair comparison to other watches in the marketplace) the MSRP’s for the Stührling Original timepieces are based upon accepted principles of manufacturing costs for the watch industry…as if they were to be distributed via traditional Retailers in a high-end environment.