Omega x Swatch MoonSwatch: the challenges of success

We asked Swatch if the company had any way to measure the increased demand for this product, and the reply may seem surprising. Reaction within the company to the MoonSwatches was overwhelmingly positive, with many (of course, unfulfilled) requests from employees to purchase watches. This ‘internal marketing research’ is uncannily prescient, per the Swatch supply chain manager we spoke to. Combined with the reactions provided by influencers, Swatch has become adept at hearing demand sensing signals for product launches. 

Swatch has planned MoonSwatch as an unlimited product with an affordable price tag. While Swatch watches are produced in Switzerland, a handful of components are sourced from China. Many have seen the images of the backlog of ships at the port of Shanghai caused by strict COVID lockdowns. Supply chains with global footprints are struggling to keep up, and air cargo capacity is also hard to come by. In the case of China, this problem has just been exacerbated by the recently introduced general travel restrictions for Chinese citizens. 

As the Swatch manager explained, there was no time to build up safety stock on components for the MoonSwatches before the launch. The supply chain is working with vendors to expedite orders on a product whose supply chain did not have agility as a priority. On top of this, one of the suppliers is wrestling with a perceived quality issue, with blue color needed for one of the SKUs. So, despite the product’s popularity, scaling up production is impossible: it would be hard to imagine more challenging times to expedite such a critical increase in production unless the availability is to remain very low. 

Strategy in a time of supply shortages 

Finding the tradeoff between safety stocks, working capital and agility is a difficult balance to maintain. Swatch’s position – having  immediate visibility into launch performance through a vertically controlled downstream supply chain and domestic in-house production  – is a powerful one. However, with a handful of components sourced globally, realigning and ramping up production in the face of unprecedented success is a big challenge.   

Holding a sufficiently high safety stock would have supported Swatch during the times of demand peaks. Now, cooling down secondary markets by providing high service levels to customers should be Swatch’s priority in face of an unlimited production run.  

Because of supply chain issues with components, the strategy to sell MoonSwatches offline, reducing the number of flagship stores and increasing the shipments per point of sale is one option. This appears to be the current tactic, as the Swatch website shows only selected stores carry the product. Another option would be to hold the inventory of MoonSwatches for some time, instead of selling them immediately, and then to release this inventory all at once, sending a strong signal to the secondary market. If the signal reaches the audience successfully, the backlog situation will be normalized. If the signal is not strong enough, the backlog may take an upward trend again. Nevertheless, in both cases and even during the times with no in-store inventory, loyal and non-loyal customers will be attracted to stores. 

The introduction of the MoonSwatch collection has been a tremendous success for Swatch. Reaping the learning of this production introduction on the supply chain side will prove as important as capturing the marketing opportunities and will become a reference point for Swatch and other companies facing uncertainties in supply and demand.