Company Profile: Fossil Group Inc. in Global Personal Accessories
Fossil Group is an international manufacturer and distributor of personal accessories, founded in 1984 by the Kartsotis brothers. It has been publicly traded on the NASDAQ Global Select Market since 1993. The company specialises in fashion accessories and manages the product lifecycle solely from designing, marketing to distribution. In 2017, Fossil Group is committed to launch a few hundred new smart watches, through its own Fossil brand and through its licensed brands Armani, Michael Kors, Diesel, etc.
Out of its four product segments, Fossil Group is highly dependent on Watches for revenue and growth, which consistently makes up more than 70% of its net sales (76.6% in 2016). This is due to a wide range of men’s and women’s watches and smart watches, supported by a diversified distribution network, including Fossil and Skagen branded stores. In the Jewellery segment, sales from Michael Kors and Fossil were the bigger contributors to jewellery sales decline. However, Asia Pacific saw an increase in jewellery sales of 75%, from USD7.2 million to USD12.6 million, driven mainly by India.
The main threats to Fossil Group Inc. are high progress rate in technology and Non-specialized watch makers to compete directly. Fossil’s increasing dependence on technology products represents a threat as new competitors’ technologies could evolve faster than its own, making Fossil products obsolete. The core product category in Fossil Group is watches. This product is another accessory that fast fashion retailers can use to gain market share in this industry, thus making watches more affordable for consumers.
As its strength lies in manufacturing and distribution of watches, Fossil Group has continually derived over 70% of its net sales from its Watches segment. Hence, despite the slowdown in watch sales, its growth strategy still involves strengthening traditional watch offerings, particularly in Swiss watches and licensed brands. Surprisingly, Fossil’s licensed brand in watches Michael Kors, is one of the biggest Fossil competitors in accessories, mainly bags. Fossil and Michael Kors’s market overlap is USD396 million, with 29 markets in common. This overlap occurs mainly in North America and comes mainly from mid-priced handbags, crossbody bags and wallet and coin pouches. While Michael Kors bags target mainly female consumers, Fossil bags target mainly male consumers. An astute strategy for Fossil to follow would be to increase its brand awareness in women’s bags
Even though Fossil Group has presence across Asia Pacific, it has not fully exploited the growth opportunities of the region. In mid-priced watches, the region is expected to see the fastest growth over the forecast period 2017-2022 with a 3.8% CAGR at constant 2017 prices. Large markets such as India, Indonesia and Japan are expected to lead growth thanks to growing interest in international brands and increasing willingness and growing disposable income to spend on personal accessories, which are viewed by consumers as essential tools for them to improve personal appearance along with apparel purchases.
Fossil Group’s brand portfolio, consisting of brands such as Fossil, Michael Kors and Tory Burch, is less varied and more concentrated on the mid-priced range. This is because the company believes that most consumers regard watches not only as timepieces, but also as fashion accessories, and that they more often than not will purchase several watches with varying styles, functions and prices.