Competitive Advantages

Competitive Advantages

Leading and complementary brands focused on Classes B and C. We have been operating in the Brazilian market since 1956 and have brands that are recognized and established in the watch segment. Our brands had a market share of approximately 40% in 2012, according to our estimates based on data from SUFRAMA. Our brands are highly complementary with positioning in different styles, seeking to maximize the space used in our clients’ showcase and reach different segments of the population without creating competition among our products. We believe our brands, namely “Technos”, “Mariner”, “Mormaii”, “Euro”, “Allora”, “Touch”, “Dumont”, “Condor”, “Fossil”, “Michael Kors have leading market positions and are among the most desired accessory brands by Classes A, B and C consumers in Brazil. Our internal marketing team is, along with the advertising and brand development agencies, dedicated to the creation and dissemination of publicity campaigns and point-of-sale materials intended to build our brand recognition and, as a result, reinforce our brand’s positioning and visibility to our Clients and Consumers

Diversified and comprehensive distribution network and strong relationship with Clients. We distribute our products to a broad network of Clients consisting of jewelry stores, watch stores and eyeglass stores, many of which are family businesses with a single point of sale. We have established our distribution network over the course of our history, developing strong relationships over decades and even generations. In addition, we supply our products to the main fashion-oriented department stores in Brazil, as well as large online retailers. Moreover, the sale of our products is evenly distributed geographically, reaching certain regions where we believe our competitors, with smaller sales teams, do not operate. The reach of our distribution channels also provides us with significant exposure to areas that have the highest economic growth in Brazil. Our products are perceived by our clients as having high turnover and unit margins, contributing to consumer traffic and interest at their stores and, consequently, improved business results.

Exclusive and experienced sales team. We serve our Clients network through our exclusive sales team, strengthening the relationship between our sales force and our Clients. Our sales force compensation is based on commissions and premiums according to short- and long-term goals and results. We consider our sales team to be an important competitive advantage, given that the majority of our competitors in the fashion accessories industry outsource their representatives through nonexclusive arrangements, decreasing the product knowledge and commitment of the sales person to the company.

Balanced portfolio with a mix of product launches and line products. In developing our products, we aim to: (1) constantly update our collections; and (2) create and maintain a collection of line products. Our internal design team is trained to capture the most important fashion trends and translate them into our product designs in partnership with our suppliers, combining agility and speed with attractive costs and superior quality. Our design team is also responsible for maintaining our collection of line products, a set of watches with many years of success and strong brand identification with our Clients and Consumers. Our product launches keep our portfolio interesting and current, attracting new Consumers and justifying regular sales team visits to our Clients. Our line products, in turn, have constant and captive demand and provide us with significant results, mitigating the risk of our overall portfolio of products.

Flexible supply chain with strong operating efficiency. We outsource the production of watch components to Asia and assemble the final products in the Manaus Free-Trade Zone. We purchase manufactured components from our foreign suppliers in order to avoid the investment of capital to produce the components, allowing us to maintain flexibility to work with different partners who are able to fulfill our orders in a shorter time frame, at lower prices and with better quality. Moreover, long-term direct relationships with our suppliers, without intermediaries, have yielded better quality components, greater knowledge of our products, and more commitment of such suppliers to us. We have an efficient assembly and distribution facility in Manaus that allows us to execute the final assembly of our products and distribute them quickly and with lower direct and indirect assembly cost increments.

Quality control and competitive post-sale services. We have a strong structure for quality control of our products and services in the source of our watch components in Asia, internal processes conducted in the State of Manaus and post-sale services provided to our Clients and Consumers. Based on internal research, we understand that high quality and efficient post-sale services are two of the main factors that make the Client decide to work with a watch manufacturer. In our plant in the State of Manaus, we have employees highly committed to quality control in watch components reception, as well as in internal assembly, storage, and delivery processes. In addition to our physical presence, we also provide consumer assistance services all over Brazil through a toll-free number and electronic channels. We seek to invest in client assistance services to obtain competitive edge in the market and remain the first choice by our Clients. Our board of executive officers is focused on our success. As a result of our efforts in high quality and post-sale services, we were able to achieve excellent results, decreasing significantly our rate of defects at source, decreasing our average time to fix watches and achieving a high level of client satisfaction, as measured by our consumer assistance service.

Historical growth, in line with high and consistent returns and strong cash generation. We have a track record of growth, profitability and cash generation. Our margins were defended, even during economic downturns, by our market leadership, brand recognition, extensive distribution network and solid capital structure.

Experienced management team members that are also our shareholders. Our management team combines executives with more than 30 years of experience in the watch segment with executives with knowledge and experience in other segments from various Brazilian and international companies and with outstanding academic credentials. This same combination is present in our other levels, creating a healthy and innovative dynamic working environment. Our strong culture has developed over 56 years and is based on ethics, quality and entrepreneurship. We are one of the Brazilian companies that pioneered the use of variable compensation to incentivize and compensate our employees. We have had a profit-sharing program since 1989, entered into in 1995 through an agreement among important unions to which the employees of our subsidiaries are associated, that distributes a significant percentage of our results. Our current profit-sharing program is linked to our growth and results goals, department-specific goals and individual goals, each of which is set forth at the beginning of the year and monitored every month with transparency. Currently, our Board of Executive Officers and other key employees hold ownership interest in our capital stock, aligning the interests of our shareholders with those of our management. 

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