Layoffs at Daniel Wellington. Is this the end of an era?

In early June 2022, Swedish newspapers relayed the news that Swedish watchmaker Daniel Wellington will be laying off 15% of their workforce, which would affect half of the staff based at their Stockholm headquarters (Williams, 2022).

The founder of JFT Holding AB and its subsidiary Daniel Wellington AB, Filip Tysander, had been looking for new capital as early as 2020 (Oberoende sajt med inrikting på finans, juridik och revision., 2022), to the tune of SEK 0.5 billion (over USD 50 million) and had been considering the sale of some parts of the business.

The author has often sung the praises of Filip Tysander for having pioneered social media advertising and social media influencer marketing (Wictor, 2019).

From the start, Mr. Tysander did set up his affairs with "safety hulls", so while the watch business is handled by the daughter company Daniel Wellington AB, the mother company JFT Holding AB is free to invest in other domestic startups. Examples include the fintech company Klarna, where JFT Holding as a 0.26% stake worth more than $5 million (Karlsson, 2019) or the digital healthcare provider Läkare online - Träffa Doktor direkt i mobilen - doktor.se with an investment of $1.6 million (Breakit, 2019).

Daniel Wellington tax declaration

So what went wrong, and could it have been avoided? Let's review it through five main points:

Misled focus

From the onset, Mr. Tysander's sustainable competitive advantage was the infrastructure that he had created to promote his brand on social media. That's where the company's real muscle was.

The products were almost secondary, because they were not difficult to replicate or emulate. As a matter of fact, one of the biggest domestic watch and jewellery chains, Ur & Penn, was quickly able to put together a Daniel Wellington knock-off to distribute through its own stores. Mr. Tysander tried to sue and block them in 2018, but not to avail (Breakit).

The design that initially gave him his breakthrough was that of a 1960s Bauhaus watch, fitted with a 1972 nylon strap design from the British Ministry of Defence.

vintage Bauhaus inspired Wittnauer watch

British Ministry of Defence nylon strap design

It would not be difficult for the competition to catch up product wise, but to Mr. Tysander's credit, he was the one putting the design back on the map and making it trendy throughout the 2010s until the 2020s.

Too much creative asceticism

There are two aspects of Scandinavian culture that are deeply influenced by Lutheranism.

For one, the first part of the 20th century was market by a deep sense of asceticism. Scandinavian societies implemented measures to redistribute wealth and to attempt to flatten the socio-economic classes.

Secondly, Scandinavian countries are very consensus driven (Hugoson, 2010), and it has traditionally been frowned upon to be contrarian or to attempt to diverge from the consensus. This philosophy has even been summarised in 10 Commandments, the Laws of Jante.

COS storefront

Scandinavian fashion

Consequently, the majority of Scandinavian are imbued with an almost spiritual sense of trying to keep things understated or minimalist. There is no room for flamboyance as one might find it in Romance countries such as France, Italy, Spain or Portugal.

Desigual

Image source Zimbio

To circumvent these very strict cultural rules, Scandinavian Xers (Generazion X), Millenials and Zoomers (Generation Z) have resorted to the practice of humblebragging, which consists of saying something that appears deflective or self-deprecating, when it truth it conceals a subtle boasting message.

Japan society is also imbued with asceticism, but the youth is freely experimenting with styles and mixing. In Scandinavia, that would break at least half of Jante's Laws.

Vogue street fashion

Image source Vogue

From the author's professional experience, the Japanese market is a litmus test of good branding and good product design: if one can break on the Japanese scene, one can pretty much break anywhere else.

So while many Scandinavian brands meet with success in Japan because of the cultures' shared affinity for minimalism, it might give a confirmation bias to Scandinavian creatives. So by trying to set too many creative rules for themselves, the creatives of Daniel Wellington might have painted themselves in a corner that kept their hands tied. Which brings to the next point.

All the eggs in the same basket

Since Daniel Wellington's sustainable competitive advantage was its clever use of social media marketing, there was nothing to prevent them from expanding the brand's collection, or even from introducing new brands to capitalise on their infrastructure.

Other lifestyle brands in the Affordable Luxury segment release new collections every year, so it is odd that Daniel Wellington waited 5 years before introducing black dials. Until then, all dials had religiously remained white. And it took them 10 years to introduce other case shapes than round, specifically for ladies.

To some extend, the author can understand that they might have been considering their brand to be a mono-product brand, but in that case they could have capitalised on the extremely efficient infrastructure that they had created and introduce new brands that capitalised on other styles. But here again, the cultural asceticism might have given them a confirmation bias that "less is more".

Wavering consumer taste

Like women in a French idiom with sexist undertones "souvent femme varie, bien for est qui s'y fie" (often does a woman change her heart, mad be the man who will trust her): consumers are as wavering as the wind. So when we consider the fact that Daniel Wellington has taken 5 years in average to introduce novelties, it might have been too slow to stay on top of the wave, especially when consumer taste is bound to slowly shift every couple of years.

Ten years down the road, the Millennials that Daniel Wellington targeted at its beginning have become middleweight professionals, have settled in their romantic life and might be raising children. The replacement, Generation Z (or Zoomers) put more emphasis on eco-friendly and socially responsible brands (MikMak, 2022) and are looking for more unique brands (Sharma, 2022).

youth

Image source The Annie E. Casey Foundation

With every brand now spending on digital marketing, this has also contributed to a cost-per-click inflation (Fletcher, 2019), so the Daniel Wellington marketing maching is facing advertising costs that keep increasing.

Wholly operated stores

Between 2017 and 2018, the Swedish watchmaker also embarked on an ambitious plan to open wholly-operated stores. They were looking at having 300 stores by 2018 (Syrén, 2018).

The reasoning was probably that, since they earn much more with online sales than offline sales, but that a good share of customers still prefer to purchase in brick & mortar stores, why not control their own offline sales channels?

Daniel Wellington storefront

As the reader knows, by mid 2019 a coronavirus would have forced lockdowns in many countries, putting brick and mortar retail under a lot of stress, so the timing was less than ideal for Daniel Wellington.


In conclusion, first of all the author wishes to all the collaborators working for Daniel Wellington to see the light at the end of the tunnel and to go back to making profits. Their company has breathed fresh air in the watch industry, pioneered social media advertising and provided consumers with a new take on the horological product and the way it is advertised. Unfortunately, the author is afraid that this assessment means that they will have to address more than one of these points: misled focus, creative asceticism, risk mitigation, ageing consumer segments and wholly owned offline sales.

Instead of being a startup that is at the end of its successful streak with one product line, they could still switch to continue being a powerhouse in the making, with a broad portfolio of brands and products. The decisions that they take in 2022 and 2023 are likely to determine the fate of the company.

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