TALKING SHOP: Jonathan Zadok on tariffs and the art of luxury retail

Zadok Jewelers opened its first store in Houston half a century ago. Jonathan Zadok, son of founders Dror and Helene Zadok, is now responsible for the running of the company, along with his two brothers, Segev and Gilad. They opened their second boutique in Austin earlier this year, becoming a Rolex authorized dealer in the process. Watch Insider’s Daniel Malins chatted with Jonathan to discuss his views on the ever-changing face of retail.

Watch Insider: We’ll get onto the effect that tariffs on Swiss imports have had on you shortly, but how relieved are you with the recent good news about them being reduced to 15% from 39%?

Jonathan Zadok: I welcome the tariff reduction to 15%, as it supports price stability and strengthens access to the finest Swiss timepieces for our clients. Thank you to the industry leaders who helped with resolving this issue.

WP: What had been the implications of the tariffs on your business?

JK: Look, if it was up to me, I would say no tariffs around the world, let’s just keep everything free trade. 

So, how did we feel it? First of all, through price increases and margin decreases. And secondly, which may have been a benefit to us for a while, clients were buying in preparation for more price increases, as most people realise that luxury brands tend to only go up in price.

That being said, it also created shortages, because you had the difficulty of bringing product into the United States. A lot of brands brought pieces into the United States before the big tariffs went into effect, but, even if they did, they didn’t necessarily bring as much as they needed. 

I think that brands want pricing to be equal around the world. This definitely helps to prevent gray market activity, as there’d be no reason for a US customer to be buying somewhere else in the world. And, frankly, no reason for someone else in the world to be buying in the US. We want to keep price parity unless they just choose to buy on a vacation.

With the tariffs now negotiated down to 15%, we can potentially pass that tariff along and sort of spread it around the world. So, for example, if a brand does 20% of its business in the US and they have to make up the difference of 5% between the 10% that they had on tariffs in April 2025 and 15% that they’ve ended up at, they can take that difference and divide it around the rest of the world. So prices could go up 1% everywhere, for example, which helps maintain pricing parity.

Watches are amazing and we love them, but they’re not food; nobody really needs a luxury Swiss watch. It’s a want, not a need, so at some point you hit up a place where people just aren’t going to spend the extra money you’re asking for.

WI: When you reference the double effect of price increases and your margin simultaneously being eaten into, how did you go about deciding the weight of each of each of those elements? 

JK: Some brands had price increases, some brands did both price increases and margin decreases. I mean, it’s a lot more detailed than we make it seem. When you raise prices but you reduce margins, you’re not losing 100% of the profit that the margin reduction took away, because some margin is included in some of that price increase.

It’s not terrible and at first it seems like you’re actually making more money when you look at your sales, because initially you’re selling older product at better margins. If everyone had a 5% price increase and next year your business went up by 3%, did you really grow? You made 3% more in revenue, but the amount of units you sold is actually less.

We’ve given significant salary increases to our staff, and costs in general have gone up like crazy. So, when people go to the grocery store and they see that their bills are 20–40% higher than they were a couple of years ago, we saw that too, just on the business side. So, we need that margin in order to stay profitable.

WI: Are the staff pay rises in response to the cost of living being so much higher for normal people, or is it a preemptive way of retaining highly skilled and motivated staff?

JK: The pay raises that we’ve done only have to do with inflationary pressures, which were there before the tariffs.

One way to look at tariffs is as a bit of a tax on the population. Because if you put tariffs on anything, the cost of that tariff has to get passed on to the consumer, at least some portion of it. That essnetially becomes a tax on the consumer. So if, for example, I have a friend that’s in the meat business and there’s significant amounts of tariffs now on meat, then the cost of a burger at McDonald’s is going to go up. So, in effect, that’s a tax on the consumer, and that individual therefore needs to make more money to pay for it.

Obviously we were printing too much money during Covid, and the definition of inflation is too much money chasing too few goods. But, on top of that, the tariff issue created another sense of inflation, or a tax rather than inflation, I should say.

WI: I’d suggest that history has some pretty good cases for the argument against protectionism. It may look like a good idea, politically, but it tends to end up as a race to the bottom, because whatever benefit you think you’ve got in terms of protecting jobs, gets balanced against everyone’s lives being more expensive. 

JK: I’ll go back to what I previously said, which is that I’m a believer in free trade. Unfortunately, there are a lot of governments around the world that have significant tariffs, especially on US goods. The problem is that the US is not producing a lot of goods, and so therefore we’re a bigger target for tariffs than some other countries. Additionally, we’re huge consumers of goods, which includes a lot of goods from other countries that we have to pay this tariff tax on. 

Tariffs can be good, tariffs can be bad, but tariffs that are too high are a big issue for our industry. And let’s remember that they’re called Swiss watches for a reason, because they’re made in Switzerland, right? I don’t see the Swiss watch industry moving their production to cities in the US. I understand that in some industries, for example the car or pharmaceutical industries, there is a clear desire to move manufacturing back to the US, but the watch industry is not one of those where this has any realistic chance of happening.

WI: That’s a really good point. It felt particularly egregious where the watch industry was concerned, because there are so few brands with a manufacturing facility in the States, and so it strikes me as having been a lot fairer to have given those few companies a competitive advantage through government subsidies, for instance.

JK: Exactly. So, look at the argument that says that watches are a luxury and so therefore they’re effectively only taxing people that are buying luxury goods. But I would argue that there’s a significant amount of employment involved. We have over 100 employees now that are depending on, to a large degree, Swiss watches. And you take my situation and multiply it across hundreds, if not thousands, of stores in the US, and that’s a significant amount of people that are depending on this industry. 

WI: Just focusing on Zadok and your operation, how have things been going at the Houston store since the revamp back in 2021?

JK: It’s funny, we went from about 15,000 square feet to 28,000 square feet and we’ve run out of room quite quickly. So we’re actually expanding a little bit into the building that we developed above us to expand our watch repair department.

WI: When you expand any store, is it to accommodate more product or have you got in mind entertainment space?

JK: We’ve become quite involved in watch servicing. We forget that every year millions more Swiss watches are made with automatic movements, or even quartz movements for that matter. And those watches need to be serviced, right? It’s not like a t-shirt, where you wear it for a few years and then you’re done with it or give it to charity. Watches don’t get thrown away, so every year millions of them just get added to the tens or hundreds of millions that have already been made. And there are just not enough watchmakers to service them all, so we’ve been bringing some of that in-house so that we can just provide a better customer experience for our clients.

WI: That’s such an interesting point that’s not spoken about enough. A lot of the people I talk to from outside of the watch industry just can’t get their heads around how expensive it is to get a watch serviced, and also the timeframe that’s involved. They look to me in the hope that I know the cheat codes, but I’m never able to provide them with good news!

JK: Well, service is a loss leader, right? It’s milk at the grocery store: it drives traffic and hopefully some of that traffic may buy something else. But it also allows us to give a much better experience to the client that bought a watch from us, which is a big argument for why you shouldn’t buy the watch from someone else.

When I buy my car from the dealership, the dealership is going to take much better care of me than they would have done if I didn’t buy the car from them. We want to promote clients buying watches from us, so you know that watch is going to get priority.

WI: How difficult is it to keep up with the latest equipment that certain brands insist on, as part of being an authorized service center? 

JK: It’s definitely difficult, but I will say that sometimes it’s not a bad thing for the brands to do that because it just keeps you more up to date. It makes you better because you know if they’re doing research and figuring out that there are better ways to do things, then that’s not a terrible thing.

But it is expensive, so you’ve got to look at the flip side and say, “Where am I getting the benefits of the service aspect?” And at what point do the benefits outweigh the loss you’re going to have in service?

WI: I guess you’re probably never that far from that line of it being worthwhile. I mean, even if you just broken even, I guess it’s no bad thing per se.

JK: Exactly. I mean, when your car needs service, it goes in and it comes back on the same day or maybe the next day. So, why do watches sometimes take many months to come back? As an industry we need to do better, so that we don’t have people that say they don’t really want to buy an expensive watch because when it needs service it’s going to cost a fortune and it’s going to take a long time.

WI: Why does it take so long? Is it that the amount of watches that need to be serviced is just far greater than the number of people who are qualified to service them? 

JK: I think that’s the simplest way to put it. I think that there are not nearly enough watchmakers. So, as I said, the brands can continue to produce, but there are not enough watchmakers to fix the watches that are already in the system, let alone the new watches coming. 

There’s been a lot of emphasis from some of the bigger brands to focus on watch schools and training new watchmakers, which I think is incredibly important and has been a long time coming. If we don’t fix the problem of not having enough watchmakers, the consumer’s just going to get tired of it. The quartz crisis created the loss of a lot of watchmakers, but also, the salaries for watchmakers have gotten to be much higher now because of the lack of them. It’s simple supply and demand. You need more watchmakers, so the demand is high, the supply is low, and if you’re a good watchmaker, you can demand a very good salary.

There should be more marketing effort by the industry to attract young people that can become watchmakers through trade schools. Europe is great at doing that, the US is much less so. Becoming a watchmaker is a time consuming thing, but if you promote it as a trade school, just like you promote plumbing school, I think there’s a huge value in it for a lot of young people.

The growth of our industry, especially in the last five years since Covid, has been incredible, but service has to keep up with it, otherwise we’ll pay for it later with upset customers. We’re trying to do our part to keep our clients happy by delivering that service to them which they expect and deserve.

WI: Back to Texas, you’ve got stores in Houston and Austin – do you notice any difference between those two cities as environments for luxury watches and jewelry?

JK: Houston and Austin are about two and a half hours driving distance apart, but I would say they’re vastly different in the overall demographics and the mindset. Houston is a much more conservative, established market. The money tends to be with a slightly older age group.

Whereas if you look at Austin, it’s such a young city with a lot of money because of the tech industry there. 

WI: Does that affect your approach to business at the two stores? 

JK: Slightly, but I’ll say that the basics apply at both stores. Going back to product, there are certain things that in Austin will sell better than in Houston, and certain things in Houston that will sell better than in Austin. So it’s just about tweaking the inventory to fit the right demographic and the right type of taste in those cities.

WI: Final question on Texas: what does growth and expansion look like for you? You said you’re moving into the floor above in the Houston store, so that counts as expansion. Can you do the same in Austin, or is it about new locations and, if so, would you be beholden to staying in Texas?

JK: We took 48 years to open our second store, so we’re in no rush to expand by opening more stores. That being said, we expanded our Houston location six different times during that 48 years before we finally moved. So we believe that if you build something, which is where people really want to go, clients will travel to see you.

This industry is not like a grocery store. You will only drive so far to buy a gallon of milk, but if you want to buy a piece of jewelry or you want to buy a fine watch from somebody, you’re going to travel much further for the selection they have or for the experience and service that they give. We have people that come visit us in our Houston store from all over the area, but also from all over the country. And they continue to work with us even when they move away. That’s about building the right types of relationships and taking care of your clients over the years.

So, you can do more and more business out of the same store. A grocery store can only do so much business out of it because there are only so many people that live in the area. A jewelry store can do way more business because they’re dealing with a much wider scope of people. It’s about clienteling and taking care of that client over and over again and building on that and asking them for referrals.

I’m not going to sit here and say we’re not going to ever look at expanding somewhere else or open another store or anything like that. We eventually will look at it, but at this point we really want to focus on making sure that what we have runs the way we want it to.

WI: I feel like everything’s moved on in retail in so many ways over the last few years, but the retail experience has hit a bit of a plateau. Is that a fair observation? If so, what do you think will be the next retail innovation?

JK: I don’t know the right answer to that. I think there’s going to be some interesting technology that’s going to come, whether it’s virtually trying on things or stuff like that. But I think what Covid taught us is that people want to be around other people, so I think we shouldn’t complicate things and give a reason for people to come out of their houses and visit.

We host events that are really family friendly, and it makes watches fun. The younger kids come, they get into watches, they get into what their parents like and they just enjoy it. It creates the next generation of watch lovers.

WI: I do wonder whether Gen Z slips through the cracks a bit. If they’re used to spending their lives online playing Xbox with their headsets on etc, I wonder how difficult it is to persuade them to come to events to try a watch on, chat to other watch enthusiasts, share a glass of champagne and some anecdotes with like-minded individuals etc.

JK: Look, I’m no expert but I think Covid was detrimental to the younger generation, especially those between 10 and 20 years old. I mean, I have young kids and I saw how it affected my daughter and it was horrible to see her trying to do Zoom lessons when she was four or five years old. They need to be around people. 

But I think the watch industry has done a great job with cool marketing to create an excitement to get out there and be part of groups like RedBar or whatever. People want to belong to something, especially today when there are still a significant amount of jobs that are being done at home. The desire to get out and attend these events is more than it’s ever been. 

WI: I guess modern youth pop culture has helped, in terms of celebrities wearing their watches and posting them on social media.

JK: Independent brands are great at getting young people interested in watches. As those young people mature and their salaries grow, they can then move into those watches that David Beckham wears. He wears a Tudor, and to me that’s a great brand to be able to get into early on.

TAG Heuer have done an amazing job at developing that younger client and having price points that make it economical to be able to buy a fine watch at a great price. Which is great, because again, as their wallet grows, they start moving up into the more expensive watches. We want that life cycle of that client from when they’re young, which goes back to service. If you disappoint them during that journey, they may get into something else that doesn’t have that same issue of service, and the delays that go with it. 

WI: I think that’s a great point. It’s like when you’re buying or selling a house, supposedly people form an opinion based on the first few seconds of the viewing. Let’s say an 18 year-old’s first experience of buying a watch is terrible, then you may lose them forever.

JK: That’s right. And you’ve got to keep that service up, because you might be 10 years into the journey and, if you’ve been disappointed over and over again, at some point you find something else that will disappoint you less.

I think service and the way we treat young people when they do need to come in for a repair determines the longevity of our business and the love that the clients have for it. 

This article first appeared in the December 2025 edition of Watch Insider.