Why Are Watch Prices All Over The Place?

Benjamin C. from Framingham, Massachusetts, USA asks:

I am having a very hard time reconciling the cost of some watches. For instance a simple IWC Portofino costs $4500 list. There is nothing special about it that justifies the cost. It does not contain any precious metals or stones. The band isn't made from the leather of an exotic animal. Aside from telling the time and a calendar dial, it doesn't do anything. The Master of G watches that Casio produces for their G-Shock line at least have features like solar power, shock protection, stopwatch, alarm, moon phase, and a host of other features.

I've seen watches on this blog that retail for upwards of $40,000. Even when a watch contains gold, it's not enough to even remotely cover the exorbitant MSRP. Can you provide some insight into what factors into the wholesale/retail cost of a luxury watch? Is it all about the construction and manufacture of the parts? If so, then how it is possible that some watches can cost more then cars?

This is a question that everyone hits. The reason is this: you’re used to thinking of watches as functional things, where the price is related to how well it works as a watch. Most of what you see here are luxury goods, which have a very different pricing psychology. Luxury goods are supposed to be expensive, and often designed to draw attention to themselves as markers of wealth and status. There is more to it but that is the simple answer.

Do a bit of reading on Thorsten Veblen and "conspicuous consumption" and it’ll make more sense.

It gets more complex than that, too - the majority of the luxury market is aimed at mass recognition: Think Chanel, Rolex, LV bags, that sort of thing. As you get more expensive, the signaling changes to where the watches are not recognizable to the common man, only to others of similar wealth and taste. It pays to be a educated in the watch world so that you know where to go for the most bang for your buck. You can also check out our watch buying guides that help you learn what to look for in general.

Fascinating stuff.

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  • ocabj

    Watch lust: Don’t try to understand it. Just try not to let it overcome your bank account.

  • Perdendosi

    Well, there IS a little bit of value relative to build quality.  A Lange 1, for example, isn’t just a brand name (even for those in the know) — there is serious investment in movement, quality control, design, and finishing.  Of course, that’s not entirely justifying its price, but I think you did miss even mentioning that in the answer.

  • Narreme1

    I can’t agree more with Perdondosi. That answer strikes me as not as sophisticated as your readers expect you to be. Like Walmart spending X $million in relief during Katrina, and then spending 2X+ to advertise that they spent X… Walmart still has to expend X. Likewise watch “manufactures” have real fixed costs. Even though they have high margins, delivering quality means higher costs.

  • First off, it’s a good question. 
    The only thing a Casio G-Shock and the IWC Portofino have in common is that they both tell the time. If you just need to tell the time, don’t buy a watch at all. Check the time on your cell phone (which is more accurate anyway). The love of micro-machines does not easily transfer  to a quartz watch, no matter how many functions is has. 
    The whole question is sort of like since is photograph is a more accurate depiction, why do we still have portrait and landscape painting? If you can’t see the difference, always buy the G-Shock.

  • Fraser Petrick

    High priced watches: “…designed to draw attention to themselves as markers of wealth and status.” Now, that’s just plain wrong on so many levels. The only person I have to impress is myself. No one I know cares a hoot what I’ve got on my wrist. My $65 Timex is accurate; my $350 Bulova is accurate and beautiful. And if I could justify many thousands of dollars I would love to have gold Rolex. But whether it’s $65 or $35,000, I’m the only one who will notice or care. Status/schmatus.

  • Fraser Petrick

    ocabj “Watch lust”. That’s it! I’ve got it…bad! Maybe we should meet in a church basement: “Hello everyone, My name’s Fraser , and I’ve got watch lust.” “Hello, Fraser.”

  • Fraser Petrick ” …and its been 37 days since my last watch purchase.”

  • Captain Bart Friday

    I believe it’s spelled Thorstein.

  • JohnCreed

    A luxury watch isn’t about telling the time, it is about your relationship with time. A watch is about style, a story and the history of both your watch and your own life. On a more practical level, there are countless hours of research and development put into high-grade watch movements, employing the finest mechanical engineers in the world to compile hundreds of tiny parts into a durable and accurate machine, all in the size of something slightly larger than a quarter. High-grade watches are about craftsmanship and style, not just about telling time. If life was as simple as you make it seem, none of us would own anything of quality because, after all, a shirt is a shirt as long as you’re not naked; a bus can get you someplace as fast as a car; and a cardboard box can keep the rain off your head as well as a home.

  • scottrossonline

    MarkCarson You hit the nail on the head.  I just wanted to add a counterpoint that is worth consideration.  Even for those of us who love mechanical watches and everything that entails (the engineering, the artistry, the craftsmanship, etc) the pricing of many watches is starting to become hard to justify.  I drive a luxury car.  Technically, any automobile can get me from point A to point B.  However, I can point to hundreds of factors that actually make my luxury vehicle 4x more expensive to produce than a Toyota or Ford.  It’s true that when people see my car, they know I paid more for it.  But the multiple I pay is not purely attributable to aesthetics.  With luxury watches, this is not the case.  Rolex is producing more watches a year than some luxury automobile manufacturers and it doesn’t cost Rolex nearly as much to make a watch as it costs to make a sports car.  When the Japanese and Chinese are making fully mechanical tourbillon watches for under $3K, we know that the price of a JLC or Patek is not in the fact that only a few people can actually produce such watches.

    I have full appreciation for the high end manufacturers.  I’m just suggesting that the Swiss manufacturers might consider all the market factors and preemptively bring their pricing strategy more in line with reality before they are forced to just to survive.