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How To Fix High-End Watch Retail Though Flattening Regulations And Price Consistency

How To Fix High-End Watch Retail Though Flattening Regulations And Price Consistency Featured Articles

At aBlogtoWatch, we’ve dedicated a lot of editorial time to discussing the very real problems that the watch industry is facing today. To some people who see their status as mere timepiece consumers, I can understand why such topics could be interpreted as boring or off-topic. Yet, I still feel there is value in it even if your interest is more in buying watches as opposed to a deeper involvement in the industry. If anything, it helps people understand the context within which their favorite watches are produced, and perhaps also explains frustrations that regular consumers of luxury watches face. I encourage anyone who puts money into anything that could be considered a “high-end watch” to pay attention to the industry that makes such products in order for them to be the smartest possible consumers.

How To Fix High-End Watch Retail Though Flattening Regulations And Price Consistency Featured Articles

We began this larger discussion of “fixing the modern watch industry” by explaining that the economic and performance issues the traditional watch industry is facing are not related to technology timepieces and also only tangentially related to economic recessions. In other words, industry problems are not temporary and merely blamed on external factors. We also started to point out deep systemic issues in the structure of how the watch industry operates internationally that has led to a situation where growth is challenging, prices are bloated, inventory is excessive, and marketing is misunderstood and mismanaged.

How To Fix High-End Watch Retail Though Flattening Regulations And Price Consistency Featured Articles

How To Fix High-End Watch Retail Though Flattening Regulations And Price Consistency Featured Articles

Identifying issues is one thing, but I feel a greater ameliorative responsibility to the industry which does indeed represent where my income and that of aBlogtoWatch comes from. So, in addition to simply demonstrating to the watch industry some of the larger problems that exist (even though some issues are well-noted by them, not all areas of the industry are aware of all the problems), we have taken steps to at least suggest possible solutions to the major problems which once resolved should lead to a happier, healthier watch industry.

How To Fix High-End Watch Retail Though Flattening Regulations And Price Consistency Featured Articles

This is the final of three articles in a series which attempt to identify major fixable problems in the watch industry, along with solutions to fix them as mentioned above. No solution comes without additional problems to solve, but after lots of study, discussion, and analysis, we’ve identified that these are all solutions that could work quite well and additional problems that arise are by no means insurmountable.

So why listen to aBlogtoWatch’s advice? Consumers, manufacturers, and retailers alike are clearly aware that the luxury watch market has a variety of struggles and challenges. With that said, myself and the rest of the aBlogtoWatch team are uniquely situated in a position to survey large areas of the industry “from above.” Thus, while we are not experts in all fields, we do regularly work with experts in all fields, and have the unique ability to claim having a very comprehensive understanding of the larger watch industry and how it all fits together. This “broad spectrum” awareness makes us unique, especially in seeing how various parts of the industry fit together to form the larger puzzle.

How To Fix High-End Watch Retail Though Flattening Regulations And Price Consistency Featured Articles

This “solution” series on fixing the modern watch industry focuses on the larger areas of manufacturing and production, marketing and communication, as well as sales and distribution. This particular article will cover that final area of sales and distribution. You can read about the other problems and solutions in other articles you should find links to in this article. In other words, the major topics of discussion related to how watches are made, how they are sold, and considering timepiece sales in a truly global market place.

A summary for my plan to fixing watch retail is to deregulate the experience of being a watch retailer by flattening the market (I’ll explain that later), ending price discrepancies around the world, and establishing a single currency (such as the Swiss Franc) that all watch sales will be based on.

How To Fix High-End Watch Retail Though Flattening Regulations And Price Consistency Featured Articles

The Current Picture Of Watch Retail Around The World

Explaining what is wrong with watch retail is quite complicated, and could take a book or more to fully discuss. I’ve never sold watches but I have as many close colleagues that do so, as I do who make watches. More so, I have the experience of working with people around the world who sell new and used watches. People who sell watches online and off-line, who auction watches, who trade watches, and who engage in dealer-to-dealer sales and trades. I say all this again to demonstrate my ability to intelligently speak on the topic.

Watch retailers these days aren’t the happiest lot. Prior to the internet, it used to be that if you had a nice store, in a nice part of town, with decent friendly staff selling decent products, you could make good money; better yet, if you carried brands that benefited from high demand and powerful marketing. The best news was that there was little pressure to discount. Watch brands put limitations on what you could do, which were intended to prevent you from competing with retailers in other areas that sold the same products, as well as to “protect brand image.”

How To Fix High-End Watch Retail Though Flattening Regulations And Price Consistency Featured Articles

Today, the situation of being a “traditional” watch retailer is very different, even though the rules you must comply with are similar to those in the past. You are faced with the fact that the internet has allowed a blossoming “parallel market” for watches to develop which allows watches from around the world, at lower prices, sold outside of “authorized” (rule bound) channels, to be sold to customers at prices below what you are allowed to charge. More so, some of these prices are so low that even if you could discount you would not be able to earn enough money per watch to pay all of your bills.

Watch retail today is often seen as “showrooming,” in that customers come in to see products hands-on and make purchase decisions, but eventually go online to purchase watches at a discount. At worst, watches sold across state lines (in places like the United States) aren’t subject to sales tax. The number one problem facing watch retailers today isn’t a lack of good products, the inability to get inventory, or finding customers. It is that they simply cannot offer the price discounts that customers have been accustomed to.

How To Fix High-End Watch Retail Though Flattening Regulations And Price Consistency Featured Articles

The internet has removed many of the traditional boundaries between cities, states, countries, and even languages. It has allowed customers to not only find good prices, but also has allowed clever watch retailers – who often have no official relationship with the brands they are selling – to sell at the lowest price they can find, and to enjoy slightly lower business overhead costs than traditional brick and mortar stores for high-end watches that tend to exist in “high rent districts.”

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  • Chaz

    Interesting read for a late Saturday night! I’ll need to digest and add more later. However, in
    all reality, shouldn’t ANY watch over $1,000 be considered a “high end watch”…all nitpicking aside?

    Thanks for taking the time, AA.

    • Mikita

      You mean considering solely the price of the item as it is? I think it’s tricky. For instance, many plastic G-Shocks cost above $1,000 – are they “high end watch”? Or 7Friday based on $10 Miyota? Or multiple Invictas? Or tool watches like Archimede/Stowa/DAEDALUS (sorry :)? I think these aren’t traditionally perceived as “high end watches”, yet exceed 1k due to some other reasons. But, honestly, I don’t think that there is any constitution for what is a high end watch; hence, all perceive it in a different way. For some, even Rolex isn’t high-end enough, for some – even $250 Tissot is already high-end.

      • Ariel Adams

        The bottom line is that there is no mathematical number to distinguish what is and isn’t a high-end watch. So we simply choose a price we are comfortable with, hence $1,000. What is more important is to separate more exclusive watches that more inherent value, from less exclusive watches with less inherent value.

        • Mikita

          I think I didn’t fully get your last sentence. Are you talking about the depreciation? Inherent value – do you mean the raw value of materials and labour involved?

    • Ariel Adams

      Yes, but I think we can all agree that there are some $1000 plus watch that really should be priced well-under $1000. So I should say all watches that should be priced at $1,000 and up 🙂

  • Stephen Washington

    Yet another article about your ridiculous ideas to “fix” the watch industry. Thank god this will be the last one! Man-up and write an article on why you think watch collectors like myself should have to pay inflated prices and why you hate “gray market” dealers.

  • Stephen Washington

    Ariel, I’m curious to know what you think should happen to “gray market” dealers who have provided great service and fair pricing to watch collectors like myself?

    • Ariel Adams

      Good question. I think otherwise high-quality gray market retailers should be turned into authorized dealers. They have already demonstrated the ability to do all the hard parts, so the brands should just entrust them to do official authorized sales in the same medium that they now do non-authorized sales. I think the solution is really that simple for many of the retailers you refer to.

      • Chaz

        But brands wouldn’t need to do that because, like auto dealers, don’t they make a good chunk of change in the service department?

        I know cars go in for maintenance a LOT more frequently than watches, but once a Patek goes in for an overhaul…we’re talking $1,000++

  • TrevorButterworth

    “Fewer watch retailers” not “less watch retailers.”

  • There are inherent problems with a 25% mark-up on watches. The first being that retailers of expensive watches (over $500 USD) don’t have enough unit turnover on a monthly basis to pay the rent with that little mark-up. And if a customer gets even a 10% discount off retail then the store’s margin shrinks by 40%. BTW – jewelry stores operate with even higher markups. “Triple key” is normal and some items, just like watches with gemstones, have even higher multipliers.

    Once a dealer (I’ll stop short of calling them retailers to avoid the impression that they must be brick and mortar) buys a watch from a manufacturer, they should be free to sell it for whatever price they want to clients located anywhere they can find and service them. Yes tha manufacturers should sell a a single price worldwide to dealers, but after that it should be hands off for retail pricing. Ad dollars will be a sticky issue as ad campaigns still have the notion of geographic exposure.

    • Chaz

      Yes, but didn’t AA address the issue that with lower margin, dealers would have to stick to “set” prices and rampant discounting would be curbed?

      Naturally if that’s how the game is supposed to be played, human nature guarantees there WILL be cheaters in the pack…

      • MeaCulpa

        That would probably also be Illegal.

  • Phil leavell

    First off I really enjoyed articles like this, I personally don’t think the watch industry is going to listen to the consumer until it’s too late.
    I personally came to the realization that I go to a jewelry store and look at the watches that I admire, then I’ll look at the Green Market pricing , Bentley used Market and depending on the circumstances and conditions who purchased the product in any of the three depending on which is more beneficial to me as you stated the Retailer’s don’t have a lot of wiggle room.

  • Mikita

    Personally, I’ve got almost all my watches from gray dealers or forum members. Gladly, I’ve never had a single problem when dealing with reputable gray dealers / reputable forum sellers; and the price difference between gray/white was collosal. I see one main problem with white ADs: not worth it. I don’t think that some warranty benefits (very arguable – I have an example of bad service by white AD) are really worth such huge extra $$. Okay, you get the “hour of glory” feeling when you buy from AD – in best case they offer you coffee with cookies and some more or less experienced guy may talk to you to make you feel special about what you buy from them. But even this may not happen, actually.
    So, again, why should I pay extra $$? What will I get for it?

    • Phil leavell

      First off thank you for your opinion of my artwork. And it’s too bad I can’t type like I paint.
      Like you I have saved money using the grey market. But I found you really don’t have the service at times in the grey market I bought beautiful watches near without problems. But from one will see reparable pre-market dealer instead of new I got secondhand startup and it was a hassle to return. On the other side of the coin I bought a tutor watch from a dealer which had a problem with the size of the strap when I brought it back and show them my concerns they simply ordered me a custom-made larger scrap installed at no extra charge the service the vendor gave was incredible and well worth it and they did have movement on their price

      • Mikita

        Your work left me under impression, I’ve even set it as a wallpaper on my phone 🙂 From it emanates some kind of positive energy. I’d like to see more of your works, actually.
        Great example regarding the Tudor service, such things do matter. So far I had pleasant experience with both gray dealers (Ashford/Rakuten stores for JDM watches) and white ADs. Japanese gray sellers from Rakuten left me especially impressed: fast order processing, very fast delivery, and a bunch of gifts in the kit.

        • Phil leavell

          I had good luck with the japnies grey market also. Although I reconnected to friend,s in Japan so I don’t use the grey market there anymore.
          I glad you like art here’s one I just finished . probably make cool scren injoy
          https ://uploads.disquscdn.com/images/cc59fee973a779a6b7d48606230059b8e953e4c879619d134f981bfdf1801a7e.png

          • Mikita

            Thanks! I like this one as well

          • Phil leavell

            I left one today on the blog for the VC under Raymond Wilkie
            The one you’re looking at tickets 4 tries to get the Rams Head to appear through the inks it is done in acrylics

          • Mikita

            Heading to VC topic 🙂 acrylics look so juicy

    • Alexandre Leupin

      I got three bottles of Champagne for my (impulse) buy at a high end retailer. That was the most expensive champagne in the world, since a gray retailer was selling the exact same watch for $6000 less (without the factory warranty, substitued by their own 2 year warranty). What Ariel proposes amouts to a replacement of the old cartel by a new, a bit more flexible, one. Particulary bad, and unenforcable, in that respect is an exchange rate control. In an online retail world, all this spells doom for both manufacturers and retailers. The only solution for the watch industry is to let retailers (gray, white or green) sell as they wish at the price they want, instead of constraining them in all manners possible and force-feeding them watches they cannot sell. These retailers, and the manufacturers, will end up like force fed geese, minus the foie gras.

      • Mikita

        According to Google, the most expensive champagne in the world costs $2 million (Goût de Diamants), but $6000 for three bottles is still expensive. However the difference in $6000 between white/gray doesn’t tell me anything since I don’t know the price of the watch itself. If you were buying a $12,000 watch that’s a great deal of discount, but if it was a $500,000 – that’s another story.
        Agree on the exchange rate control – it’ll only lead to chaos and following devastation of ADs. And yes – the current situation looks like force-feeding the ADs; I see this in many ADs – shelves full of old stock and ADs have to somehow deal with the situation in order to be able to store the new stock. Some of ADs work even sillier – they hold new models, waiting for the weather to come from the sea i.e. hoping that their old stock will get at least partly sold. But in most cases old supplies simply collect dust on the shelves waiting till either the manufacturers redeem them back or till they appear in hands of gray dealers with enormous discounts like Jomashop/Ashford/chrono24 stores etc.

  • Dinkee, H. O.

    I was unaware that Ariel Adams was an expert in business and economics. I just assumed he was just some “dude” who liked watches, started a blog, and lucked out as it caught on as there were no serious or consistent competitors at the time and he was non-offensive. But now to find that he’s in the position to advise multi-billion dollar corporations and industry on how to conduct business reveals he must have a track record of success in multi-national business and advanced degrees in economics! Very surprising.

  • SuperStrapper

    The $1000 mark is an interesting number. I thought the expert opinion was that there is simply nothing interesting under $7000?

  • Lawrence

    The Bill of material and labor to manufacture a Rolex submariner is around 90-300bucks…Once you have the tooling it is very cheap.

    • MeaCulpa

      but the cost of advertising that Rolex isn’t cheap and I suspect that that’s the largest part of the – admittedly over inflated – price for just about any prestige watch.

    • JosephWelke

      Where’d you read that? Honestly curious.

  • Marius

    COMEDY CENTRAL presents:

    THE WATCH GUY!!!

    THE WATCH GUY!!! is widely regarded as the funniest and most entertaining stand-up comedy act since Eddie Murphy’s “Delirious.” Critics from all over the world highly recommend THE WATCH GUY!!! to the fans of horology, falconry, chess, philately, house music, and numismatics. Here are some of the best jokes:

    “…myself and the rest of the aBlogtoWatch team are uniquely situated in a position to survey large areas of the industry “from above.”

    “Thus, while we are not experts in all fields, we do regularly work with experts in all fields, and have the unique ability to claim having a very comprehensive understanding of the larger watch industry and how it all fits together.”

    “This “broad spectrum” awareness makes us unique, especially in seeing how various parts of the industry fit together to form the larger puzzle.”

    “My prediction is that the margin on luxury watches should be reduced from about 50% retail price to only about 20%-30% of retail price.”

    “Borders are all gone, or at least they need to be considered as gone.”

    “The solution I propose in order to combat currency arbitrage is to have each watch brand determine a single currency that all of their watch prices are sold on.Thus, a 10,000 Swiss Franc watch in Switzerland would cost exactly 10,000 Swiss Francs anywhere else in the world.”

    • Dinkee, H. O.

      That first one is a knee-slapper!

      Reducing the margins on a luxury good to base good levels, imagining that all “borders” are gone (Imagine there’s no heaven…), and that a good should not be priced differently in different countries with completely different environments — WOW! Who is THE WATCH GUY? I’d love to read his blog. Funny as hell!

      • MeaCulpa

        As ablogtowatch has ventured into cars maybe they should give Audi a call and tell them that Audis sold in Denmark (150% tax on cars+VAT) should have the same equipment as in the US and both should be priced in Euros. That will surly fly with the Danes who suddenly will buy not a single Audi.

    • Phil leavell

      As usual funny as hell well written and close to the truth kudos

    • Moonraker

      Does the Watch Guy know the Berluti Guy?

    • MeaCulpa

      The level of self importance in the post is magnificent! The single currency bit is interesting, does that mean if I, living in Sweden m, decides to buy a Rolex on Monday as I’ve seen some spiffy advertising put the price at 50.000 sek when the SEK/CHF is at 1:5 goes to buy the watch on Tuesday after receiving my pay check should suddenly pay 60.000 sek due to fluctuations in the currency putting SEK/CHF at 1:6? That makes for a very unhappy customer and customers holding out for fluctuations in in exchange rates. OR should the dealer eat the 10.000 sek difference? Most dealers are small buisness and I don’t imagine that they are all that keen on pricing in foreign currencies as they don’t want the added risk of currency fluctuations.

      Maybe watch bloggers should stick to their bred and butter, also known as giving nothing a bad review and waxing on about lifestyle this and that.

    • Berndt Norten

      Nobel material ain’t it?

      • Mikita

        Shnobel Prize, at the very least

  • FrankD51

    The expensive watch industry still relies on impulse purchases to customers who aren’t well versed in a particular brand or the value of the product. The industry won’t give this up without a huge fight for these creampuff buyers represent huge profits. And brands are going more and more to boutique concepts in an effort to cut out the middleman and keep more of the profits for themselves, think Tourbillon boutiques, or the individual brands like AP. AP in particular is cutting out retail dealers and relying more and more on their boutiques, but that doesn’t always support the prices on the used market for the product which often plummet in value. An AP Offshore retails in the $26k range but can be found all over the net ‘pre-owned’ for about $10k less in perfect condition with boxes/papers. Who knows how it all ends, but I think one of the major problems is there is just too much product to support retail sales, the overproduction problem needs to be solved sooner rather than later.

  • mtnsicl

    “The problem, the problem, the problem”. The problem is the traditional watch is going the way of the wagon wheel. There is nothing you can do about that. Technology is marching on and almost none of the watch companies out there are willing to march with it. The younger generation is just not into traditional watches. The industry will slowly consolidate and evolve and become much smaller over time. There’s nothing that is going to stop that. And Ariel, the watch industry will never work together and implement the fixes that you think will fix the industry. As a consumer, I really don’t see anything wrong with the industry. I can buy what I want and when I want. I can have it at my house in a week at a discounted price and usually with free shipping. The only thing that hinders me is the amount of money I have to spend on watches, and that’s no fault of the watch industry. As a consumer, I have no obligation to support the industry. My only obligation is to buy what I need or what I want at the lowest possible price.

    • Chaz

      The traditional watch WENT the way of the wagon wheel a LONG time ago. And yet, here we are with more and more desirable wagon wheels at higher and higher prices (current vintage craze included).

      Call it a hipster “yearning” for more “craftsman” or “artisan” items assembled by hand in “Old School” methods or simply pure nostalgia.

      • commentator bob

        The problem for the Swiss is that the hipsters have Sea-Gull movements in Kenneth Coles and Fossils. Or they have Seiko 5s. Or on a good day for the Swiss a Sistem51. Because they care about the gears and springs, not the “Swiss Made”.

  • Moonraker

    For a slow reader like myself that third page is always a killer. Ariel, you should do a follow-up article about what the watch brands say to you after reading your advice. Receptive? Dismissive? Anonymize it if you must.

    Meanwhile, Rolex, “The Charity”, rolls on…

  • Iron Mike Gallego

    Ariel,

    There are a number of issues here.

    First, “minimum resale price maintenance” varies in its legality around the world. It is often (though less and less so) viewed as a violation of antitrust laws. Any price solution you propose would have to take this into account.

    Second, and far more importantly, the issue is not the gray market, but simple supply and demand. The gray market can only function because there is a surplus of supply. This is where the case study of Rolex becomes essential. You’ll notice that when you find Rolex on gray market sites, the discount from retail is negligible (almost always < 10%) such that it rarely makes sense for someone considering such a watch to turn away from the security one gets from buying from an authorized retailer. Rolex can do this because (a) they have built the strongest and most loyal brand identity in the world, (b) because unlike most of their competitors, they actually vigorously enforce their retail price policies, and (c), most importantly, they've calibrated their supply to match the demand for the product.

    If you want a Rolex dive watch, you basically have one choice, the Submariner. Yes, there is a Sea Dweller for hardcore divers, and a Deep Sea for guys with bad hair plugs and leased Ferraris, but 90% of the dive watch sales will be the Sub. Compare this with, say, Omega, a brand that has the second highest level of brand recognition, but which is regularly cannibalized on gray market sites. Omega makes more different lines of Seamaster than Rolex does dive watch; hell, the Planet Ocean sub-line alone contains more different options than Rolex makes divers. On top of this, Omega can't help designing a special edition watch for every single event on the calendar – hey, it's Groundhog's Day, get this brown Speedmaster Groundhog Edition. Now, if Omega were truly disciplined about the number of watches they produced in each edition, maybe they could still maintain demand that matched their supply, but of course, they can't do that, because you can't engage in an Omega style marketing campaign for a watch produced in Linde Werdelin quantities. The result is that Omega's very business model results in what will inevitably be a ton of excess supply, and their dealers pretty much need to offload it to remain financially viable. Rolex dealers do not since they have a limited selection and because Rolex updates its watches on approximately the same cycle as Halley's Comet, so Rolex retailers are not constantly in need of pushing out last year's inventory to make room for a dozen new special editions.

    The other problem is that as some brands have successfully raised prices, other brands have tried to follow suit in spite of any evidence that there is a demand which justifies it. Once Omega moved from $2000 watches up to $5000 watches, there was some idea that, I guess, Raymond Weil could accordingly lift its prices to fill that niche, but the problem was that Raymond Weil buyers were unwilling to pay more. The result? Every gray market site has Raymond Weil watches selling for 60% off their list price. Of course, in that situation, only a fool would pay list price. That's a problem Rolex simply does not have. Sure, they've raised prices, but not in a way that priced out their core customer (and that core customer of course has nowhere else to look for a new Rolex even if they did).

    Yes, Rolex has options that other brands do not by virtue of its status. But one reason they've maintained that status, and the demand, is because they're also one of the smartest, most disciplined brands out there. If some of their peers could resist the greedy urge to compete with them on price and in volume, they might find themselves better able to control their retail distribution as well.

    TL;DR – Rolex is smart.

    • commentator bob

      “TL;DR – Rolex is smart.”

      And the really funny thing is that when this site plays consultant its advice generally directly contradicts the way Rolex operates.

      For example, Rolex would never let its local market prices fluctuate with a foreign currency because that would mean that watch retail prices could go down.

  • Tempvs Mortvvs

    The last one in this series of naive and specious articles ?????? YAY!!!!!

    • commentator bob

      Seriously. “I would have never guessed it, but currency fluctuation keeps global manufacturers of luxury goods up at night. How about they just peg all of their markets to one currency, so that the local currency retail prices can swing wildly up-and-down day-to-day?”

      Very remeniscent of “nobody knew that health care could be so complicated.”

    • MeaCulpa

      “Naive” is usually a nice way of saying something not so nice. It’s almost like people who write an essay about how nice a watch looks and feels in a way that is very close to what you find in an inflight magazine are not qualified to write about economics or buisness.

  • Watch Obsolescence

    Glad to see this is the final article. The reality is that the watch industry is dying a very slow death. More people don’t want to wear a watch. It doesn’t really matter what the watch industry does, sales will continue to decline in the long run as people find alternatives to a watch and younger people don’t want to own one. I don’t believe in the “theory” of demand creation (other than fads) unless it is addiction drugs (alcohol, tobacco, or illicit). When demand is declining what do companies do to maintain the same revenue (raise prices). That is exactly what has been going on for years since electronics have been replacing watches. I just read that people at one company are opting for a chip implant so they don’t need to carry an identification badge for work. I think you can determine for yourself where things are headed and it isn’t more people buying mechanical watches.

    • proudAmerican702

      Agreed. Addressing a Smart Watch article, I wrote this a few days ago:

      “…But, I’m afraid that Gen Y-er’s and Millenials will buy into this high-tech stuff, repeatedly buying the latest & greatest electronic wrist adornment doodad, instead of buying a mechanical watch. As this cycle repeats, and these “kids” eventually become the 30-60 yr olds who have disposable income, will they ever embrace mechanical watches? I see the manufacturers increasingly building more complicated, and more luxurious Smart Watches.

      These kids have grown up with computers in their classrooms since kindergarten, and playing with mom & dad’s cellular phones since before they could walk. Do they have any interest in a mechanical wristwatch, that occasionally requires a tune-up & lube job? Or are they content to just throw away today’s Smart Watch, for the ‘New & Improved’ Smart Watch of tomorrow?

      I’m afraid there’s another Quartz Crisis coming. It might be a decade or more away, but I’m afraid it’s coming.”

  • Yojimbo

    so your ‘solution’ is a cartel approach with regulated price fixing?

    • MeaCulpa

      Well if we’re not letting economics get in the way of the “solution” then why should we let legalities get in the way of the “solution”?

      • Moonraker

        to the Swiss question?

  • commentator bob

    It is shocking how much of this armchair advice contradicts or ignores Rolex. By far the most successful mechanical watch company in the world, with the smallest grey market issues.

    For example, the five-year warranty that Rolex put on its authorized watches is not even mentioned. Meanwhile, the companies having the biggest grey market issues offer at best two-year manufacturer warranties.

    Also, the tiny number of model variations Rolex offers despite moving over 1,000,000 watches per year is not mentioned.

  • Rob Crenshaw

    If it ain’t broke don’t fix it.

    This poorly-written and naive analysis is pointless, and this egotistical “solution” to a non-problem isn’t going to happen. Pricing and sales always boils down to supply and demand: no matter what the mechanics and back stories that price a luxury watch, if that price is unsustainable it will go down, or it will get discounted. If it is sustainable then people will line up for years to pay it, for example Daytona ceramic. As a consumer, I don’t need to know how GM handles foreign distribution of similar-to-US models, how many cars they have sitting unsold on lots in Venezuela, and how their balance sheet is doing; that information is pertinent to management and shareholders. All I need to know is how much they are charging for a new Corvette, whether I find that price fair and can afford it, and whether I can buy it for less money with the same warranty from another dealer, a broker, or Uncle Bob who works at GM and gets Friends and Family pricing.

    • Omar

      Amen. Your paragraph should be the entire article.

  • WolverBilly

    Why of course your qualified to tell the Swiss how to fix their business! Your cunning use of Sponsored Posts (and use of 500 words when 50 will do) not doubt impresses the living crap out of them.

    The fact is, you are no doubt a source of great amusement. They tell you you’re on point with all your brilliant observations, and then laugh their asses off at your Hublot-grade bloviation behind your back. Grow up, dude. Seriously, you’re hurting yourself.

  • Horologer

    This article reads like some kind of pompous self aggrandisation, with a ‘solution’ to a problem that no one has invited you to solve. Peppered with the same pics from your one (?) trip to HongKong where you’ve attained part of your ‘global’ oversight of the shape of the industry?? Really???? THIS Is your solution? As others before me have stated, I’m glad that this is a last of this series of expert articles. Please stick to what you were doing : Giving uninformed opinions on random watches, before you decided to monetise the site. Very disappointed…

  • Mark1884

    Well folks, I knew exactly what kind of comments were waiting – before I read the article.
    I was not disappointed after reading them. I think most of them were spot on, and some very funny! This was a topic best left alone.
    Ariel should have seen this coming, he set himself up on this one.

  • Sten

    My glass orb tells me that nothing major is going to happen until the EU are done with Google and Apple’s business practices and start looking at the practical use of MSRP/RRP throughout the union. It wouldn’t take much scrutiny from the trade commission to determine that MSRP/RRP is de facto price fixing, which (in EU at least) i illegal. Maybe it’s a naive hope but it’s something to hang on to when there is not much else….

  • Moonraker

    Prepare yourselves for a righteous wave of moderation.

  • Word Merchant

    I own some watches, so I’m best placed to comment on all this. Basically, everything’s pretty much ok:

    1. Double the prices of all Swiss watches. Keep the poor away.
    2. Throw some of that extra money at that old silver whore Clooney so he can advertise even more bulbous Omega watches (and coffee). If Clooney wears it, I’ll wear it. Except Spanx (not implying anything here, readers).
    3. Everyone feels entirely comfortable with Scientology, so let’s get those servants-of-the-lizards Travolta and Cruise to splash their inane grins over every single publication everywhere. There, that’s Breitling sorted.
    4. Thierry Stern has explained what the ladies like, so that’s all sorted. More diamonds! Pinkness! Sparkles!
    5. Get Alex Mahogany to do some more daubs that look like the twitchings of an electrocuted tramp. Nice! Kept attention away from Biver’s nightmare inducing grin. Who wouldn’t buy a Tag now?
    6. I’m a skinny twat with greasy slicked back hair, a crap taste in jumpers and a shit-eating grin. I look like an 80s throwback and my kids are equally obnoxious. My wife has a big smile, but less personality than a hat-stand, so Patek’s nicely got us covered. No need for changes here, readers. And I don’t expect to pay for my Patek because according to them, I don’t actually own it.

  • Moonraker

    Step 1: fix headline.
    Through, not though.

    • Berndt Norten

      Step 2: play NKOB, Step by Step, oooo baby, gonna get that copy editor in my world….

      • Moonraker

        Step 3: repeat steps 1 though 3.
        If ever I believe my work is done then I’ll start back at 1.

        • Berndt Norten

          And if 6 was 9?

          • Moonraker

            If a rat had wings it’d be a bat. But I digress. Self-flagged!

          • Moonraker

            Still “though”. Real attention to detail here.
            ABTW – Tell your wife you read it for the typos.

  • Moonraker

    You can’t tie prices to one currency. Maybe you can tie prices to a basket of deplorable currencies, like the Zloty, the Dong, the Bolivar, and the Ariary. Only those four, through. 🙂

    • commentator bob

      If you need a nice watch to get Dong you’re doing it wrong (although I do love a woman with a Tank or OP).

      • Moonraker

        I’m not looking to get Dong. I’m looking to give Dong.
        Because I’m generous.

        • Berndt Norten

          Give love.
          And keep blood between brothers

  • TheChuphta

    As a subseaexploerr III (with the longer handset but appropriately rattley bracelet to show I’m just insouciant enough to not care that I care) owner I enjoy knowing that the Swiss have taken a stance on something and told me what to pay.

  • Julius Swerving

    It always kills me when I see a reflexive pronoun misused. C’mon guys…

    • Raymond Wilkie

      I get it.
      I hate split infinitives, starting a sentence with a preposition and beginning a comment without a capital letter……………..I get sooooooooooo mad !

      • Kuroji

        Spit infinitives are the best! You should be happy that this is possible in English. Most languages are not so fortunate.

  • Berndt Norten

    When it comes to commentary on the comments I’d like to see less angry people. A lot of people are full of anger and personally I find it very bad. Let’s aim for less anger and angry comments especially when it comes to the comments section. Thanks.

    • Raymond Wilkie

      I second that.

    • Moonraker

      Though, in my increasing maturity, I do find myself angered by things that anger me.

      • Kuroji

        Lol!

  • William Jones

    im still not sure what exactly is the problem. Is it grey marketed watches? Whose problem is that exactly? It seems to be to the benefit of consumers. I will shed no tears for high end watch retailers occupying highly finished space and paying outrageous rents. No one forced them into the business. Moreover if a 40-50% markup is the norm why should I or anyone else have to pay it? If you enable the retailers to meet the market the high en watch retailers will go the way of the full priced book retailer.

    • Raymond Wilkie

      You’r not thinking like a rich guy with low self esteem.

      • Kuroji

        The rich guys I’ve met all had way too much self esteem.

    • Omar

      The mark up is higher than that. Rolex strictly manages their pricing but one of the grey marketers told me personally that they have the highest mark up.

  • TrevorXM

    A lot of the pomposity was kicked out of Ben Clymer in the aftermath of his embarrassing Rolex Daytona ceramic bezel pajama party with that sub-talent John Mayer. Reading the comments below, there is a dire situation now for ABTW. Not that you have embarrassed yourself to anything like the same degree or made yourself an internet laughing stock like he did, but it is extremely clear that your readership does not approve of this kind of stuff on your blog. It’s just one take down comment after another — and they are all right. Please stop. Stick to watch reviews (real watches) and visits to factories and some interviews and the rest. That’s what people are here for.

  • Geraldo123

    Interesting article . And with an interesting article , an interesting debate usually follows. However, sometimes concepts differ from execution. I won’t be surprised if there ends up fewer retailers and markups that remain high. Nevertheless, thanks for the article Ariel. I enjoyed it.

  • Mikita

    Coming next: how to fix the Ming dynasty vase with insulating tape.

  • Moonraker

    WOW! This went well.
    Led, meet Zeppelin.

  • Bozzor

    Some of the comments below are absolutely insulting and incredibly rude to someone who has comprehensive and broad experience at just about every part of the value chain when it comes to watches. And it’s not as if what he writes is throwing out everything they teach in MBA courses. There are a number of possible solutions to the problems ailing this sector: Ariel has highlighted a number of intriguing possibilities. If anyone has any better ideas, you would do your cause more justice by articulating them, providing real evidence and explaining clearly why they are likely to be more effective than what has been suggested thus far.

    • Stephen Washington

      Bozzor, I respect you coming to the aid of what I assume is a friend but please understand he brought this on himself! He wrote not one but three articles showcasing his narrow vision on “How to fix” the high end watch industry. What I find “insulting” is the arrogance he displayed by thinking he could write such nonsense without the watch community giving him a piece of their mind. Your overzealous statement that he “has comprehensive and broad experience at just about every part of the value chain when it comes to watches” is ridiculous. Ariel is a passionate watch guy with a blog and some youtube videos, nothing more! His attempts to somehow impress the watch powers that be have gotten out of control. These comments are harsh but not off base. Let Ariel take his cyber thrashing like a man so he can move on and never do this again.

      • Rob Crenshaw

        Well put, sir!
        And at the same time, perhaps Ariel will also stop monetizing the site with “sponsored posts” and shill reviews of ho-hum nothing watches, which has quickly thrown whatever goodwill ABTW had into the toilet, because none of the content is now believable. I don’t even understand the motivations behind this series of exposé and Fix-It articles: don’t bite the hand that feeds you!

        As I wrote before, if it ain’t broke don’t fix it. ABTW is where I come for show reports, watch reviews, independents, microbrands, in other words promotion of new watches. That’s all I want. These articles, and other obviously paid content, have turned ABTW into ABTI (Ignore).

        My advice to Mr Adams is to spend more time fixing his own enterprise instead of worrying about others he has no control over, and of which has only marginal understanding.

        • Stephen Washington

          Rob, I agree with you 100%!

  • Simon_Hell

    This is way overanalyzed. The whole industry is based on irrational. There’s no retail segment that would be more logically backward and preposterous. But thats what its all about. That is the appeal, because luxury defies logic.

    Pretty much all the mechanical watches cost the same to make. Or can cost. This is the only segment where costs are artificially inflated to follow to the criminally high profit margin.

    • Bert Kanne

      Very well said. Hi end watches sell for what people think they are worth. It is a product catagory that can’t be analyzed because its completely irrational.

    • Genevieve Anderson

      Profits are criminal?

      • Kuroji

        Usury laws.

  • Eric

    I am under the impression Mr. Adams would like to be hired as CEO of any big luxurious Swiss watch company. This articles might be his way to show boards and investors he has a plan.

  • JF Schnell

    I understand all the “technical analyses” indicated here and it technicalities however the simple fact is everyone in the high end of the spectrum is trying to get premium price out of customers. Honestly, I understand that high end means higher in value. At a certain level I may agree that the prices are high. On the other hand I have to say they are way too high. There is a huge deal of speculation. Reason when “grey market” takes over. If things continue the way they are the downfall of well known watchmakers is closer than we may think. Their marketing strategies may not work.

  • Buy and Sold

    I don’t think the watch industry is in crisis at all. It is simply that those who have not adapted to the changes in buying patterns are losing ground. There are plenty of watch companies and dealers doing very well: the formula for success is to do as they do.

  • Berndt Norten

    The Fatal Conceit of ABTW, or, the best laid plans of mice and men often go awry when grandma takes the wheel….

  • Omar

    The prices are simply way too high. The bottom line is the bottom line. They have crept up precipitously and disproportionately compared to inflation as you have illustrated. So much so, that many people prefer to buy used because the premium of new is too high and the price retention is like a used car for most brands not named Rolex (or specific models like the Nautilus).

  • gt0279a

    Nothing to see here. The market will always correct itself. Luxury goods are built on marketing hype anyway. It’s not like the Chinese were passing down family heirloom APs or Rolexs to know these brands, it’s all the years and billions invested into the hype. They will gladly fly to the Europe or the US and pay lower prices than what the correct market price is in China. The brands have to do that. Added VAT will screw up any tie to a single currency instantly creating inequity. Include VAT in the msrp and the same happens at a discount to travelers. I could only imagine when hundreds of retail stores start shipping $10,000 items internationally on a regular basis.

  • Dénes Albert

    There is a saying in my native Hungarian language that goes “The shoemaker should stick to his shoe mold”.

    • Garrett Hu

      Read what Iron Mike wrote, whatever they do to “control” selling costs will not violate antitrust laws. Because at the end of the day a retailer is free to sell for whatever price they please. But revoking a retailer’s authorized dealer status is also at will. So if they “feel” you are damaging their brand then that is a good reason. It’s easy to win this lawsuit by stating all the “grey market” guys out there. If they were indeed price fixing then there should not be any grey market since why would anyone go into business to lose money.

      So many ways to skin a cat.

  • Garrett Hu

    I honestly didn’t read the entire article, I am sure it’s a very informative enlightening. As much as I can say I am a very passionate watch guy (seriously, it’s on my mind all the time) I like to enjoy watches, share opinions on a watch, read watch reviews or about companies that are doing great innovative things. Just getting back to having a great time, it is what it’s all about.

    How to fix the watch industry and opinions are all great but the industry has been around for hundreds of years and it will be around for hundreds more. Who the heck cares? Ariel should care and does because it’s his business and this is his house so he should be able to say what he damn well pleases.

    Like a watch that you feel is overpriced or don’t like, then don’t buy it. Don’t like what you read here well go read something else.

    We are already helping by buying or not buying, there is no stronger or louder message, it’s heard loud and clear then it’s up to them to adapt of exit the business.

    IMHO we all need to just get back to enjoying watches for what they are and leave the industry to the brand CEOs, they will just keep going through CEOs until they find the right one.

    • Stephen Washington

      “This is his house so he should be able to say what he damn well pleases!” Without the watch community he would have no “house!”

    • Ariel Adams

      Good comment and I think most the audience here probably just wants to think about what watches to buy and which ones not to. These articles are for the industry and for the people with a deeper level of interest in topic of the industry itself. It is also a chance for me to get a bit more academic and analytical because I’ll be honest that just focusing on products all the time, without thinking about people, economics, systems, or geo-politics can be a bit dull for the team.

  • Kuroji

    I would guess that margins on precious metal watches are much higher than 50%.

    • Rob Weintraub

      Margins are generally 40% on most brands.

      • Kuroji

        You must be talking about retail markup, which is not what I mean. I’m talking gross margins end to end.

        • Timestandsstill

          I believe he is talking about profit margin based on dealer cost from the manufacturer. People often get mark up and profit margin’s mixed up.
          A 100% markup is a 50% profit margin.
          A 50% mark up from cost is a 33% profit margin.
          A $10,000 watch at a 40 percent profit margin would cost the dealer $6000.

          • Kuroji

            Right. That is to say, he’s talking about the AD’s margin. This is not something that people who are not the AD care about. What buyers care about is the total gross margin. i.e. retail selling price – COGS
            The argument is often made that a significant part of the value is the branding, so one should come up with a dollar value for that.

  • Horologer

    In the chaos and vitriol surrounding this post, a truth emerges: I cannot seem to read any article on A Blog to Watch without remembering the one above. It taints my entire experience, and essentially makes me question EVERY word written. Time to remove ABTW from my list of sites I read regularly. Ariel is such a pompous guy. How many of you feel the same?

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