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What About Value? Won’t Somebody Please Think Of The Value!

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Watches In Today’s Retail Market

This topic is really important. And discussing it is going to piss off a lot of people, but I need to get it off my chest. Funny enough, due to a mix-up on our end, this article was published before it was finished, retracted, and then eventually completed. Cries of censorship filled our inbox! Consider this a follow-up to a previous article I penned that discussed Why Watches Are So Expensive. OK, this isn’t exactly news to many people, but watches are really expensive. And to be honest with you, they are usually too expensive. Way too expensive – and whether that is good or bad is another topic. This (longish) article is about value, and what the hell happened to it. It actually isn’t just about the watch industry and I am not really trying to advocate for change, but rather using the luxury industry perspective to discuss a particular set of observations.

The previous article I linked to above discusses all of the reasons watches as luxury goods are expensive (in a diplomatic way) and offers a lot of good and useful information in understanding the watch industry and why items are simply going to cost a lot of money to begin with. At the same time there is a more devious side to the equation that rides on the back of the necessary evil of making a fine instrument. And that devious little character is “the ego.” A detail not separable from the world of luxury and the emotions which create desire for it.

Egos can make people overconfident. So confident that they are willing to charge a lot more for something than it might be worth, or that an educated consumer might be willing to spend given the competition. Let’s talk about  our current economic state and general economics for a moment. You know how there is that big “retail meltdown” all over the US (and the world) that has been going on for a number of years? Not just with watches but with almost everything. Stores we once saw as social fixtures are going away and surviving retailers only talk about finicky consumers. Many brick and mortar watch retailers are or have closed their doors because people simply aren’t buying from them anymore. What is going on? Well, we are finicky. Consumers (and I mean all consumers) want a simple thing. To pay the best price possible for the most useful (in this case a highly relative term) things. It isn’t a complex formula, but it seems to piss off a lot of people. Go into a high-end watch store and hear them snobbishly poof about how “we do not discount at this establishment.” Oh yeah? Well the Internet does, and people who sell you inventory also seem to allow for tons of their stuff to be available online. Don’t get upset with me because I simply want the best deal out there.” The natural response to this over the last few years has been for brands to remove or highly limit the availability of goods to third-party retailers. If products are sold online, they are sold direct from the brand at 100% retail price. They finally figured out that a lower-cost option  for buying the same thing always wins.

Why The Best Price Wins

Wanting the best deal out there is just simple psychology. People that don’t price-hunt are bad business people and are fiscally irresponsible. The ability to price-shop with the speed that the Internet allows is incredible. What did we have before that? Calling around? Driving around to other stores close by? Before the Internet, simple logistical impediments made price comparison shopping a pain. It’s not like you are going to fly to South America to see if you can get that new flat screen television cheaper over there. And because retailers more or less have the same fixed costs, the consumer could more or less expect the same prices all around town – save for an occasional special sale.

The Internet changed all that. Prices all over the world could be compared, assuming someone was willing to ship something. People with used or unwanted items had an immediate connection to interested consumers, and shops without bloated overheads (think rent on those high-end streets and in upscale malls) could conduct business for pennies on the dollar. The ability for Internet merchants to have lower prices combined with the ability consumers had to price compare in milliseconds killed retail as we know it. We will never look back without complaint. For more on that, you can study the ways Best Buy is trying to stay alive today and the reasons for the once super-power chain’s sharp decline.

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Does The Retail Model Hold Up?

It is true, I am convinced that the Internet killed the retail model that we have had and known for a long time. Going back to the watch industry, the historical “arguments” against buying online are simply too weak. Here are the three best arguments. First, “people want to try things on before they buy them.” Maybe, but either they will go to a store to try it out and then buy online, or simply do their research and rely on reviews of people they trust.

Second, buying in stores from authorized dealers gives you a valid warranty and “the luxury buying experience.” If the luxury buying experience is anything like the luxury dining experiences – I am going to pay too much and still feel hungry afterward. Oh, that and a human being is there to lay a napkin on my lap. That isn’t worth extra $$$ to me. Neither is a warranty half the time. This is another complicated topic in the watch industry – whether the warranty is worth it. Have you ever had to send your watch in to get it serviced under warranty? First, a good watch shouldn’t have issues in the 1-3 year warranty period. So if and when it needs work, the warranty won’t mean anything. Second, watch brands charge a mint to fix watches – even under warranty a lot of the time because they find reasons why repairs aren’t covered. Watch service is big business I learned. Huge actually and the industry that provides it is just now really forming. So while I do like to do things the “official” way, the traditional AD (authorized dealer) argument just doesn’t hold up. Don’t get me wrong. I like ADs. They are my friends. I want them to succeed. But the tools they have available to them are often pitiful, but less and less so as the people in charge brighten up. The industry needs to change in order to give them a value proposition that savvy consumers will actually find appealing.

The third major argument to buy from an AD is also complex. Brands and dealers often warn that only by purchasing from them are you guaranteed to receive a genuine watch, or one that is truly new. This is technically true, but the situation runs deeper than that. Let’s start with the “real watch” side of the argument. While it has happened before, the chances of you buying a fake watch from a reputable dealer (authorized or not) is incredibly slim. If by reputable dealer you mean a kiosk on the street selling watches for $100, then you might be in for a little surprise when you get home. Otherwise, I wouldn’t worry too much about buying fakes in stores at prices that don’t seem too good to be true.

However, watches from alternate retail channels might be pre-owned, or just thrown around a bit. They might also be what other industries call “refurbished,” or watches that have been repaired after not coming out of the factory in proper working order. Ultra deep discounts on new watches can sometimes carry with them little strings. It is good to read the small print, ask the necessary questions, and make sure return policies are reasonable. That means watches might come with small technical errors, cosmetic issues, etc… Sometimes this is not even known to the dealers. You have to understand that the longer a watch is unsold and the more hands it moves through, the more likely it will receive “unloving treatment.” As I’ve mentioned in the past, retailers handle watches like commodities. In the US for instance, they are required to put all watches from a store front into a safe at night for insurance purposes. That means the watches are packed up and moved around each and every day.

So that ultra-good deal you are getting online might be for something that is technically new, but doesn’t look it. The dealer selling it bought it for pennies on the dollar and is probably happy to sell it for a 60% off or lower discount. The complex system of dealers, distributors, subsidiaries, etc… will vastly increase the prices of these low-volume items. A brand that sells 50,000 mechanical watches a year is doing pretty well. But that is nothing compared to a million or more units a year. That means that each watch must be marked up high-enough to make a profit, unlike smaller margins on units which sell at much higher volumes. The end result is that the price to value equation to the consumer is relatively low given all the pieces that take a cut.

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The Strategy Of Modern Watch Marketing

Brands today are getting smarter about using the Internet and are cutting out many of the middlemen who are increasingly redundant. This means selling direct to consumers and removing a lot of the salespeople who went around to dealers selling new product. That also means prices should go down offering more value to the consumer, but that frequently isn’t the case. Prices are going up and many brands are lucky enough to profit more from each sale. Why is this happening? What happened to value?

Well my friends, the reality is that we are not dealing in necessary consumables and life sustaining items. We are dealing with luxury products, which by definition are reserved for the few. And even though a lot of advertising from brands suggests otherwise, these are not meant to be items for the everyday man. As long as people are buying watches then the natural laws of luxury economics dictates that prices will go up. So why do we get so angry then when that new watch we love costs $10,000 or more and we are just a simple person with good taste? We aren’t all Prada-clinging, Vuitton-lusting materialists. Not at all. It is because high-end mechanical watches strike a special nerve in many men (as well as women) that make us appreciate and desire them. Attention to detail, high-quality materials, precision-engineering, and a peek into an alternate, more exciting lifestyle that we will probably never have. This isn’t exactly the typical profile of a luxury good, and it makes watches feel very different.

It doesn’t help that most of the watches we want today were more reasonably priced in past lifetimes. As timepieces have moved away from being tools to lifestyle items, their prices and demographics changed, but their core messages did not. Rolex, Omega, TAG Heuer, and many others existed for many years as mere makers of “good” watches. Sometimes expensive, sometimes fabulous, and sometimes ironic in their design, they never dreamed of making sport watches that would only be taken underwater, flown with, or taken on safari in advertisements. Today’s luxury status of timepieces simply does not mix well psychologically with the core concept of what many consumers expect and demand. While it makes sense for a diamond-covered watch to cost a mint, why does something meant to be taken underwater and survive need to cost as much as a teenager’s first car? It is just hard for many people who understand the deeper nuances of timepiece luxury economics to accept.

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Shallow Pockets, Loud Voices

As I have learned, the scientific mind is frequently drawn to the allure of good watches. Though we are but a fringe of the buying demographic, we do represent an incredibly essential role these days. As we do not represent the majority of the people with the spending power to keep the watch industry alive, we will remain second-class buyers, but we are first class opinion-generators.

The role of watch media is incomplete without the role of enthusiast feedback. Whether you know it or not, the opinions generated online and the feedback of consumers is measured by the power of their words versus the power of their wallets. Knowledgeable people who discuss watches online influence not only the lay consumer, but also mainstream media as well as retailers who decide what to buy. Also, of course, the watch brands who remain silent but meticulously survey each and every word written about them on the Internet. The role of the finicky watch enthusiast (a nod to all us WIS types out there) helps shape the larger opinion and direction watch developments take. That guy looking at reviews online will notice your comments, the woman making one last check to ensure a model is legit before buying it as a gift will appreciate your thoughts. You will help entice or derail many a purchase. What role will you have in value?

Value Versus Price

There are watches I can afford and watches I will never be able to consider purchasing. For the latter I discuss them as art, as items of quality in-line with their price. I attempt to measure $100,000 plus watches against other $100,000 plus watches, and likewise for all price segments. Though I am not the consumer of many timepieces I discuss, I treat them as if I was a potential buyer with the budget necessary to purchase them. I have accepted that many watches, like art in a museum, were never destined for my ownership. The value there is in exclusivity, creativity, and quality. They are only as over-priced as any art is.

I look at value as a function of what you get for the money – not about sheer price. It is up to each individual consumer to determine whether a watch presents them with value. I suggest this to all consumers and all brands when it comes to a particular product. Does the watch offer features and quality relative or greater to other watches of that price? If not, then you have a value problem. Too often brands will try to play with this concept by adding budget to marketing campaigns or conceiving confusing messages about the product. If that formula sells the watch then great, but that doesn’t mean you have a high-value product.

Consumers should feel comfortable with each purchase. Each alone will determine what they can afford, but it saddens me when the principle complaint watches get – even by the extremely educated – is that a timepiece’s price is too high. I just don’t want to see that ubiquitous remark as often. Value is about what you get for the money and I’d like to see people getting a lot of watch for their dollar as often as possible. I didn’t write this to admonish or warn, but rather to espouse conversation and meaningful discussion on what we are buying and why.



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  • Ulysses31

    I normally don’t mind buying things online.  Hanging around WUS forums for a few years I got the impression that a lot of people thought buying an expensive watch online (Swiss, thousands of dollars territory) was fraught with risk.  I didn’t really believe that internet retailers were just trying to con you, and i’d much rather save hundreds of dollars, but that was the prevailing belief.  I don’t suppose you have a list anywhere on this site of reputable online watch retailers, that have been tried and tested by blog readers?  If not, it might be a nice new feature.

  • DangerussArt

    Nice article Ariel.
    Every watch I’ve purchased in the past 5 or 6 years (save one impulse buy) has been done online. Either through a trusted, established internet retailer or through forum transactions with people I trust. This accounts for dozens of watches –  maybe 40. I may be exception to the rule, but I’ve never received a bad watch, a fake, a non-runner, or an abused one. I rarely visit watch stores. It seems they seldom have what I’m interested in seeing, or have some scentless feces mentality about the staff. With more and more  watch makers opening e-boutiques, why bother. For some brands like Marvin, or even Oris, there’s not a retail dealer in reasonable driving distance (and I’m in a major city no-less) so for me the only way to acquire one is online.
    If I were after some limited boutique edition where you had to be one of the AD “cool kids” to even have a shot, I could see the benefit. Fortunately my tastes run more pedestrian than that.

    • Hey all, this article was published accidentally before it was done by someone while I was/am on vacation. Sorry about that. It simply wasn’t complete yet.

  • nateb123

    When I was selling luxury watches, value was a word I put a lot of thought towards.  The highest discount you can find doesn’t necessarily equal value.  We used to sell far more watches at a much higher margin than many competitors because people were willing to pay much closer to the MSRP if they knew what they were buying.  This does mean that it takes more time, money and effort to train your staff up to provide a higher level of knowledge but it’s a far smaller investment than giving 20% off or more on most sales.  The biggest problem with this model is that it’s left to individual retailers to inform their customers when it should be the brands which do this.
    I believe this is why single brand boutiques are doing extremely well despite many refusing to give discounts.  Being solely employed by Breitling, Patek or Omega means knowing far more about the product and the company than most multi-brand retailers.  Also because these are owned by the brands, their margins are much higher and this allows them to pay their staff quite a bit more.  Many of the best salespeople work at boutiques now because they offer higher pay and excellent benefits, often with less focus on commission.
    Finally, taking everything out of the equation except convenience, you have online shopping websites being launched by many brands.  These websites only offer watches at full price and are booming.  Convenience is apparently worth a lot to people.  This isn’t to say that I think watches shouldn’t be cheaper.  They absolutely should.  I have a pocket watch that I bought for about the price I could sell gold in the case for which has a beautiful movement and I think that clearly there is a disconnect between cost and price in the industry.  But given how much consumers are willing to pay, apparently not many share your disillusionment.

  • MarkCarson

    Yes Internet sales have  drastically changed retailing. Bookstores have been consumed by Amazon. People like touching and checking out items, but then go home home and order online. Oddly, I’m a bit surprised that auto dealers aren’t more vulnerable to this. Perhaps because you still need have service needs after a car sale.
    I’ve been dealing with the same car dealership for 13 years and counting. Pretty much everyone there (sales, reception, service and parts) knows me by name and I’m well treated, so this is a pleasant place for me. But would I order the same car strictly online if there was a substantially larger discount? You bet I would. And this is because I’m an educated buyer who has already gone online and knows the model and all of the options I want. So my ‘Sales Advisor’ simply enters my order, gives me a modest discount and makes his commission. I even ordred a one-off car back in 2009 where I dealt directly with the factory (for 13 months) but in the end “placed” the done deal order with my local dealership. I did not mind as I have an good ongoing relationship with them even though I’m an easy sale and I don’t waste their time and always do my homework before showing up. But educated buyers are an up and coming thing in all forms of sales (as Ariel noted).

    One more side story and I will tie this into watches (I promise). My wife and I enjoy dining out at a really nice restaurant a couple of times a year. I drop about $400 for dinner for two and never regret it. Does the cost of the food justify that? Of course not, but I would not buy the same food from a take out window even if it was half the price. What we go for is the experience and the service and the ambience. After a few years, you find that people know your name and remember you. You ask for your favorite waiter. You can order items that are no longer on the menu because the executive chef knows you, etc. 
    The watch buying experience can be like a luxury car dealership or fine dining in you are more interested in “the experience” and the personal service and care less about the price. But…most watches are mainly commodities and less service products. I can’t get the same entrees and environment and waiter if I go to another restaurant. Not that watches are exactly like burgers, but price competition and the notion of value does (or should) apply. So things are a changing…

    With the prospect of lower distribution costs, brand boutiques and online sales must be very appealing to traditional brands. But they live in fear of what will happen to their ADs and the retail chain (that they are comfortable with and is well known to them). So they are in uncharted territory. New brands without a traditional retail channel can sell directly via the Internet from day one (I’m doing that). But if you expect new Internet only brands to have price that are a fraction of the big brands, you  are forgetting the volume versus initial outlay costs Ariel mentioned. My venture (Individual Design) had over $40,000 in upfront costs before the first revenue dollar came in thee door. While that may seem like peanuts to a venture capitalist, until you sell your first 50 watches, you are at a loss – there is no profit. Forget the amortized or steady state projected  unit costs of parts and labor. There is financial outlay and only the hope that you will generate enough volume to recoop your investment so you can do another design.
    Yes, the  big guys have a money printing machine when it all goes well. But don’t forget  you are paying more for marketing than parts. and production costs. And so it goes….

    • DG Cayse

      MarkCarson Well said Mr. Carson. An anecdote speaking to online sales of autos. I have a dear friend who works as a Sales Associate of a high-end marque German car company. Quite the status symbol and has been for many many years. He works in a very prestigious dealership in a world famous location. His business was slowly going down. Year by year he was seeing less and less of his usual clients. Of course this was hitting him, and the dealership in their bottom-line. So, in the mid-90s he pitched a major shift for this very old line brick & mortar dealership – Online sales. Get on the internet.
      What seems today a no-brainer was revolutionary for this dealership. It had to be OK’d all the way over to Germany. But they finally gave it a go. Slow at first – but within 12 months it was doing 20% of their sales and booking 40% of their repairs and maintenance. Now the numbers are even higher. The company? Mercedes-Benz of Beverly Hills…yes…that Beverly Hills.
      The internet has truly re-shaped sales & marketing for the “high-end” aspect of retail.
      As to the watch industry – I predict a major re-shaping of things in the next year or so. Informed customers vs head-in-the-sand manufacturers and ADs.

  • Borys Bozzor Pawliw

    Realistically, a watch is the only piece of a jewellery a businessman who isn’t in the entertainment industry can get away with. Like women with traditional jewellery and (and I guess) shoes, watches are a status symbol, a statement in a secret mens language that evaluates status and style. Logically, why would anyone pay $25,000 for a steel watch which has less accuracy and functionality than a $250 Protrek? Because you CAN, and other people are expected to know it and respect your achievements because of it.

    • MarkCarson

      Borys Bozzor Pawliw  
      I agree, outside of a wedding ring, a lot of men will only wear a watch as jewelry (which can be a statement of status, fashion or whatever). Not that everyone pays attention that one is, or is not, even wearing a watch let alone something interesting. But it is like wearing decent shoes and pants, it all says something about you, whether anyone else notices or not is another matter, ha ha.

  • aBlogtoWatch

    @Troopernine Thanks! Someone on our team accidentally published this piece before it was done. So wait for it to be complete.

    • Troopernine

      @aBlogtoWatch I thought the content was relevant/important given today’s landscape and thoughtfully delivered. Eagerly await the update.

  • AmanGupta1

    I think one of the reasons for high pricing because the value proposition is extremely subjective. For a $10,000 watch, there is no way you can figure out it costs that and not $5,000. I wonder if there is another pricing model that could be introduced.
    In India, most of the jewelry bought by ladies is 22K yellow gold jewelry. There is a very fixed pricing model in the jewelry industry: Let X be the price of the weight of gold in the piece. The jeweler will just add “making charges” which is a percent of X. If you ever want to sell that piece of jewelry later, then the price will always be the price of that much gold – making charges are lost. The making charges are usually in the range of 15-25%, and is the basic reason for difference in prices if you go to a famous or exclusive brand vs a local jeweler. If you buy jewelry in India, you might be surprised that whenever you ask for a price, the salesperson takes a minute on the calculator to give you the answer.
    Indians, in general, are very value conscious, even if they are spending equivalent of tens of thousands of dollars on stuff like jewelry. This model makes it easy for them to more easily gauge if their buy is good value for them or not, and brings some objectivity to a luxury purchase.

    • MarkCarson

      AmanGupta1  – I have purchased gold jewelry in Bahrain so I’m very familiar with the practice of buying by the weight of the gold (at market price) with the “making” multiplier. At the Gold Suk, the multiplers ranged from 1.5 to 2 or more. So you comment that the “making charge” of 15-25% in India obviously has some serious markup when it retails elsewhere. And I was told that most of the gold jewelry sold in Bahrain was fashioned in India (no doubt due to low labor costs in in South Asia).

      But here is why I don’t think that model applies very well to watches (for the most part). In countries like India and in the Middle East, gold jewelry is mostly about the gold. There are often no precious stones and certainly no mechanical aspects which are the defining aspect of fine watch. The raw materials are worth more than then  labor or design costs.

      What do you think a watch price would be if you only considered the cost of the materials (on a per gram basis) and then applied a multiplier? So many grams of brass, so many of steel, etc. times what sort of crazy multiplier? 
      The cost of a mechanical watch is more about the industrial and labor and design costs to manufacture than the cost of the raw materials. OK, plus the huge marketing and distribution costs by the time it gets to a retailer. Again not related to the raw materials costs. The cost to market a gold cased watch with an alligator strap and the same watch with a gold bracelet is essentially the same, but the gold bracelet costs more. But the price of a gold bracelet is still less than a high end watch head even though it weighs about the same (or often more). So in the ‘India’ model, a gold bracelet would be overly expensive for a given  ‘making’ rate or the watch itself would be a losing proposition for the brand if a gold weight model was applied to its raw materials costs (where the gold case would be of value – steel and brass are pretty cheap).

      To drive the point home – do you a purchase car in India based on its weight of steel, aluminum and plastic (times a multiplier for the ‘making’)? No? So you can see the gold jewelry model does not apply very well to mechanical items like watches (in any price segment). The only hypothetical case I could see is if a watch has a gold or platinum case and a $1 quartz movement. Then you could determine its value by weight as a mostly precious metal item.

      • AmanGupta1

        MarkCarson AmanGupta1 I didn’t mean that the exact same pricing structure would apply to watches. I don’t know the solution, but hoped some objectivity can be brought into it.
        The indie brands (like Steinhart, Ocean7, Helson) etc. already give us a better idea on pricing. Usually they would have a base watch, then have extra charges based on Titanium case/Black PVD/a different strap/COSC certified movement etc. The fact their pricing already seems pretty VFM, makes us easy to be sure of our purchase.

        • MarkCarson

          AmanGupta1 MarkCarson I agree that determining a fair value for watches is difficult. The problem is finding a pricing model that works for both high and low volume producers and also varies by distribution method (brick & mortar versus Internet) and the degree of marketing expense (all of which gets passed on to us, like it or not). Have a great  new year.

  • Jacquess

    One big improvement would be if warranty and service shenanigans changed for the better. What kind of a luxury experience involves the manufacturer attempting to weasel out of warranty obligations and/or trying to price gouge on servicing?

  • johnro6659

    I have talks like this with a lot of fellow watch collectors all the time about this and truthfully a $100,000.00 watch doesn’t do anything more than a $25.00 – $100.00 Timex does, except empty your bank account! In all honesty high priced watches are bought as status symbols more than to tell time. I have inexpensive watches that have lifetime warranties and very expensive watches with only a few year warranty. I have never had to send in any of my inexpensive watches for repair or service yet! Some are twenty years old or more. I change my own batteries so none of my quartz need to go to a watch shop. Now, I have had to send in my expensive better made watches dozens of times. Some big brand companies will service the watch for free either for the life of the watch or up to several years but you have to pay shipping both ways. This is one example: I have a Tag I got in the 70s that has probably logged in over a 100,000 miles on it and racked up a good chunk of change in shipping and costs. Once I sent it in and they sent it back with a new face! I was pissed because they never asked me and the face was a lot different than the original. I sent it back and had them put back the old one thank god they still had it. I figured by now I could have bought a new Tag with what I paid for shipping if the watch didn’t have sentimental value it would have been sold a long time ago. Today manufacturing is high tech you have a lot of work done by machine and computers. CNC, Laser cutting and engraving brings costs down. The Chinese are pumping out a lot of watch from inexpensive quarts and some great autos and mechanical watches. Some Swiss manufacturers are buying movements and parts from China but still charge top dollar for a watch. I am a very eclectic collector now I learned when I sold jewelry that mark-ups are huge on watches and jewelry. I found out another thing wearing a status symbol expensive watch. People who don’t know watches or brands have no clue if your wearing a good or bad watch! I hate wearing my Rolex’ every time I wear one people ask if it’s real or not there are so many knockoffs out there people assume it’s a fake. When I wear my  Patek Philippe or Hublot I might get a comment “That’s a pretty watch, Who makes it” I tell them and I get “Is that a good watch I never heard of it”. I wear something like a Swatch Timex or Invicta people know right away what brand it is. In the end a watch is a tool to tell time and it’s only worth what people are willing to pay. Some people think the more it’s worth the better it is but the more intricate the watch the more trouble you can have with it and the more it has to be service.
    Patek philippe

  • koshyk

    Love reading your columns as always Ariel.  You make many strong points.  My two cents is that certain brands are known for value such as Seiko, or Sinn.  Some brands are known for being beautiful pieces, yet have ridiculous prices for what they are, such as Panerai.  As you mentioned, as long as people are willing to pay those prices the watches will be worth that.  As you and John mentioned on the Hour Time podcast, its like Psychology.  It is what it is because a group of people say so.  Thats it.

  • rclayton

    Good column.  Rolex is an example of trying to maintain value.  They are gradually shutting down their dealerships of long standing (One in my high-end Florida town lost their franchise after 27 years) and opening Rolex boutiques.  They are also pressuring the few remaining dealers to not discount.  They can get away with this with certain iconic watches, like the Submariner, but others still get discounted or not sold because of the value/price equation (Yachtmaster).  It is best to buy used. Either go to a forum such as the one for Rolex and look for a trusted seller or go to a local jeweller you trust, as I did for my 2008 Sub.  Value is harder to determine for a low-volume watch like my Magrette or Anonimo.  Anonimo is heavily discounted online but Magrette is only avalable from the maker in New Zealand.  Both excellent watches but nobody recognizes them like they do a Rolex. Since the luxury market seems to be more recession-proof than the lower end, we are probably not going to see much downward movement in prices in the future.

  • Mister_w

    My everyday watch is a Christopher Ward C5 that cost me less than £200. I can see where every one of those £200 was spent and very little is on marketing or flashy shop fronts. There will always be people who want a watch as a status symbol and are prepared to pay more for a name, like the teens who buy Beats headphones, but there are an increasing number of us who want a good looking, good value watch. I think the future has space for both but the high end brands will find their market share is reduced.

  • vmarks

    Another interesting part of the “luxury AD experience” is the experience of going to the counter and being told “you should really buy now, BRANDNAME is raising the prices in the near future and we’ll have to charge you $1000 more next month.”
    Contrary to pressuring ADs to not discount, they’re pressuring dealers to raise prices so that even fewer in the market can consider their products an option.
    I understand that ADs are at the mercy of their contracts with the brands, but the brands should understand that having their representatives have to say this doesn’t make them look good. It makes them look like they view sales as an unwanted unnecessary evil they have to engage in. 

    That experience doesn’t increase desirability of their products, it’s off-putting. It increases pricing, but not necessarily the value.

    If manufacturers don’t like customers, and they don’t like service, and they regularly anger consumers by changing parts at service that consumers prefer to have been left well enough alone, it’s a wonder they’re in business at all.

    • GeoffBot

      Nomos is increasing prices tomorrow – buy one today!  No, really – they say so on their site.  Though that isn’t surprising – all watches are going up in price.  Though even if the prices go up a few hundred quid they’re still superb VFM – in-house movements, beautiful finishing and reasonable service costs  I bought one and am awaiting delivery.

      • vmarks

        @geoffbot I hope you enjoy your new watch.
        Manufacturing costs are not increasing, or not increasing dramatically. The BRAND that I had in mind when I wrote my comment has increased prices by 2000 USD since I began watching a specific timepiece at the local AD counter. It debuted at 6250 USD and is now at 8200 USD. For exactly the same watch that has been sitting below the glass counter.
        Costs increase for a few reasons:
        1) company needs increased margins to please shareholders/fill owners pockets/fund future development/marketing needs
        2) company needs to increase costs to cover increasing replacement costs – this is why gasoline/petrol prices go up. The replacement cost for materials/labor is higher than the cost of what it was to produce the unit on sale today.
        3) company raises prices to create a worth that isn’t present or wasn’t present in their initial go-to-market strategy.
        I’ll elaborate a little on (3). A 1950 Bulova Director (10K case, 15 jewel swiss manual wind) cost $33.75 when new. Adjusting for inflation, that’s 288.27 USD in 2011 money. A watch that cost $950 in 1980 should cost $2,795.16 today. Instead, the price for that model’s replacement costs $7,500.
        A common practice in non-watch industries is to price goods at a price 80% of the target consumers can bear. This strikes a balance between selling enough and leaving some demand that people can strive for. In luxury goods I can see charging a higher price and setting that ratio so that less of the potential consumers are able to afford the product.
        The problem is two-fold. 1) It’s really disheartening to see a product that was within budget and reach get re-priced out of reach. Instead of making the consumer aspire to ownership, it makes the consumer turn away. 2) Especially when there’s no apparent justification, such as the replacement cost mentioned above.
        It’s possible to say, “sure, you’re just not their target customer.” And I could live with that, although I would suggest that they’re shrinking their market drastically.
        Another user pointed out that buying used was a good solution. And it is, but it does nothing for the manufacturer who has essentially lost a sale. You could argue that they never would have made that sale anyway, but I think they would have had they not raised prices each year, widening the disparity between used and new. You can also say that they’ll get service fees. Even if there’s huge margin in service, it’s not as high a profit as they make on the initial purchase.

        • Jacquess

          vmarks I can’t help but feel that luxury watch brands are sensing the shrinking of the middle classes, and feel that there are two pricing models: cheap crap for the have nots, overpriced quality for the haves.

        • Aegir

          Jacquess vmarks 
          Not too far off the mark I would think

  • stevej2001

    I’ve a somewhat contrarian view. I think that a high quality AD is worth some extra cost. I think that having the opportunity to examine watches at an AD and then buy online is essentially stealing. No, I’m not in the watch selling business, just a relatively new collector.
    I think cutting out ADs will be unwise for the the brands, since so many of us live far away from boutiques. I’m in the periphery of the San Francisco Bay Area, and despite the many millions who live in the nearby, the nearest boutiques are in LA. What percentage of the population lives a good distance away from NY, LA, Las Vegas, Miami, etc?
    I’ve discovered an AD in the SF area that does discount a reasonable amount and will spend time demonstrating and teaching. I suspect I could get a slightly better price online, but I feel his expertise is a value to me. 
    I’m also into cameras and have been for a long time, so I know the marketing issues there in much more detail. Camera stores are dying because of the internet as well. But cameras are a more technically driven market, and more of a high volume one as well. I rarely visit my local store because they have little in stock, charge MSRP, and have often incorrect advice. I’ll go in there occasionally for something I need right now, or need to see to buy (like a camera bag I just bought). Listening to the sales people talk to other customers, I often feel like I need to interrupt and correct what the salesperson is saying. 
    That said, I’d never have them demonstrate a product and then buy it online. I offends my sense of fairness. But cameras also often need to be handled and used before purchase. It’s a dilemma for folks like me, but fortunately there’s a SF camera store that doesn’t discount much but does have an enormous selection and gives good advice. I’m paying for the ability to touch and try, and I consider it a value. However, I bought a lens recently based on it’s reviews, and I bought it online. No need to try before you buy with something like that.
    My watch AD has a good selection and gives good advice. He does discount a bit, and the extra 5% or so I could save online isn’t worth it to me, and if everybody cuts him out of sales, he’s not going to be there much longer.
    Think about that the next time you consider a watch purchase!

  • Excellent Article.  Thank you very much.  I will not be buying from an AD in person anytime soon. Those who insist will not earn my business.  I recently tried to develop a relationship with an AD in the  area I live near and they turned out to be nothing but a liar, and horrible representative for the “Brand” they were trying to sell.  They turned out to be selfish, arrogant and abusive with their words.  I took my hard earned money/business somewhere else.  They will never see my business again.  The AD I’m working with now has been nothing but kind, helpful and understanding.  Willing to work with me.  They represent watches they way they should be and the Company should bend over backwards to help them represent their brand.  They do.  I’ve never seen anything like it.  They are the best I’ve ever worked with-the Company that owns the brand and the AD that represents the brand.  I am so happy with them both.

  • bichondaddy

    Well…where I live…the jewelery stores in the suburban areas…except for a few exceptions…have all but stopped carrying high end watches.  They still carry watches…but they are more on the line of Bulova, Hamilton, Seiko and Citizen.  The place I go has told me that the market was large enough anymore to make carrying any of the “Big Names.”  The internet just has too many options available. 
    I also agree with some of the other comments about service on high end watches….my Rolex sits in the box because I got tired of paying them $700 or more everytime it needed service. 
    I guess since I am medically retired & I don’t worry about trying to impress fellow co-workers with the watch I wear.  I’d rather wear a Citizen Eco Drive than worry about impressing people. Buy what you like and feel you can afford.

    • MarkCarson

      bichondaddy I recently had a brief conversation with the local manager of a large jewelry chain (mall stores). You should realize that Honolulu sells to a higher proportion of international customers (from Asia.) in the same way that Miami or New York does. So it may not be typical of more mainstream retail markets.

      But her comment was that they are moving more up-market with TAG Heuer becoming their entry brand. Perpetual calendars being an example of what their customers are looking for. The implication is that watches that retail for under $2,000 are not what they intend to be selling in the future. 
      So the retail storefront is becoming a super-luxury outlet and not the place most of use can even afford to set foot into. I guess the retailers are ceding what we think of the as the mid-range (almost affordable) market to the on-line world. Plus their crazy mall-rent costs force them to sell only high per unit profit watches. 
      Increasingly, if you’re a millionaire from Montana looking to buy a Patek, you have to also factor in airfare to a ‘destination shopping location’ so you can even purchase a high end watch.  And if you want a $1500 TAG, you will likely only be buying it online in the future as no retailers will be carry it. Weird, eh?

      • bichondaddy

        Well…living here in the suburbs of Houston….there are many high end jewelry stores that do cater to the folks that are well off.  All you have to do is go to the Galleria area or to the Woodlands and you’ll find many shops selling higher end watches. I just don’t have the need for one anymore.

  • Panagiotis

    I think that 90% of brick and mortar watch stores that i have visited worldwide have really rude and annoying staff. Add to that the fact that they have no idea what they are talking about and it really is a wonder they still exist. 
    I will only buy from a retailer if they can offer a reasonable discount that still allows for a reasonable profit margin on their side. If the retailer is very good/knowledgeable/polite i will accept a slightly smaller discount because i feel that they should be rewarded for their service.
    Short of the ability to actually handle the “product” an online retailer usually offers better service and is MUCH more aware of what they sell and who their audience is.
    So yeah, i’ll take online vs. physical store any day of the week…

  • Sunnymay

    Watches can be ridiculously expensive, yet I connect anything of quality with the experience of where I got it.  The products seem to live from the atmosphere and ambience from which they surface in my world and everything is connected somehow and some way.

  • phb

    This is a timely post. While I’ve had an interest in watches for years I yet have to purchase my first decent watch. As such I have been reading a lot, learning about brands’ history and perceptions in the process. By nature I would describe myself as a value-oriented person, which is why although I appreciate fine time pieces my seiko skx diver has been my most trusted go-to watch for the past decade. The new Omega Aquaterra with a blue face was a close call but  I can not get beyond the fact that the movement rate has been decreased to accomodate for the co-axial escapement, technically it is frustrating. Anyway, I was looking at the Bremont Solo with a white dial and the watch was starting to grow on me when I read a review somewhere and realized the watch costs 4000 USD. I was more thinking along 1.5k, 2 at most. For that kind of money there are a lot of serious pieces out there, including Jaeger or even Rolex, either pre-owned or through gray imports. The funny thing is that the main reason why it’s been taking me so long to decide on what watch to get is to steer clear of Rolex in the first place. The more I learn about watches, the more I’m starting to realize that after all, Rolex might be a pretty good deal at the end of the day if you stick to one of their classic models.

    • DG Cayse

      phb I would suggest you spend time visiting as many of the web sites of lesser-known watch makers. You will find extremely high quality, along with real warranties, for a much lower cost. That, to me at least, is true value.

  • Aegir

    It is a wider topic when taking into account small private brands and independents. The former for example, having most parts made for them at component makers in low volume and there is no love shown to the small brand when they order 50 cases made for them, or 50 dials. The tooling costs, the setup costs, the other costs that come with such a production. 
    Most of these private brands can not afford to put their watches in retail, and are operating already on small margins and still people complain of their prices. Granted, the big players are doing well, but then if a Rolex was $1200, there would be making 10 times the current million or so watches they put out, and then would you really want one? I think not, you are paying for that prestige for those brands. Independents that sell a watch for half a million dollars, well your then buying art, and private label your buying exclusivity. With online sales, we are not selling a lot, as people do not want to risk buying without trying it on, and there is no solution to that.

    • MarkCarson

      Aegir If you know someone who will make cases in lots of 50 (decent ones that is), please let know. I’ve found dials to have an MOQ of 100 and hands at MOQ 200. Don’t get me started on cases…the usual MOQ is 500 and they act like they are doing you a favor with 400.

      • Aegir

        MarkCarson Aegir 

        [email protected]     tell me a a brief thing about it Mark, and I will direct you to the right place

        • MarkCarson

          Aegir MarkCarson Thanks – email sent.

  • DG Cayse

    Mr. Adams, another point you mention is a very good one – The cost of ‘authorized service’ for the brands. I, personally, have tired of spending the US$500 or so for maintenance and service every 3,4, or 5 years. I have a Sub that was purchased in the mid-80s that has now accrued more in “maintenance & service” costs that I originally paid for it. This DOES NOT represent value to me. Another Datejust is approaching the same status. I simply do not wear these, along with a few others of this level, for this simple reason.
    I purchased these marques based solely on their reliability under rough conditions. They proved their worth. But the service costs vs value is simply not there anymore.
    And then their is the attendant increasing costs of insurance for these items. Good Luck with that!

    • Aegir

      DG Cayse 
      An old sub can be serviced quicker, cheaper, and just as well by an experienced watchmaker that is not an AD. I do not service any watches I have ever owned, until I know they need it, such as the mainspring needs replacing, where the power reserve is obviously less and time keeping is off, otherwise whats the point?

  • avb

    Local ADs face competition not just from on-line sellers, but out-of-state ADs too.  I do feel better knowing that a piece is covered by the manufacturer’s warranty because they’re not going away and their work reflects on the brand’s reputation, so I’d hope standards are relatively high.  Plus, service by a manufacturer’s service center often comes with a 12 or 24-month warranty on the work performed.
    But if I can call an AD out-of-state and get them to offer at least the same discount that my local AD offers, I’m saving the sales tax, which is 8.5% where I am, so meaningful.  Each brand’s web site makes this so easy by listing their ADs.
    I am concerned about how long a piece has been in an AD’s case which can be up to two years for some pieces.  Not only has it been subjected to daily case wear, but the oils dry up over time regardless of use.  Anymore, I try to find an AD who doesn’t have what I want in stock so that they’re ordering it and I’m getting a piece that has never been on display.

  • Tekky

    Watch companies (or the jewelry stores) dodging the warranty is a big one for me.  I bought a Tissot several years ago that suffered a problem that should have been covered by warranty, just two months later.  But they said they wouldn’t even try… that the problem must have been abuse.  Despite there being no marks, water, scratches, dents or anything on the watch.  It had never had an impact, exposure to moisture, extreme temperatures or anything other than babying care.
    So I had to pay $ to get my new watch repaired.  Very annoying.
    And the last time I bought a watch in a jewelry store.  There’s no point paying that mark-up if they don’t stand behind it.  Since then I’ve purchased direct (e.g. Christopher Ward), internet retailers and watchmakers (for restored vintage watches), but never B&M.

  • cluedog12

    Great post! I will nitpick the final comment though as value and price do go hand-in-hand to an extent though. Taking 2000 as the base year, the 2012 CPI was roughly 133.3. While the average watch MSRP might only be up 33%, the eye test suggests this is not the case at the high end.
    Essentially, if the price of luxury watches is vastly outpacing the rate of inflation, the value equation is heavily skewed towards pieces produced during the early days of the current mechanical watch rennaisance (1990 – 2002, say). For example, one could purchase a 1990’s Ulysse Nardin astronomical complication from auction for under $20k. The same watches in its most modern iteration is likely to set a collector back double or more, even in refurbished condition. While some of the price movement can be explained by the migration towards in house movements and the associated R & D costs, I remain unconvinced. Most of the new inhouse movements are no finer than the old F Piguet and Lemania options.
    Outside of the few JLC Extreme LABs of the world, it is entirely possible that value is absent amongst modern luxury watches in the $20k+ price bracket.That may be why collectors complain about price rather than value.
    For a future post, I challenge you to define value in the $100k+ price bracket beyond “how many axis the tourbillon spins upon”.

  • richardstonelaw1944

    I remain puzzled about the “Manufacture” movements… It seems to me that if one were to consider designing one’s own “movement” it should have to have some advantage over those otherwise available, either in price of function. From what I have see the manufacture movements, with the possible exception of the Rolex movement, are not any better than what can be purchased from an outside company. The other issue is of course the strange idea that using such a Manufacture movement entitles the company to charge more for the watch. However, all that does is make the watch more difficult to service and repair. None of it makes any sense. I can understand the higher price for gold watches, too…, but why does the cost so greatly exceed the value of the gold?It may be true that the lump of stainless is essentially without cost, and the gold costs a lot, but not to the point of any watch being worth (for example) US$10,000. Is it that much more difficult to work with gold? 
    So, as we see from prior posts on this topic the “model” is apparently not “rational” in terms of knowing what time it is, but only rational in the sense of prestige and perception in terms of exclusivity and status. In other words, as jewelry.
    Design is an element in all of this, and Rolex and Panerai and Omega (among many others) know and understand this. Certain watches look very good, in terms of design. Others do not, even accounting for taste. What we may be seeing in one sense with the boutique brands is a situation where the designers have figured out how to make the watches they like, as opposed to being employed by a brand and designing watches that the brand wants. 
    Another intriguing aspect of this is that knock-offs, replicas, and homage watches expose value: If someone in China can make a superb Panerai for US$500, why does it cost Panerai at least US$5000? Is that all design? No. It’s probably mostly marketing costs and a very fat profit for the brand owners.

    • richardstonelaw1944 There is a longer answer to this but in a nutshell you are right, charging more for something you make is not logical from an industrial sense. Having said that, few brands can compete with the economy of scale and accumulated knowledge ETA has. What you are paying for (hopefully) is increased craftsmanship, complication, prestige, and decoration. In effect, something more hand made versus industrially mass produced.

    • Aegir

      One small issue, is ETA not supplying small brands directly, nor even supplying large ones anymore. The Swiss Government stopped them from cutting off supply some 10 years ago in order to give a realistic time frame for brands to make their own, but now they have cut off supply. If you then are a small to medium brand and buy from a broker, what then when said broker has a different grade and finish of the ETA movement you are using? Then at some point, none at all. 
      But your point is valid for sure, one reason I use Soprod, and others are hearing of them as well. In fact I could not be more happy with them.

      • MarkCarson

        Aegir Is your company going to be at BaselWorld 2013? If so, I’d love to see your watches in person. Cheers

        • Aegir

          MarkCarson Aegir 
          Not this year, I have little to show, as two new models arrive some time after Basel. Next year I will be there however.

    • Aegir

      There is the other matter of precious metal recovery, which must account for some of the cost when machining Gold and other precious metals.(then there is the jewelry factor in the price) I know this does not account for all the extra math, but there are always more things going on. Advertising and marketing costs, wages and so forth are huge for some of these companies, so I can understand them to a degree, but I never did understand their pricing models. I read several times that there is the 7:1 rule in Swiss watch sales, 7 times the cost for retail than the cost to build. How true that is, I can not comment, but seems about right to me with the information I have.

      • MarkCarson

        Aegir I had heard it was 4 to 10 times the production costs. And varied by market segment with the most expensive watches having the highest mark up. Talk about profit per unit!!!

  • Thank you, great comments and very helpful. Hopefully some of that “huge” markup is being used to develop new watches and better, faster, more efficient, nicer, and on the list goes. It does get to the point though that only those with more money than they need, will be able to afford these “Nicer, Better Quality” watches. So, there will always be a market for the less expensive watch and the very expensive watch. It would be nice to see a company really go after the middle market that will supply watches as nice as those in the upper tier but affordable to regular “Joes” like me. I love the history of watch making and the hard madeprocess. Although I could not make a watch, I do understand the how much effort goes into fine quality woodworking. I can only imagine what a watch maker must feel when they have finished a fine watch. It must be an amazing feeling. In many ways I find it a privilege to own a fine watch. I only wish I could afford my dreams.

  • But much beyond a mid-tier watch what is the difference? Gold, platinum, diamonds, silver, etc. There is a point where the difference is the material and not the workings, yes/no? Right now I buy the most I can afford. Sometimes that is a very fine, nice watch for under $500 or even $100. It depends on what I’m wearing it for. Even if I could afford, say a 5K watch or higher-50K, I don’t think I would be comfortable owning it for a variety of reasons. Having a watch has never been about showing wealth I have or don’t have but want too. Function is most important, but function with understood value is important as well to me. Thanks again for this column. I really enjoy thinking about this “stuff” and seeing what others are thinking. Watches are amazing! I can only imagine how the craftsman must feel when he sees his work being enjoyed by so many. I admit I am in awe with some of the detail that goes into a fine movement and watch. Not as much awe as I have for the making of the Universe, but I am amazed not only with the detail and complexity of the movement, but the mind that can think of it and then put it into action by making it. A fine watch, to me, is no different than a fine piece of art or the creation of a beautiful symphony. They will all stand the test of time, hopefully, and bring much joy to the, creator, owner and those who enjoy from a distance.

  • Great article Ariel.

  • JorgeXavier

    You are absolutely right: there is an important distinction between “value” and “price”. I don’t have the money – or desire – to fork more than €1000 on a watch and I feel there are tons os beautifull models for “only” 3 digits. It is just a question to find them.
    Unfortunately, the web is more about haute horlogerie than accessible luxury.
    BTW, recently I found out a really nice blog about really nice watches that you should check out:

  • ZL

    Request @aBlogtoWatch @aBlogtoWatch :
    In another blogtowatch, Paul Hubbard called Christopher Ward a “high-value brand.”
    I have similarly identified Hamilton and Sea-Gull as brands in a similar price range as Christopher Ward and offering similarly high quality pieces. 
    This is an interesting concept. Although discovering them for myself is rewarding, I would like to see more about blogging it and more recommendations for other high-value brands. Of course various price ranges and high-value individual pieces are also welcome!

    • ZL

      “more blogging about it” I meant

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