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On Ariel’s Watch: Higher Luxury Watch Prices Are Coming, But That’s Probably A Good Thing

On Ariel's Watch: Higher Luxury Watch Prices Are Coming, But That's Probably A Good Thing Featured Articles

The watch industry is anything but boring, right now. The latest business trend I’ve noticed is something that could quite possibly change the way the modern watch industry does business, even if consumers protest at the start. The question us watch buyers need to ask ourselves is: Are we willing to up the amount of money we are accustomed to spending on certain brands or models, in exchange for increased actual exclusivity and also retail price consistency? Prices for a lot of popular watches and big-name luxury brands are going up — and in some instances, by a lot. The first reaction from all watch buyers is understandably defensive. So, the bad is news that the watch industry will probably raise prices on a lot of popular timepieces, and entire brands might up their average price points anywhere from 20% to 80%.

What this doesn’t mean is that all watches prices are going up, but rather prices from many popular brands. Naturally, smaller or second-tier brands will enter now abandoned price categories left by primary brands. So, there will always be wristwatches at all price categories, but the entry point for serious luxury timepieces is probably going to be raised.

On Ariel's Watch: Higher Luxury Watch Prices Are Coming, But That's Probably A Good Thing Featured Articles

A natural reaction to this turn even of events might be confusion — because the last few years saw a lot of watch price points drop. I celebrated the drop in prices because, in many instances, models were priced too ambitiously, and I always appreciate it when more people can afford good timepieces. That said, the reason prices went down was to help stimulate sales — but that isn’t really what stimulates status-item popularity. The bigger problem with overall price reductions is that they rely on a watch industry benefiting from an economy of scale that is rapidly decreasing. The mechanical (“traditional,” if you will) watch industry isn’t going to disappear but is probably experiencing another phase of contraction and consolidation as market share becomes increasingly gobbled up by more marketing-agile independent brands, as well as wrist real estate space crowded by connected-technology watches.

Another challenge the watch industry struggles to overcome is the stagnation in the economy. People aren’t making as much money as they used to, and not enough new people are becoming rich. Existing rich people are mostly well-insulated from the recession, but they are a finite buying pool. The watch industry of today must face the reality that its most likely customers in the coming years are existing customers, not the new customers it keeps scouring the planet for. (I’ll note that retailers prefer fresh-money consumers because they are considered less educated in luxury products and more prone to going with a retailer’s suggestions and less their own personal preference at that phase in their consumer journey.) But established watch consumers, who have been through at least several timepiece purchases, are at a point that retailers have far less persuasive power over their next purchase.

On Ariel's Watch: Higher Luxury Watch Prices Are Coming, But That's Probably A Good Thing Featured Articles

The response to fewer overall global sales for luxury wristwatches is to increase the price of each timepiece in order to make up for the lower overall production. We have seen what two decades of over-production of wristwatch inventory has done to the market — and it isn’t pretty. Scores of gray market dealers (and far worse) hawk all sorts of watches at all price ranges. Watch brands and authorized dealers routinely dump watches they can’t sell to consumers into the “gray hold,” where they are just expected to magically find discreet buyers who are paying on average 30 to 50 cents on the dollar (wholesale) for unsold wristwatches. The overwhelming volume of these unsold watches has leaked out of every orifice that one can imagine a timepiece could be sold. The situation barely lends itself to the classy, exclusive club luxury watch ownership that retail should be all about these days.

The watch industry is, unfortunately, not earning enough money right now to just decrease production volumes without increasing prices. Sure, some brands could do that, but as a whole, the cost of producing watches, including the number of suppliers involved, means that a lot of people need to eat each time a Swiss-made watch is produced. That means consumers of most big-name watches will have to accept higher costs in order to enjoy similar watches because fewer of them are actually being produced.

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Enough consumers will celebrate this trend immediately because they know that, in the long-term, decreased wristwatch production is valuable to future resale values and collectibility. Luxury items are most valuable when they are exclusive. The deluge of limited-edition watches collectors have seen over the last 20 years or so is a direct manifestation of this trend. Consumers are actually willing to spend more to get something that fewer people have.

A lower volume of watches also, at least theoretically, means higher resale values because, again, there are fewer pieces out there. I think most collectors would be entirely okay with the notion that watches will be produced in lower volumes, if only because it is entirely obvious to them that more exclusivity can potentially mean more prestige and collector demand in the future. Another likely effect of increased exclusivity is price consistency. If there is less competition to sell watches, then there isn’t as much competition to earn customers through discounts. Broad discounting simply trains consumers that retail prices don’t mean anything. If prices did start to mean something, because fewer watches were being produced and, thus, discounted, then I think watch consumers would be much more accepting of retail prices higher than what they are used to paying.

On Ariel's Watch: Higher Luxury Watch Prices Are Coming, But That's Probably A Good Thing Featured Articles

Finally, what might also occur with the “big name” watchmakers increasing their prices and lowering their production volumes is an evening out of demand across brands and watch models. If discount-hunting becomes less a part of the collector culture, then the game of watch buying will be seeking out what you can find to buy, as opposed to how much money you spent on it. Right now in the market, there are hundreds of brands, and yet collectors focus on perhaps 25 brands, with about five of those receiving the majority of attention. The consumer market is far bigger than that number of watch brands, and a flattening of discounts and increase in price points is a sure way to spread attention across more of them, in my opinion.

In 2019 and beyond, wristwatch collecting will continue to be a fun and accessible hobby at all price levels. It does not require a lot of money to buy many of the world’s available automatic watches, for example. Collecting, or merely appreciating (as an owner), luxury watches will probably be more elitist tomorrow than it is today. There will always be plenty of good watches for the middle class, but those watches intended for the ultra-wealthy will be priced accordingly. What their customers will get in response is the assurance that few other people also have their products, as well as the peace of mind that their same wrist trophies aren’t being discounted to the level that someone in a different socio-economic class can afford it.

On Ariel's Watch: Higher Luxury Watch Prices Are Coming, But That's Probably A Good Thing Featured Articles

Most “regular guy” watch collectors are already psychologically ready for “outpricing” since they grew up in an industry where Richard Mille and ilk routinely price most of their watches like nice homes. Those collectors will have plenty of other brands vying for their attention, but it is possible that more than one of the brands they know and love could be unaffordable overnight.

The watch industry in various areas has already begun the process of increasing prices here and there. How fast it will continue can depend on a number of variables. What I am sure of is that if the watch industry embraces its need to shrink and focus a bit, then it will also realize that to earn enough to sustain business, price points of the bigger brands will mostly need to go up. This is especially because the market for wristwatches is established and stagnant, which means brands will need to routinely sell to the same group of consumers — a group that happens to be mostly wealthy and able to absorb even appreciable price increases. Regular watch collectors might want to start planning and spending accordingly.



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  • Swiss_Cheese

    I’m all for pricing watches like Richard Milles higher than they already are, hopefully it means we see less of them out in public on the wrist of your average stock standard new money millionaire (saw a green/yellow/black Yohan Blake example a few weeks ago, the pepto bismol supplies ran low that day). Relegate them to the eccentric billionaires who spend 99% of their time on their private islands.

    That being said, I dread the day I walk in to my local AD after years of saving and hear: “With a 5% discount, the 1815 Chrono comes to $275,880…”

  • commentator bob

    Having a picture of the Code 11.59, which is currently selling grey for 20% off+ despite being a new release, as an example of higher prices defeating the grey market is a bit of a joke.

    • Colt Foutz

      I got it. And thought it was funny. 😉

  • Defeng Wu

    This is ridiculous. Higher price is better? What world do you live in? Oh, I forgot this is one of those paid ad-opinion pieces. Sorry then pls ignore my previous comment

    • Ariel Adams

      I’m going to respond to this comment because it is blatantly false. I understand that you don’t want prices to go up, but accusing this discussion of impropriety without any evidence of any kind lacks responsibility. These types of comments are exactly what is not allowed around here.

      I will further add that in addition to not accepting money to share an opinion, I have specifically called the industry out on this practice:

      Your heart might be in the right place but you are attacking the wrong person, on the wrong website of behavior we agree is unacceptable.

  • Marius

    Rolex and PP can easily raise the prices of their SS models. The grey market pricing for these pieces proves this.

    Other brands? No way. If your current output can be had on the grey market for 20% off RRP, then it is already overpriced and/or overproduced.

  • Jared

    i think it was all but guaranteed to happen

    three reasons:

    1. in-house movements, yes at first when brands released in-house movements the prices didn’t jump that much. But that was only because the brands didn’t want to spook the buyers. But the whole move to in-house was 100% a marketing ploy. I mean think about it, what does in-house really gets you as a consumer(in the sub $5K category), a less reliable movement than an ETA, in many cases with the same exact specs, maybe a bit more power reserve. Is it really worth 2x-3x of the price? But for brands that was the point, in-house means that instead of their limit being ~$10K for an ETA watch, with in-house their limit now goes up to $15K. I’ll bet that the actual production cost for in-house is actually cheaper than an ETA. I can all but guarantee you that Rolex pays less to make their in-house SA3135 than some microbrand pays for a Sellita SW200. Why? Because Rolex just pays the production costs, while the microbrand pays for the production cost AND Sellita/ETA’s profit margin(which should be 100-200%). Hell, I’d bet the actual production cost between a SW200 and SA3135 at the manufacturing level per unit, is probably like $30. Its all just steel and blueprints from 50 years ago.

    2. changing market, watches went from being tools to being luxury goods. And for luxury goods price is a feature not a bug. A $3,000 watch priced at $6,000 can in many cases sell more units. Because at $6,000 the watch is out of reach of “poor” people. I mean think about it, a $3,000 watch would be a luxury item in the past, but nowadays someone living in California pays more than that every month to rent a tiny apartment…thats not really impressive…is it?

    3. Instagram, before it, when you bought a watch, the chances of anyone actually noticing it in the real world were slim. And people saw so few watches, that even entry level luxury pieces got you props. Now with instagram, people are used to seeing Richard Mille’s on “everyone’s” wrist. They are used to seeing pateks. They are used to seeing MB&Fs. They are used to seeing Rolexes. A Tudor on your wrist 20 years ago, would have gotten someone to take a photo of a rare watch in the wild. A tudor on your wrist now? Noone would bother snapping a photo even if they already had their phone out. And rich people need those props, so they just move up market.

    • Rolex sells something like nearly a million watches a year. For them, making their own movements makes sense. For smaller volume manufacturers in the affordable segements, developing an in-house caliber (a million in development I’m told) makes zero sense. Much cheaper and a safer use of capital to just buy ETA or Sellita. In volume a standard grade ETA 2824 or Sellita SW 200 is in the 65 CHF range. I doubt they produce them for 30 bucks and sell them for roughly 65. Microbrands (who are not ordering 1000 movements at a time) pay way more than 65 CHF (more like double if you are lucky).

      I do agree that the trend to in-house movements has generally not benefited the consumer. Increased costs have to be passed along even though these not time tested movements are not as reliable and not as easily nor economically serviced.

  • Twinbarrel

    So it is prudent to put yourself on waiting lists for the overly popular Rolex, Patek and AP watches asap despite their (sometimes 10yr+) long waiting lists, just as long as they will honour the current retail prices. Even an entry on Tiffany’s waiting list can prove to be very lucrative.
    It only makes sense that retailers and brands make profits instead of gray market dealers (as I outline the foundation strategy for above) who currently buy enough from AD’s to always be at top of the list to buy these popular watches and flip them.
    So if you’re telling us the watch industry will continue to expand that limited production range of highly desirable watches nothing will change in favor of the brands and retailers pockets.
    Imo a logical solution is to increase the retail prices as well as production to an acceptable level in tune with the real market demand in order to kill the gray market. A number of gray market dealers I know probably earn similar profits compared to retailers.
    I see what you’re saying that other brands are upping the anti and sliding upward into the next higher price levels (Oris, B&R…).

  • Panagiotis

    I am a new collector and price consistency is very welcomed news. Higher prices on already high priced watches not so much. Buying an a.lange & Söhne is expensive as it is I would hate to see datograph to be priced even higher. Also, brands should focus on reliability and trust between them and the customer first. If they are going to increase their prices everything should be impeccable not only when you buy a product but also after. I do not see how a closed market would benefit by an even closer clientele.

    • Ariel Adams

      A. Lange & Sohne is actually among the brands that is the least guilty of producing more watches than it can sell based on my information. That means brands like that are far less likely to increase prices in any immediate time as compared with some others. What I am talking about is a trend, but it isn’t going to effect all areas of the watch industry at the same time.

      • Panagiotis

        I really appreciate that you took the time to answer. Honestly, that is music to my ears.

  • Reality, MD

    These watch companies are completely out of touch. As someone lucky enough to be able to afford most of these higher end pieces I highly doubt I will ever purchase direct again. I find myself in the secondary/vintage market looking for great values (part of the fun). If 40% of these narcissistic watch brands exist in the next 5/10 years I will be surprised.

    This line from Ariel sums it up perfectly “which means brands will need to routinely sell to the same group of consumers” No thank you!

    • IanE

      Yes. Personally I think we consumers have been pushed around over the last decade by very many watch manufactures. Enough already – though, fortunately for me, I now have ten decent watches and the only watches I have seen recently that appealed to me are already way out of my price range. Count me on strike now!

      • Amit Chopra

        I recently tried getting what many deem to be a “hot” AP…. I was basically told by someone working at the NYC boutique that I haven’t done enough business to deserve this watch. If watch companies are so arrogant and don’t want my $50K business; then I’m ok to move on. I also sold my existing RO and will never look at the brand again. This type of behavior / arrogance is unacceptable.

        • Jenson Lee

          Money’s not enough anymore…time to get some kneepads

    • Berndt Norten

      By chance are you…friends with Trapper John?!


    ‘think most collectors would be entirely okay with the notion that watches will be produced in lower volumes, if only because it is entirely obvious to them that more exclusivity can potentially mean more prestige and collector demand in the future’
    See, this is where I disagree, I don’t care about getting more prestige and collector demand. I care about what I like and what I can afford, however, if I happen to sell something and it retains its value better than that is ok a me but not remotely my primary concern. The prob is prices for some watches at 40% off on grey dealer x y z is the price imho and resale value speaks to that as well. Let’s use Planet ocean as an example which can be found around 4.5k new every day when they sell in store for 6.5/7 ,do you think overnight increasing the price to 10k will work? They industry already shot itself in the foot by over producing which led to heavy discounts as you mention so I really doubt going up in price will lead to anything. Let’s bump up the blro price to grey level 18k ok sounds good but it isn’t a 18k watch and when you can get a lot more for your dough (like a vacheron) then something will need to give.
    My theory is that the industry is stuck , increase prices and then drive people away because they know a PO isn’t a 10k watch in the same manner a blro isn’t a 18k watch ; reduce production cut sponsors and ambassadors bs and hope people still buy watches at their current price, but I doubt increasing prices will do anything except for rolex AP and Pp

  • Tony NW

    You started with

    Are we willing to up the amount of money we are accustomed to spending on certain brands or models, in exchange for increased actual exclusivity and also retail price consistency?

    Exclusive is not the same as luxury. Having a pristine Pontiac Fiero would indeed be exclusive, but only valuable in a very small community. A limited edition Nixon watch with a kitschy but unusual plastic design and the stock quartz movement would be far more exclusive than a Rolex DJ41 126334 (white gold, fluted, jubilee), at 1% of the cost.

    This site often mistakes expensive, handcrafted and often nearly illegible and pointless for “luxury.” While “extravagant” and “needlessly expensive” are partially synonymous with luxury, most people would probably find a mid-range Lexus more “luxurious” in the sense of pampering, comfort and reliability than a Ferrari 308, or indeed any Ferrari. The Ferrari is “exotic“; we have a word for that.

    ABTW regularly reviews or at least profiles exotic watches. And all sorts of other watches; the mix here is pretty good.

    The difference between exotic and luxury becomes starker with the change from last millennium’s conspicuous consumption to this decade’s “understated-luxury” bent, in which a diamond-encrusted gold watch went from bling to gauche. And, as you point out, fewer rich people. So now value and discretion matter.

    With value mattering, some of these brands are way out of their leagues. They aren’t Rolex, they don’t have the consistency, the “exclusive” technology or the ability to be simultaneously a social status object and discrete… because unless they’re over-the-top, they aren’t distinguishable from what less expensive companies are turning out.

    That’s even hurting Omega… great technology, but no long-term consistent visual identity. To a non-watch person, a few models are instantly recognizable (beyond Rolex), including the Cartier Tank, Breitling Navitimer, Patek Philippe Calatrava (although they probably don’t know the model name), Panerai Luminor and maybe, without knowing the brand or model, people recognize the Audemars Royal Oak. These all have distinct looks and histories, more so than the typical Omega.

    Where does that leave the recently-reviewed $28,000 Ulysse Nardin Marine Tourbillon? Or even their $6300 Diver? Nice watch, distinctive bezel, but where’s the value proposition for someone wanting either:
    1. An exceptionally accurate timepiece
    2. Something discretely recognizable by relatively normal people, rather than only horologists, as valuable/special?

    The market reset isn’t going to be towards higher prices, but towards a bloodbath of companies all targeting the same limited pool of consumers willing to pay > $5K for a watch.

    • Ariel Adams

      I think watch lovers who have a lot of understanding of the product need to step back for a moment and recognize that we don’t represent the bread and butter of the luxury watch industry’s profits. For the most part, the watch industry exists because of the more general appeal of having a nice watch. Now it is true that watch-educated enthusiasts like us play a huge role in creating demand among less sophisticated buyers. The conversations we have here on aBlogtoWatch are viewed by people who don’t have the interest or time to regularly follow watches, but who view the website when making a purchase decision. We have a big effect on what the general public wants. With that said, our (understandable) hyper-focus on getting the most for the least money is a function of us being enthusiasts more than being interested in the simple act of wearing a nice watch. Along those lines, the definition of “luxury” varies greatly and to many people includes exotic items given that exoticism is typically associated with “a lot of people don’t have this, can’t get away with wearing this, or don’t know that this exists.”

      The conversations we have about value for money don’t really happen with normal consumers. For them, value for money is different. They want to make sure that for their large investment the watch makes them feel good, looks nice, is well made, and has a positive effect when other people see them. Ideally value also means that if the item needs to be sold there is some market for it. Value to most buyers has nothing to do with minor technical comparisons between brands and models that we as enthusiasts love. I think that times it really helps to turn off the fact that we are so knowledgeable about the topic area and realize that our level of sophistication is responsible for only a relatively boutique area of wrist watch purchase decision making.

  • John Frei

    People aren’t making as much money as they used to, and not enough new people are becoming rich.”?

    Well, that’s certainly not true here in America where we have a roaring economy, record-low unemployment and rising wages. In other words, more wealth is being created at all levels. But perhaps you were referring to the world at large.

    • funkright

      I’m thinking you’re not actually looking at America’s demographics as a whole. If you look at the distribution of income gains since 2008/2009 Great Recession they definitely aren’t across the board. The improvements are mostly concentrated amongst those who can spend their discretionary income on luxury items like the watches covered on this and other sites.

      • John Frei

        I don’t think in terms of “distribution of income”, I think in terms of opportunity and wealth creation.The factors I cite actually are an argument for an “across the board” outcome. I would be interested in seeing the data that you base your argument on.

    • Ariel Adams

      I’ve not seen too much evidence to suggest that our American economy is actually doing that well. Yes, our media says frequently that unemployment is low, and that the economy is doing well. What I have personally experienced and been able to gleam is not exactly that. America might have less people without work, but it has a huge number of under-employed people who aren’t making enough money to support themselves, that matches their education, or that allows them to be socially mobile. People don’t earn enough money to save, and relationships with employers are often such that employees fear losing their job. What I see is the effects of low consumer confidence (not feeling confident that if they spend money today they will earn more tomorrow), and stagnant social mobility (people having clear or ready opportunities to exit their current socio-economic status for a different one).

      This isn’t how I want thing to be, but all the evidence I’ve seen, read, studied, etc… indicates that these are general trends. Personally, I want nothing more than for a burgeoning global middle class eager and ready to buy new wrist watches.

      • John Frei

        “I’ve not seen too much evidence to suggest that our American economy is actually doing that well.”

        What? No offense, but that’s like saying I don’t see much evidence that the Sun rises in the East and sets in the West.

        Yeah not too much evidence except for “a roaring economy, record-low unemployment and rising wages”. And because or those things, there is more opportunity in America than in decades and very mobile social/economic mobility. By the way, not everybody considers becoming middle class to be Shangri-La. Some people aim higher.

      • 2manywatchs

        Agreed. Need some evidence? Check out the US Debt clock and look at the median income now, versus the year 2000. Then, look at the difference between the median home and car prices now versus 2000… to say nothing of the cost of gas… and groceries… and health insurance. Prices have (almost) doubled on these items while salaries are up ~8%. Lipstick, meet pig.

  • Kitab Shah

    I’m not sure such a strategy will work for many of today’s brands (though if many go to the wall, then I guess the remaining will become more desirable by default).

    For my money watches compete with other hobbies and endeavours, and I very much factor in a price less than retail when considering the marginal joy a watch purchase would bring. I think my purchasing would probably slow to once every 5 years if discounts were not possible. Or even stop entirely. After all you only wear one watch at a time…

  • Larry Holmack

    Luxury watches are not something I can afford…so if Rolex decides to raise prices by 30%…oh well. The people who can afford luxury watches don’t worry about price…where as I sometimes have to pay for my gas with the loose change in my ” Bad Dog Jar.” Yeah…my wife works and we have my disability income…and we do okay…but it’s a fine line each month. Despite the great economy…those of us who used to be doing quite well…and had to downsize before the current upward swing…well.. it’s a struggle to get back where we once were. I know a lot of people in the same boat…some you can see living in tents in the streets of San Francisco, Los Angeles and other large cities.
    So excuse me for not really caring if some Wall Street banker has to drop a few extra grand on his 5th Rolex….

  • Independent_George


    1. When AA was in France, meeting with Watch Persons one suspects, more than one Watch Person might have whispered in his ear “Like winter, higher prices are coming.” Therefore this article.

    2. Higher Prices will might mean the death of certain brands. Are people going to accept annual 5% increases for Baume et Mercier? Mido? Rado? Bremont?

    3. Higher prices will mean lower production numbers, which will mean lower employment throughout the watch industry. Interesting to see how the Brands manage this and how the Swiss Gov’t and Swiss society reacts.

    4. Higher prices and lower production numbers might mean that brands might have to cut back on models and/or entire line-ups. Last year Breitling released 74 separate SKUs. Does Breitling even need any more 74 separate SKUs total? Does Longines need a Master collection and a Record collection, an 1832 collection, an Evidenza collection, a Saint-Imier collection, along with three separate Conquest collections?

    5. In this weird “race to exclusivity” brands seem to be just throwing anything against the wall to see what sticks. A $6K all steel B&R with a Sellita movement? Seiko just threw a spring drive movement into what was a $1,000 Presage watch with a perfectly fine 6R15 movement and is charging close to $5K? A lot of these watches are just going end up being sold a significant discounts anyway, so, one has to ask, what is the strategy here?

    6. I can’t see how less choice but more expensive watches is going to help watch enthusiast sites. Fewer customers should mean fewer readers. And with brands seemingly going the “cheap” Instagram influencer route, can’t see how this bodes well for ABTW, at least as a website with free content.

    7. Personally, I don’t mind higher prices/lower production/higher exclusivity if it means better value retention. I just sold a Bremont. Retail price = $4,095. I bought it for $2,600 new from an AD. I sold it for $1,675 over the Bay and the folks at over at Feldmar were congratulating me for getting such a good price. It’s a watch that is less than one year old, still under warranty, and it still much have been overvalued at 40% of it’s retail price?

    • Ariel Adams

      Thanks for the thoughts. I think if I hard to write this article again I would have spent a bit more time assuring people that they will not be priced out of mechanical watches. Rather, the brands they know and collect might not be the brands they are buying in several years from now as other brands will come in to fill price gaps.

      What everyone agrees is that the world has far too many luxury watches in 2019. Perhaps with economic changes in a decade or two the number of luxury watches the world needs will increase. Today, if the watch industry continues to produce far more watches than the market can sustain, then it will either need to destroy or warehouse huge numbers of watches that can’t be sold, or will have to deal with the ever eroding “equity value” brand suffer when consumers will never pay retail, are always requiring big discounts, and frankly don’t purchase a lot because they feel a better deal is just around the corner.

      Also, no one tipped me off or informed me that this stuff is coming. The watch industry is actually full of people who are so focused on their narrow area of work that very few people I talk to are aware of these larger emergent trends. This means that I, as I travel, converse, and study the world timepiece market must alone (quite often) recognize and ponder these emergent trends and then bring a discussion of them to the table. Since these are often seminal discussions about these major topics, more discussion and discovery are necessary to understand all the angles. What is important is a discussion about them since without that, the watch industry often allows itself to implement directions without really asking itself how that might effect the brand or the industry as a whole a few years down the line. Thank you again for your contribution to this discussion.

      • Independent_George

        Thank you for providing a forum for discussion. I look forward to these Sunday think pieces because my interest in watches is a little more involved than simply desiring and acquiring fancy bling for my wrist. I find the insiderey, business, cultural and wonky parts of the watch world fascinating in large part because it is so idiosyncratic.

        If I only cared about bling on my wrist, I would have bought Submariner/RO and an Apple Watch and called it a career. In fact, I seem to be “growing out” of my acquisition phase. I know what I like and how much I’ll pay and own at any one time. There are maybe one or two new releases a year that pique my interest. But what keeps me interested is, in a way, the weirdness of all of this, and all of y’all.

  • Rob Crenshaw

    This same thing happened in the high-end audio business 20 years ago, and now it’s dead. Sales dropped due to “music as integrated lifestyle” products instead of “music as a hobby” lifestyle, and the boutique manufacturers were forced to raise prices considerably on their aging pool of diehards. Once those diehards got too old to hear or care anymore, they stopped buying and the industry collapsed.

    By the end the prices had become insane: a truly great pair of speakers went from $5-10K to $50-100K, but sounded no better. Imagine if the same thing happened with watches. A 15202 or 5711 increases in price from $25-30K to $250-300K. Don’t laugh, it’s exactly what happened in high-end audio, which is why I stopped buying any of it.

    The manufacturers have to understand that they can only increase prices so much before the Veblen Effect dies. Personally I wonder if Rolex’s scaling down production is not the conspiracy many think it is, but something they see about the watch industry’s future that they are preparing for. Namely that the market is shrinking and they don’t want to be caught overproducing. Only Rolex knows.

    • Ariel Adams

      The HiFi industry is an interesting analog. Indeed, many industries which have had their main value propositions radically effected by new technology have suffered. Watches might be different because of the value they have. In HiFi, most of the interest was what the objects to. You need to be into HiFi to get the most out of it. Watches have value just sitting on your wrist – whether or not you know how to use or appreciate it. The status-indicating and fashion value of watches is different than tech items which are mostly hidden in your house. I don’t think wrist watches will suffer a precisely similar fate because most of the buyer’s interest is not about their functionality. That was what happened in the 1980s and we saw how luxury marketing gave the traditional watch industry new life. Now that same concept needs to be reconfigured for our modern times.

    • Mark Lewis-Jones

      Rob. A keen observation. What Ariel draws attention to, indirectly, is that brands need to really focus on producing what they can sell, not selling what they produce. The previous failure to do this is what produced a glut in the market. Combined with current market challenges, this becomes an imperative. Brands that do not focus here will continue to risk that their overstocks get dumped at discount prices in other sales channels, undermining their brand equity and ability to sell-in new stock to their retail partners when the brand is “burned.”

  • dr3

    How on Earth can any of these price hikes be seen as a positive? Way to play right into the hands of the industry.
    I would take lower prices and lower “exclusivity” any day of the week. This sort of elitist nonsense is what may kill this hobby/interest off for many.

    • Ariel Adams

      I don’t think I am playing into the hands of the industry at all, and I’m not saying that price hikes will price watches out of people’s wrists. The idea is that established brands will be forced to increase prices if they are going to exist in a world where they can produce less. The large universe of smaller or newer brands will be there to fill in price gaps in areas where more established brands no longer have product. This isn’t a value judgement where I am advocating for one position or another. Rather, it is an analysis of a trend and how it might effect the larger industry over the long run.

  • commentator bob

    There is a ton of inequality in the US and China, the two largest global watch markets, but a TON of new wealth. The equity and real estate bubbles from zero interest rate monetary policy globally, along with irresponsible trillion dollar deficits in the US, are creating unprecedented new wealth. The following companies have already or will go public this year alone, creating tens of billions in new wealth:

    Beyond Meat Inc. (BYND)
    Chewy (CHWY)
    CrowdStrike Holdings (CRWD)
    Fiverr International Ltd. (FVRR)
    Lyft (LYFT)
    Pinterest (PINS)
    Slack (WORK)
    The RealReal (REAL)
    The We Company (aka WeWork)
    Uber (UBER)
    Zoom (ZM)

    If a watch company can’t make it this environment it can’t make it period. It will be really interesting to see watch companies raising prices into the coming stagnation/recession in 2020.

    Talking about raising prices and cutting production is just childish “I’m taking my ball and going home” talk from second-tier watch company PR reps and leadership.

    If you are a CEO at a second-tier watch company you can extend your tenure a year or two by telling a gullible board that your company can become the next Rolex, you just need to raise prices.

    The truth is they have to cut production just to maintain the prices they have, and cutting production beyond that is just going to put them on a death spiral of less retailers carrying them, leading to less economy of scale, leading to higher prices, leading to less sales and distribution, leading to death.

    Think of a $5,000 MSRP watch that sells for $3,000 grey and is produced at 50,000 annually. Production would have to be cut heavily, maybe down to 25,000 to 30,000 watches, just to get the watch to sell near the $5,000 MSRP. Now you want to raise the price to $8,000, and not have them moving grey? Production needs to cut maybe to 10,000 units.

    There goes the distribution and production scale, and here comes the death spiral.

    The truth about Rolex is that they are not exclusive, they just carefully manage supply and demand and own 50%+ of the US luxury watch market. The retail presence, sponsorship, and advertising necessary to maintain their brand image is based on 1,000,000+ in annual units sold.

    • Ariel Adams

      I want to say something important here. Stock market increases in wealth is mostly theoretical and based on consumer optimism. The companies you listed mostly don’t make profits and mostly rely on some innovation in the future to actually operated without investors. Most of these companies also rely on a growing middle class or service class to afford what they produce. I don’t feel confident that a lot of that is happening to create a “new wealth bubble.” Again, this is open for discussion – but while I am familiar with your argument, I have see too much evidence to suggest that wealth creation (outside of theoretical future value) is happening fast enough or widely enough.

      • Correct – companies that don’t actually make money are doomed in the longer haul to fail. The companies Bob mentioned sound too much like companies before the 2000 Internet bubble burst. So he is right that “wealth” is being created at the moment, but these potential clients are a pool that can rapidly evaporate when their IPO stocks tank. I’d short the fake meat companies about now.

        • commentator bob

          The funny thing is that the fake meat companies have the closest thing to a real product. And it is informed by global population and resource trends. Their weakness is that as soon as they perfect their business models global agribusiness companies will steal them. Their only hope is to build their brands quickly enough that it is easier to buy than crush them.

          • Independent_George

            Not so sure if Agribusinesses buying the fake meat companies is a bad thing at all.

          • egznyc

            I assume you feel the fake meat companies have something that will sell, right? And that’s why the big boys will want to steal their (fake) lunch meat, right? Personally, I am an omnivore, but that doesn’t mean I wouldn’t want the fake meat segment to grow.

      • commentator bob

        Record numbers of people are millionaires, record numbers of people are making six figures. High-end home sales are setting records. Luxury cars are setting records. But nobody but Rolex, Patek, and the AP Royal Oak line can sell a watch at retail. That’s a problem for the watch industry, and raising prices on brands people do not desire is not going to fix it.

        Sure that wealth is due to the kind of idiot that bankrupts casinos running trillion dollar deficits, but it is spendable money (for now) all the same.

        Could the tech stock value evaporate tomorrow? Absolutely, but today it is real, and thanks to the IPOs liquid. So where are the “wrist trophies”?

        • SuperStrapper

          Their problem is relevance, and that problem will never get better. People need a place to hide from the cold and rain, so a line of sight to an opulent home exists from squalor. Transportation and commuting are near-universal concepts, and I partially believe cars were only originally invented to satisfy competition, not a problem. The notion of uyingb a nice car is subconscious to the masses.
          But a wristwatch? It struggles to translate today, how will that get any better? I promote nice and cool watches to people because they need to be promoted. I can’t tell you how many times I’ve shown a truly fascinating watch to someone and witnessed them become bemused. But the horse had to be led to water. How many people have you ever met that can’t describe a nice home or car.

    • Independent_George

      Broad based income and wage gained are based very much on productivity gains. And in the West, in general, productivity has been flat for a while, long enough for some economists to fear that a sustained, Japanese-like stagnation in here for a while because no one has any idea what to do about it.

      I agree with Commentor Bob about the fake meat companies. Real and tangible products are going to be the new hotness in the Turbulent Twenties!

  • werner

    pure economics at work. Those greedy swiss smelled the money, realising people willing to pay double retail price for unavailable watches through retail network. So why not directly ask that price, bypassing gray market. It must bother them big time, gray market earning double the price.
    In the end, if only the fortunated buy these watches, it will become a niche brand. Nobody really aspiring anymore…

    • Jared

      for luxury goods, being a niche brand is kinda the whole point. Richard mille sells way less watches than Oris or Tag, but they are in much higher demand because of that

  • Russ

    Raising the price and reducing the production of a product, with no other primary product or customer experience value improvements, is lazy, lazy product management that I sincerely hopes bites the industry in the backside.

  • Amit Chopra

    what is this article based on? with a predicted recession, good luck raising prices on discretionary luxury goods as the rich hunker down in cash.

  • cluedog12

    I agree with Ariel here. The wealth gap between the global elite (top 0.1%) and the merely prosperous (top 1%) is widening. All other things being equal, luxury watches marketed to the global elite should become less affordable for the rest of us.

    These strategic price increases must be accompanied by improvements in the quality and craftsmanship of the average watch, at minimum. This has definitely been true over the past twenty years and the trend will continue. New brands will enter the market to cater to the gap left by luxury companies, but there should always be a bridge between the two.

    independent brands (< 10,000 pcs / year) have an advantage in a stagnant market where the conglomerate brands need to continue revenue and profit growth. Limited production, rarity and hand-finishing – these are make-belief marketing constructs for large luxury brands, but just the reality of business for a watch house like Lang & Heyne.

    Anyways, all this goes out the window if the recession hits. It would be hilarious if Richemont and Swatch introduced a "watch shelter", where overstock designated for destruction was put up for clearance and collectors could choose to save the watches scheduled for "reclamation" of movements and precious metals.

  • bert gillespie

    Trying not to be Captain Obvious, although supply & demand can be manipulated in the short term by manufacturers eventually the market/consumer makes the call. Similar to the transition that’s inevitable in EV auto industry vs the gas combustion engine and the smart watch category. Both will continue to expand and hopefully the high tide that will raise all boats.

    • Jared

      I think the market already made its call

      thats why Rolex, Audemars Piguet and Patek are thriving, while all the old entry level luxury swiss brands are struggling.

      There is a reason the market has such a massive gap between $3,000 and $5,000 and thats the reason all these entry luxury brands are universally moving up market and raising their prices no matter how much people refuse to pay $X for a _____. Oris, Bell & Ross, Tag, hell even Omega, pretty much all these brands over the past 5 years have really raised their prices big time.

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  • egznyc

    Don’t forget System Audio, from Denmark, no less!

  • Steve_Macklevore

    I really hope Ariel is wrong about this future trend.

  • philips defreville

    Interesting topic. Ariel, you talk only about reducing production quantities and raising prices. Other industries would reduce production costs by moving to Vietnam or China. Production in Switzerland is the most expensive in the world. Probably not an option for the Swiss watch industry, however they are producing parts in China. Many SWATCH parts are produced in China, including Omega bracelets, I have been told. Increasingly the Swiss watch industry is becoming more contrived and meaningless, a vacuum filled with marketing BS. I find my attention has drifted to vintage. It’s an exciting world I can explore at reasonable cost, without the BS of “luxury” marketing which has overtaken the modern Swiss watch industry.

    • Shizuppy

      So true. These days the concept of Swiss watches are a dream supported by a ton of marketing money. Anyone who buys new is a fool.

  • Dan F

    If Patek Phillipe’s plan is to sell less pieces at higher prices, then why did they just spend $500 mil to build a big new factory? If that is the plan of the Uber Brands, then I think they are embarking down a very slippery slope. It is in opposition to the basic law of economics— When prices go up, it makes an item less desirable, not more! Making an item more niche, more “exclusive” is just another way of saying that it is less viable. It means that fewer people find the item to be worth its’ price. The price still has to reflect the actual value of the product, not only the Manufacturer. At some point, the price just becomes absurd. I would say that Rolex, PP, and many others have already passed that point.

    • Berndt Norten

      FEWER pieces. Even a Dane knows that. Apart from that, great, insightful post.

      Headmaster Norten.

      • Shizuppy

        Thank you, I get tired of correcting people’s grammar. Nice to see someone else do it for a change.

  • Jonny Bravo

    I do enjoy the analysis articles from Ariel. The Swiss industry has been exporting lower volumes for the past couple of years. And this year won’t be an exception, as the number of units keep decreasing each month. However, the total export value is slightly increasing, due to higher prices and the increase in exports on precious metal watches.

  • The Truth

    Mechanical/automatic watches are like fountain pens: technologically obsolete. Just as the printer is now the main source of ‘hard copy’ text, the quartz watch, and now the ‘Smart’ watch, are the main instruments used for monitoring the time. Indeed, many people now dispense with using a watch at all, preferring to rely on their smartphones. This being the case, mechanical watches are little more than aesthetic tools, bought for appearance rather than usage – this being especially true for people under 40 years of age. Production will, inevitably, be scaled back and more and more watches will become limited production. Some brands, like Ball, have already adopted this approach, and others will follow.

  • Shizuppy

    Raising prices when demand is dropping is a way to generate more capital now but will lead to extinction in the long run.

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