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From A Swiss Perspective, US Watch Prices Haven’t Increased That Much

From A Swiss Perspective, US Watch Prices Haven't Increased That Much Featured Articles

One of the biggest complaints among watch enthusiasts is that luxury watch prices are too high. This can be observed in the numerous forums and comment threads devoted to the greed of luxury watch companies for increasing prices. The truth is that watch prices and their increase depends on which side of the US Dollar you sit on and which economy you live in. Recently, on my own Watch Ponder blog (where I cover the business and history side of the industry), I wanted to find out how Swatch could only be reporting a 9% profit margin while also being accused of greed? I wanted to know why Rolex had increased the prices of their watches so much over the years. I wanted to answer the simple question: What could my grandpa have paid for a Rolex in the US decades ago?

I turned to some of the basic realities of the global economy and used changes to consumer price inflation and exchange rates to discover that watch prices haven’t changed as much as people seem to think. I found that in the United States prices have increased only by about 6x since 1957, and from the perspective of the Swiss manufacturers, their income from watches has been virtually stable with no significant increase despite the price increases in the U.S.

From A Swiss Perspective, US Watch Prices Haven't Increased That Much Featured Articles

The Rolex Submariner of 1957, next to the latest version from 2012

Over a three-article series, I will present an argument explaining that watch prices are high but aren’t as out of control as they may seem, and why we aren’t likely to see massive price decreases (>10%) anytime soon. The three articles will cover these topics:

  1. Are Swiss Watch Prices Too High? I will use historical pricing data, consumer price indices, and exchange rates to demonstrate what my grandfather would have paid if he bought a watch with today’s money.
  2. Why Luxury Swiss Watch Prices Grew Faster Than Inflation. I will use anecdotal examples to walk through the basic economic fundamentals that led to price increases.
  3. Why Luxury Swiss Watch Prices Are Not Likely To Fall. I will finish the series by using company profit margins and financial situations to explain why a >10% (or any) decrease is unlikely in the near term and discuss what it could mean for future demand.

From A Swiss Perspective, US Watch Prices Haven't Increased That Much Featured Articles

This article will only focus on the sales between the U.S. and Switzerland. What this article will not address is why price increases go up across the world once adjusting for exchange rates. Shouldn’t each country’s prices be unique depending on the exchange rates for its currency? The interplay of global currencies makes the exchange rate and purchasing power of major currencies important. If prices depended only on individual countries and purchasing power, the prices would vary by thousands of dollars. The recent Brexit devaluing of the British Pound and subsequent skyrocket in watch sales in the UK give us a very clear example of how much a large fluctuation in an exchange rate can increase the purchasing power of a visiting tourist and drastically increase watch sales.

From A Swiss Perspective, US Watch Prices Haven't Increased That Much Featured Articles

David Bredan wrote a very good article on aBlogtoWatch on this topic a few years ago, including this widely quoted chart above showing the inflation of pricing for a (No-Date) Rolex Submariner. David’s article shows how much the price of a Submariner has increased (and it seriously has gone up from $180 to over $8000). Could my grandpa really have gotten such a good deal while his grandchildren are gouged so badly? Note: I will use retail prices of Rolex throughout this article as a proxy for wholesale prices which are less public. I will address the gray market phenomenon and prices in subsequent articles.

From A Swiss Perspective, US Watch Prices Haven't Increased That Much Featured Articles

Initial Conclusion: Prices Are High, But Not As Bad As They Look

Prices for a watch are very high, there is no doubt about it. The question is how much have they increased over the years? Looking at the chart above, it looks like a 47.5x price increase. I wanted to look into this further. I used the same data set David used but a different methodology or lens. Both are valid ways to look at it. For my approach, I really want to find out how much a person in 1957, or 1973, or 1984 would have paid for their Rolex Submariner when considering the change in consumer prices and purchasing power through the years (a.k.a. inflation of the consumer price index or CPI adjustment).

From A Swiss Perspective, US Watch Prices Haven't Increased That Much Featured Articles

Vintage Submariner ref 5513

I take the prices of Rolex Subs through the years and adjust those prices to the purchasing power of 2016 dollars so that they are prices we can all relate to. What this does is to take the purchasing power of $180 in 1957 and adjusts that to the equivalent amount of money we’d have to spend in 2016 to buy the same things. When only adjusting for the changes to the US consumer price index throughout the years, I found that my grandpa would have paid about $1,550 for a Rolex Submariner with the date. That means the price of the Sub has only gone up by about 5.5x. I made these purchasing power adjustments every year there is data and adjusted them to the purchasing power of 2016 dollars. Here is what that adjustment looks like. So far, my grandpa still got a better deal.

From A Swiss Perspective, US Watch Prices Haven't Increased That Much Featured Articles

More To The Story Than The Submariner

I wanted to look beyond just the Submariner, so I took the average prices of 11 Rolex models through the years and included both stainless models and precious metals. Buying a Rolex or any Swiss watch is an international transaction, so the exchange rate matters because it determines how many Swiss francs (CHF) Rolex actually gets from a sale.

From A Swiss Perspective, US Watch Prices Haven't Increased That Much Featured Articles

As you can see, the Swiss Franc / US Dollar exchange rate has been very volatile over time (US Federal Reserve)

The second thing that matters is change to the purchasing power of money in Switzerland since it determines how much Rolex has to pay its workers. When factoring these in, it gives us a very different perspective. Since we are dealing with U.S. prices, I am only looking at sales inside the U.S. I acknowledge prices have gone up in other countries too, but I have only looked at U.S. data and the effect it would have on the actual perceived prices consumers pay in the U.S. and the money Rolex would effectively earn from the sale once converted back to Swiss francs. Consider the flow of money when you buy a watch which I have drawn out below:

From A Swiss Perspective, US Watch Prices Haven't Increased That Much Featured Articles

The first step: When the watch is sold, those dollars are then converted to Swiss francs at the exchange rate of the time. This is the amount of money Rolex actually received through the years for an average Rolex. As you can see below, the price increases (yellow line) start to become somewhat less steep when you factor in exchange rates.

From A Swiss Perspective, US Watch Prices Haven't Increased That Much Featured Articles

The next thing to consider: Adjustments to purchasing power (i.e., how much would grandpa have to pay if he purchased that watch today as opposed to decades ago given changes to the value of money?). This is similar to the initial comparison I made for the Submariner in the opening paragraphs.

From A Swiss Perspective, US Watch Prices Haven't Increased That Much Featured Articles

Because Rolex (the company setting the price) is located in Switzerland and producing watches there, we have to look at the changes to the value and purchasing power of the Swiss Franc as well. Rolex adjusts prices up to continue to cover their costs, employees’ wages, and also to continue making a profit.

About the Author

I am an occasional contributor to aBlogToWatch and other horology publications. I like to look at the watch industry from a business and historical perspective. I can be reached at my website, https://watchponder.com

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  • IanE

    You seem to be assuming that cost of production is in some real sense the same now as in 1957, whereas of course automation has massively reduced the needed manpower. Some of that should have transferred through to price REDUCTIONS!

    • SuperStrapper

      I don’t assume that in wristwatches this that can be automated in production would necessarily result in a lowered cost of production. Ariel did an article some time ago detailing facts and processes at the Rolex house that shows how intense their effort really is, which is quite complex. I’m not much of a Rolex fan, but it’s tough to deny that they produce a very controlled product, and whatever the automation is they certainly don’t shovel a bunch of coke into an oven, push a button, and have a watch pop out the other end.

    • BNABOD

      R&D spend is a bitch though and while I don’t feel sorry for Rolex the equipment they use is certainly not cheap and a lot more sophisticated than 30 years ago so that adds up.

  • Word Merchant

    I like the new Rolexes much more than the old ones.

  • John William Salevurakis

    One should also think about particular watches in relation to one another. Recall that the AP RO, on release, cost about 3x what a Sub cost. Today they don’t cost nearly that much in relation to the Sub (as little as about 2x a Sub in most cases). By your logic above then, is AP going backward on the RO relative to what they were earning on it in the 1970s? I would also look at watches through the lens of “availability to the average Joe”. The way to do this would be undertaking the much easier process of looking at watch prices (various models and brands) in comparison to average US household incomes over time. Further, as noted below, and this is tough/impossible to quantify, the costs of production have significantly changed since the 1950s (automation, etc) AND there exists the reality that the Sub of today has elements that did not (indeed, could not) exist in the 1950s. Sapphire crystals, better steel, superior movements evolved, and components become globally sourced, etc. to the point at which we are no longer even comparing apples to apples.

  • Great work Aaron, a very interesting read. It’s interesting because I still think that is a fairly significant increase, even when adjusted. While the overall quality of said Rolex is no doubt higher today, you could even discount for expectation of quality and manufacturing techniques against that curve (which can increase quality at less ultimate unit cost). You used a Mustang as a reference, I wonder what the same exercise would say with a BMW or the likes? I get the sense that even the unadjusted difference is less than double but I could be wrong.

    In any case this is a great piece and I look forward to the next.

  • ??????

    Agree with the comments below: you cannot directly compare today’s mass product fabricated via robotised process to 60 years old manufacture product.

  • This speaks to what the Swiss watch industry has been moaning about – the value of the Swiss franc relative to other currencies which causes their products to become quite expensive in the consuming markets. Another way of looking at this is that the average Swiss employee now enjoys much greater buying power in the global economy for goods made elsewhere.

    The old question “are you better off than your parents and are/will your kids be better off than you are?” becomes a resounding “YES” for the Swiss nationals as they import many of the things in their lives. But it becomes perhaps bad for them longer term if their export markets suffer for it.

    Like all currencies, a strong one is great if you are buying but sucks if you export stuff as your products are expensive on the global market. Thanks for the article Aaron, looking forward the rest of the series.

    • Sheez Gagoo

      Agree, that’s why I spend a lot of money in France, where everything costs 30-50% less, but people in exportoriented industries have 1.Decreasing income and 2. already lost their jobs to east European countries or elsewhere. Not every industry cares about Swiss Made.

  • Maybe you’ll touch on this in subsequent articles, but marketing costs for Rolex, et al, have surely more than doubled between 1967 and 2016 as well. Did Rolex and Omega have event sponsorships, boutique stores, and brand ambassadors in 1967? Also, Forbes reports Rolex’s 2016 operating margins at 30%. if Swatch is claiming 9%, then, yeah, Rolex is overpriced from anyone’s perspective, Swiss or American. Either that or Swatch needs to trim some fat.

  • Yojimbo

    “I wanted to find out how Swatch could only be reporting a 9% profit margin while also being accused of greed?”

    You have an MBA dude, given the myriad opportunities available to manipulate the left side of a ledger, did you pause a moment to question the accuracy of the claimed 9% profit margin to begin with?

    • You are suggesting that Swatch manipulate their audited books, and do so to downplay their margin? I wouldn’t expect an unsupported claim like that in a published article, escpecially one that goes against the anecdotal trend (of manipulation being used to increase top and bottom line).

      • Yojimbo

        First of all he named Swatch but the issue is obviously germane to all the Swiss watch makers commanding absurd prices, HOW do we justify it if not simply slavish devotion to the profit imperative.

        Have you followed what VW did with its diesels? Given all the blind eyes that were turned to grey market watches and the ridiculous adjustment to MSRP between regions, should one presume Swatch is scrupulously honest? You don’t have to accuse a company of doing something to look at the potential they have to do so.

        If you’re trying to suggest that an audited statement that is preceded by unaudited statement and which once finalized are then subject to rights to refiling for months afterwards in cases where there is NOT outright manipulation taking place and is therefore a document that must go without question then I have some lovely real estate investment in Florida I’d love to send you some material on.

        • Look, I am an auditor, and I know full well that audited statements are not the word of God. I am aware too that Enron was also an audited entity. VW is an operational issue that you can’t blame financial governance on.

          However, we are talking about a large publicly listed company that has the full external audit suite that comes with that. It’s fine if you have no confidence in that, but you would therefore have no confidence in the numbers coming out of any publicly traded company.

          Again, that general and totally unsupported cynicism has absolutely no place in a published article that makes a side point about modest profit margins.

          And again, even if we accept that every single company is cooking their books despite the many checks an balances, there is the final question of “why the hell would they downplay their profit?” The margin and the top line and EPS is going to be the most important indicators of performance for investors.

          So even if Aaron were to hold the same unsupported opinion as you it would further make his point for him would it not??? Would it not go: “I wanted to find out how Swatch could only be reporting a 9% profit margin (and it’s likely to be even lower than that because they are lying to us I am sure) while also being accused of greed?”

          • Yojimbo

            I deal with CPAs on the regular and fully half of you are Asperger’s fueled pedants, I suspect that you fall into that category. Where exactly did I put forward that potential reason as my own opinion? Oh exactly I didn’t Captain S.4.Bs.

            Let’s review the question he asked, “I wanted to find out how Swatch could only be reporting a 9% profit margin while also being accused of greed?” WHY WHY WHY Delilah indeed. When you ask a fucking question like that you are FREE to draw in all sorts of speculation. That is one very potential outcome. Other less plausible ones are “well as you know the majority of luxury swiss watch buyers only read 52yr old newspapers and have a completely unrealistic of luxury goods pricing”. Offering up why someone MAY believe something is fully acceptable and I seriously have no time to disprove your fucking straw man arguments.

          • You have the tendency to resort to name calling and general keyboard shouting, at the expense of making a decent point, when someone disagrees with you. I guess we’re done here. Have a great day.

            Your Asperger’s fueled pedant.

          • Yojimbo

            Sweet tits, I name call as a matter of habit and I insult as I see fit. You’re myopic.

            You dismissed my VW anecdote and yet the very reason they did it was to shave production costs which is yet another form of ‘manipulating the left side of the ledger’. You knowingly drive down costs by say using flimsy plastic parts a la certain brands and there you have it the dieselgate of the watchworld, sure one is illegal and one is just poor ethics but yet again it’s an obvious thing to at least throw in there as something that drives people to calling the Swiss greedy.

            I all caps for emphasis, if you hear yelling that’s just a shortcoming of your own personality, they call it projection.

          • Ariel Adams

            Be civil guys. No more hostility.

          • Gokart Mozart

            So if all accountants are dishonest all lawyers like yourself will drag out cases to last as long as possible to make more money and you don’t care about right or wrong or guilt so long as you make your money and a s much of it as you can.

          • Yojimbo

            I made no statement regarding dishonesty and accountants whatsoever, you should probably get either your eyes or your head checked. Your statement about me is laughable and not even worthy of reply aside from suggesting you find a hat and go pleasure yourself.

    • Watching Time

      Wouldn’t this be in Swatch’s worst interest? They make the most money when their share price goes up, which happens when they report larger earnings. If they are making their earnings look smaller, they trying to make their share price go down?

      • Yojimbo

        I cannot claim to know why, but I think it’s something he should have at least briefly touched on. So let’s say you want to avoid paying a dividend in certain quarters or for whatever reason, you manipulate those #’s and there’s your justification.

    • Donald Ford

      Could you site an instance where negatively manipulating profit margin would be a good thing for a company? Taxes maybe?

      It’s a serious question btw, I’m not being an a$$, I’m trying to learn something.

      I own a couple Sypderco Yojimbo’s btw lol.

      • Yojimbo

        I work with accountants all the time but I am not one, so you’re probably better served looking for a presentation on tax fraud. There’s different reasons you manipulate your revenue and loss figures. That it is taking place to the point of perversion is undeniable.

        Two main reasons are tax avoidance which is more often straight up fraud because the method used isn’t legal and another reason is embezzling from the corp and ultimately the investors or shareholders.

        Some publicly traded companies are masters at this manipulating their figures so they reflect good or bad depending on what quarter it is and how their stock prices are trending. All that manipulating is going to have an impact on what their actual profit margin is. I don’t know Rolex’s ownership situation, usually the worst offenders are either privately held corps where theirs fraud on investors going on or large multidivision public companies doing it to manipulate stock prices or influence lenders etc etc

      • Gokart Mozart

        Tax avoidance is legal tax evasion is illegal.

        Tax avoidance is what more i would say the bigger global corporations do to avoid tax like EU investigations into Google, and Starbucks etc. Operating in many companies they can move costs and revenues around to benefit their share holders and the big bosses profits.

        Whether that is morally acceptable is another matter. Many Governments don’t want to upset the apple cart and only act when it becomes a big scandal in the UK with Starbuck’s and Google paying only a few percent of the tax they should have paid.

        They do not however want to reduce there sales or profits because that has a negative affect on share price, investment possibilities etc. When Tescos in the Uk overstated the profits by £250 million becuse of a serious issue there was a 12% drop in shareprice when there was the annoucement made by tesco, and then big investigations and fines and people being sacked etc

        This is why countries like US (look what Donald Trump has said about reducing corporation tax) and UK in the threat about brexit of reducing corporation tax.

        Not really in the national interest if it is a big drop, but they are wiling to do it.

    • Beefalope

      For the sake of argument, let’s assume the 9% is accurate. That’s far from the whole story. That’s what the manufacturers allegedly make. What is the mark-up from manufacturer to wholesaler to retailer to consumer?

      There are a lot of mouths to feed along the way, so I’m guessing it’s substantially higher than 9%.

      • Yojimbo

        I mean I don’t dispute or accept the 9% that wasn’t really the target of what I was saying. I think that with a lot of these companies there’s multiple things going on, it’s fairly common to couch some profits and declare them later on.

        It’s illusory production costs that I suspect are often there that I am more interested in seeing if an outsider can ever determine the extent of.

  • simon

    It seems your production costs are assuming that the watches are 100% made in Switzerland. I know for a fact, as I witnessed it in person, components (dials, cases) being manufactured in Asia……looking at you omega. This must bring down the production cost with a strong CHF. I would love to see an analysis on what percentage of watches, in 1975, were 95% made in Switzerland versus today.

  • Willy Chu

    To just say that the price of a Rolex hasn’t gone up that much is not enough.

    To assess the “value” of a luxury watch, you have to compare it to other desirable goods that can be bought INSTEAD of a watch. It doesn’t exist in a vacuum. For example, the price of a large flat screen TV has dropped from $10,000 to $1000 (and less). This type of increase in technological “value for the money” has nothing to do with inflation or exchange rates.

    “… a discussion of whether or not the watch industry in Switzerland should control their own costs more efficiently is an entirely different conversation,” but it is a crucial one. The industry needs to find ways to decrease the cost of production. I don’t think boxing themselves in with ever stricter “Swiss Made” regulations is the answer.

    • Donald Ford

      While I’m certainly not a PhD holding economist I agree with this, it’s usually not helpful to compare the falling price of things that are for the most part locked in step with Moore’s Law to other things. While the manufacturing process for goods that have been around since before the industrial revolution have gotten better and more efficient, and continue to do so, it’s simply can’t keep up with the breakneck march of Moore’s Law.

    • Watching Time

      This is exactly what the Consumer Price Index does…it takes a bundle of goods and accounts for their changes in price over time. You can’t make your own bundle of goods and assume anyone will take your article as valid unless you’re a PhD economist. The TV is a datapoint but tech like this relies on Moore’s Law, whereas most other things work in the other direction when it comes to price. Cars, Jewelry, Housing, Shoes, Clothes…none of them have gotten cheaper over time and all are goods that one could buy instead of a watch.

    • Donald Ford

      I think you’re right about that, but it was impossible for them to see the full set of consequences the “Swiss Made” tag would bring with it. In ways it turned out to be great for their industry for many years, but you’re right…. In the global economy it’s beginning to strange them a bit.

    • Polerouter

      There are obvious clever ways to decrease the costs of production while even increasing performance. It’s called quartz watches (or more recently, Sistem51). But that’s not exactly what most swiss watch consumers are looking for, apparently.

  • TrevorXM

    Nice piece. You’ve come to the same conclusions which I have been stating over and over again on here and on Hodinkee and other comment boards every time there’s some silly article written by somebody who really doesn’t know what they’re talking about — because they haven’t really thought about it before they wrote, or done any serious research. Instead they rely on their “feelings” about what Swiss watches should cost, or how they “sense” a discrepancy on pricing. Not very bright. Your Mustang comparison is excellent in that it represents a quantum leap in quality and technology better than any other car, even more than a Corvette. Step into a 1966 Mustang and a 2017 Mustang like I did this past summer and it is remarkable what technology has made possible in an affordable mass produced car.

    • @TrevorXM:disqus you are absolutely correct. Technology in production is frequently assumed to mean better pricing, but that isn’t always the case. In this case, there are many factors including increased R&D costs, increased marketing costs, increased labor costs for those not replaced by automation,etc. In some cases, it does result in better prices (consider a laptop’s price compared to 20 years ago), while in other cases it hasn’t resulted in better prices (the car example).
      Many people have pointed out in this thread that a Rolex of today is not an apples-to-apples comparison to a 1957 Rolex due to to materials, design, production, etc and that is very true. Those will be factors addressed in Part II of this series. This article (as you point out) is strictly an economics look at pricing of a product that is sold under the same name and taken to be the same product (though there are obvious improvements). The interplay of the other factors will be the remainder of this 3-part series. Thanks for reading and commenting.

      • commentator bob

        You cannot compare cars because there are no cars that have remained even close to similar in terms of features. Just baseline safety and environmental laws, which manufacturers have to follow, have dramatically increased prices (and led to better cars). Beyond that a “base” car now generally equates to its loaded historical counterpart.

        Compared to that the evolutions of something like a Rolex have been trivial and insignificant.

        • TrevorXM

          And 1950’s Rolex watches didn’t have features like ceramic bezels and 904L steel and Chromalight and Parachrom hairsprings and Glidelock and on and on and on and on…

          Once again you demonstrate that you are living in the egg which is your avatar, commentator bob. YOU NEED TO BREAK OUT!

        • TrevorXM

          Logically the “base” car DOES equate to its loaded historical counterpart. Obviously, it should.

    • Beefalope

      You underestimate the importance that a person’s feelings play in purchasing decisions and overstate the role that data plays. The vast majority of people don’t do a statistical analysis for most of their purchases. Rather, if they want an item, feel it’s well-priced and can afford it, they buy it. If they want it and can afford it but feel it’s too expensive, they don’t buy it. The person who makes a decision to buy or not buy isn’t going to give a dissertation as to why; they’ll simply tell you something seemed priced right or priced wrong.

  • Jeffrey Chang

    I enjoyed the read. Thank you.

  • wallydog2

    In the mid 1960s I bought an Omega (manual wind) for about $95. (Keep in mind I knew nothing about watches. It could have been a Timex for all I knew or cared at the time; I just needed a watch. Ten years later – may the watch gods have mercy on my soul – I sold it for about $15 at a garage sale – again in an innocent state of ignorance – establishing that transaction as the stupidest thing I’ve ever done in my…life.
    As far as current quality-watch prices are concerned, I think any discourse on the subject can fall back on the 18th century economic principle that an object’s $value is determined by whatever a consumer is able and willing to pay for it; ie., beyond a practical threshold, this paper clip before me is worth $1 if there’s someone out there willing and able to pay $1 for it. It’s worth $2 if someone else out there is willing and able to pay $2 for it. In 1965, my Omega was worth $95 because that was what watch buyers of that decade were willing and able to pay for it in 1965. The same watch in 2017 might fetch $9500 because someone out there is willing and able to fork out $9500. Free enterprise capitalism has always been fluid, keeping in mind that in 1965 a bottle of Coca-Cola cost 10 cents and my annual salary as a teacher was $3700 and, we paid $33,000 for our first house in 1972……that’s why they call Economics “the dismal science”. That’s why $ nit-picking remains largely a waste of time. Want the Rolex/Omega? Buy the damn Rolex/Omega.(In the meantime Timex still makes a good watch). Plus ca change.

  • Shawn Lavigne

    “One of the biggest complaints among watch enthusiasts is that luxury watch prices are too high.” isn’t that the whole point? a way for rich folk to set themselves as special and apart from common folk. blah, blah, blah. talking in circles… anyhow, let me know when you do an in depth review of that 50 year PAM.

    • wallydog2

      Back in the early 1900s a New York newspaper raised its price from 5 cents to 7 cents. Sales went up because consumers assumed that a more expensive newspaper was better than a cheaper newspaper. The other reality continues to be that there are “conspicuous consumers” who want to be able to tell their pals that they paid $10,000 or more for an accoutrement under the rubric of status symbol – as in the British comedic skit from the early 60s: “I never did care for music much; it’s the Hi-Fidelity.” (I know a ‘Shallow Hal’/salesman-of-the-month/cock-of-the-walk type who would buy a Rolex in order to be bedecked noticeably, not because he wanted a quality time-piece.
      (We poor country church mice are so given to inverse snobbery. It’s unworthy of us small rodents.)

  • Donald Ford

    I don’t think prices falling will help to be honest. This isn’t that sort of market or that sort of product. I’m just barely a millennial (I graduated HS in 2000) and about a month ago I badgered every “friend” I could on social media, in person, wherever to answer a question I think you and hopefully the Swiss watch industry already know the answer to. “If Rolex, Omega, Breitling and IWC all slashed their prices 15% across the board tomorrow morning would that make you more likely to purchase a Swiss time piece”?

    All but five people (last count on my total was 92 responses) said that if in the morning a Rolex Submariner cost half what it does now they still wouldn’t be interested. The five people who said the price change would entice them happen to be my friends who are also into watches and all of who already own at least one Swiss time piece.

    I think that’s the problem the industry faces. Most of the people who buy their products owns all the time pieces they want or can afford and they aren’t attracting new customers. Cutting prices won’t help this.

    I would like to see a company stop using celebrity ambassadors and start appealing to the few people of my generation who have the means to purchase their product….. Nerds/Geeks. We nerds love building things.. Tell us about how you built it, why that’s awesome and why you’re so excited about it and some of us will buy it and tell our friends about it. Ever notice that when apple reveals a new product there is always Johnny Ive’s voice playing over videos of the product being produced. We care about what makes your product awesome and what makes you excited about it. No one cares George Clooney wears it in ads because we know you paid him to do so. This can’t be every companies route but I’d bet money that companies like Omega and Panerai would save money and sell more product if they gave it a try.

    • In many respects you have brought up many good points. I think you will definitely enjoy part two and three as these are the exact discussions the articles focus around. Thanks for reading and sharing your comments.

      • Donald Ford

        Thanks for researching and writing this. All three of the topics you’ve planned to cover are both extremely interesting from an enthusiast’s perspective and extremely critical from a business/market perspective if the industry as a whole is going to continue to exist. Looking forward to the next articles.

        • If you like these types of articles, make sure to check out Watch Ponder…all I do there are business-related articles on the watch industry

    • Gokart Mozart

      I agree with you to an extent, most of the younger generation are not turned on by watches, when there is so much tech stuff, that will appeal to them instead.

      I am not sure to be honest making a fuss about how these watches are made will make much of a difference, because for a start the impressively made watches will start round about the 5 digit price. Also i imagine alot of the sentiments would be along the lines of use laser engraving it will be more accurate and you can do it in 2% of the time.” or “200 hundred hours to put it together and it is still not as accurate as my £30 timex”

      Times have changed and the importance of a watch has now diminished with phones, tablets and laptops and fitness devices.

      Saying that for people who love watches a 10 to 20% drop in watches will make a difference but depends on your disposable income to buy a watch.

      A 15% drop in the price of a Nomos would be relevant for me, but not a similar drop in the value of a basic Lange.

      Regarding the Apple videos do they actually show the huge factories in China and the poorly paid workers looking no very happy, or is it some romantic vision?

    • Richard Baptist

      Totally agree with you. The profile of a watch consumer is an older male. The more expensive the piece, the older the potential customer. No industry can survive on an older customer profile. The watch industry needs to market to women, younger people and more diverse people in developed countries. The watch industry needs to raise the curtain and show people the intricacies of these small, wonderful machines. Instead they put a three hander out in steel and that’s the entry level watch. Which looks like the face of any smart watch. Show people why this is different, show them all the gears etc. , the complexity that goes into a mechanical watch and give the lower end some complications so they get value for money.

  • Lincolnshire Poacher

    Thank you Aaron. I enjoyed, and found that interesting.

  • commentator bob

    I am seeing the base price of an inline-4 Mustang LX as $7,290 in 1984. That is $16,840 today.

    The base price is now $25,185. About a 50% increase.

    However, it is not the same car in any way. Completely different infinitely better platform, independent rear suspension, V6 instead of an inline-4, A/C, power locks, power windows, antilock brakes, 8 airbags, traction control, rear disk brakes instead of drum, much better stereo system, and the list goes on well past what I have mentioned.

    In comparison, the Submariner, which already had a sapphire crystal and solid link bracelet, gained solid end links and a ceramic bezel.

    Swiss watch prices should have gone down with manufacturing efficiency. Unless I missed it this article does not mention Rolex profit margin, which I guarantee puts Swatch group to shame.

    • TrevorXM

      Manufacturing efficiency has no connection to up-to-a-standard luxury product prices like Rolex watches. It has everything to do with down-to-a-price bread and butter consumer products like Mustangs. As Aaron Stark has laid out, the next two segments will discuss why this discussion goes beyond simple economics of manufacture. Welcome to reality.

      • commentator bob

        The Mustang (and any other modern car) is actually built to standards that have gotten much tougher gradually over the last 40 years. The only new standard Rolex has had to meet is not containing lead.

    • Polerouter

      Yes, but you now you can have a dive watch with a sapphire crystal ans solid link bracelet for less than $1000. It is not called a Submariner, but it probably works better and is more reliable than a Submariner from the beginnings. Modern watches are significantly better than vintage ones, contrarily to the false impressions given by the absurd prices of some vintage watches.

      • commentator bob

        I agree with you there. It is crazy what old folded link, acrylic crystal watches go for.

        The point is almost all of the modern updates were in place in a 1984 watch. Not in a 1984 car.

  • IG

    Who the hell cares about the Swiss perspective other than the Swiss? Is buying a Swiss watch some kind of charity act for the “suffering” (overpaid) Swiss workers?

  • Garrett Hu

    Very interesting and thanks for the article. I am not as methodical but believe that any price is what people are willing to pay until they are not. People are still buying but are waiting for the right product, not cheaper. Take the Speedy Tuesday sold out in minutes tells you money is not the issue here. So if I was Omega I would be kicking myself because it would have probably sold out at $10,000 and the next one will be just that. Keep going, raise the price…why not? People still pay.

    It just needs to be the right product, the Speedy Tuesday offers 100% marketing fluff, there is no added value above and beyond the base model other than a speculation that resales will soar.

    So it’s not the value of the product and it’s not the price. I think it’s the feeling of something new, perhaps it’s cool to buy direct from brands because supporters feel they are contributing more of the price towards R and D versus feeding a retailer? Just like when I discovered online ordering the first time I bought a whole bunch of crap I didn’t need or when I got my first account on EBay…man I was in that day and night.

    I think people have money, that never changed but we’re just bored with the same old year after year of things no one can afford or affordable watches that don’t excite….

    • @garrett I agree with many of the points you’ve offered. I am a proponent of bold design. There are too many copy-cat “me too” watch models out there. Even the “new” watches offered end up being indistinguishable refreshes of a previous collection, or worse, a copy of another company’s line. If this topic interests you, I’d recommend this other article I’ve written on this topic: https://watchponder.com/2017/01/23/iconic-designs-that-changed-watch-history/

  • Yan Fin

    Life is good but expensive…

  • The Deplorable Boogur T. Wang

    Thank you Aaron. I found the piece interesting.

  • The Deplorable Boogur T. Wang

    IMO it is a “ringer” to toss a Submariner comparison into this mix.
    The Sub started and has spent most of its’ life as a hard-core tool watch. People who bought and wore the Sub ( I am one of them) needed a piece with a verifiable record of durability and dependability under adverse conditions. The Sub filled this from crystal to clasp.

    The majority of people who purchase a Sub today are “desk divers” who have scant regard, or actual knowledge, of using it under such circumstances.

    As to the “other” Rolex models; well they looked good and fit what the, then, client, wanted – cost be damned.

    Only a few watches today, by necessity rather then design, meet the previous standards of durability under adverse conditions.

    My US$. .02’s worth.

    • @disqus_oRIS81PgW2:disqus I appreciate you continuing the conversation on this. The sub is only an example, but points taken. I look at the watch industry as having a marked transition about 1970. Before this, watches were designed mostly as tools, beyond this, they were designed more to be art. Unfortunately, it seems like there has been little in new design offerings in the recent years. Here is an article I expand on this thesis more if you are interested: https://watchponder.com/2017/01/13/design-next-big-revolution-in-watch-industry/

  • sygyzy

    I’m confused about some of the math here. You said that a $150 watch in 1957 should cost $1550 in 2016 but then you say you “adjust it for buying power” and so it should really cost about $9k today. Even after reading the link describing the difference between Inflation and the CPI, they seem very intimately linked. I sitll don’t know the difference but I am surprised that a 8.6x multiplier doesn’t describe the change, but needed another 5.8x

  • Thanks for sharing the informative post with us.

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