why prices for modern watches are so high? A possible response

Following many comments from the thread below regarding the (too) high prices of modern watches I though that the following could be of interest.

I recently was speaking with an industry insider (not from VC or Richemont) about the crazy prices for modern watches which semed totally de-linked from their intrinsic value and the reply was eye opening. 

I quote:

"10 years ago every type of watch had more or less a set price: a gold chronograph was $XX, with an inhouse movement it was $xx, a tourbillon was $xx, a time only was $xx etc etc...

Came along Frank Muller who sold steel time only watches with perdestrian movements for the price of a gold chronograph with inhouse movement and his watches sold like hot cakes. The watch industry as a whole looked at this and said, if he can do it and get away with it then so can we. From then on it was a free for all"
What surprises me most today is that the traditional high end brands such as VC and PP seem a bank for the buck compared to many of the new comers or the mid range brands comming out with bells and whistles watches!
how about greed? C'mon lets face it a vast majority of what we have
03/05/2009 - 18:03
been seeing in terms of ridiculous prices...and products is due to greed and mostly from brands which who use a BNB movement, an off beat case and mega marketing methods all with 6 figure price tags. These guys forget that watch making is a long term process, these guys forget that R&D means investing in production not marketing and communications. One good thing with this crisis is that all these freeloaders will disappear and the industry may start readapting its prices to the REAL world and stop thinking that its clients are all multi billion dollar silicon valley or Russian or Chinese hot shots but also your average Joe who needs to sacrifice his vacations or kid's lunch money to buy their products!
Watch companies now understand marketing :-)
03/06/2009 - 04:01

Look at AP, though I agree some LE ROOs look pretty cool but the prices are just restricting to most...even if we have the money to snatch one. Good but ordinary JLC based mov't (now they have inhouse mov't so it makes them eligible to raise price even more) for a LE and the price is twice the regular model while it's 3-4 times the regular one in the grey market. It's not all AP's fault but the flippers are contributing as well IMHO.

Marketing, Demand and Supply, Shrewd Business Practice, etc..
03/06/2009 - 05:46
I agree with what everyone has said but unfortunately, it is a very complex and sticky situation we're in. It is hard to blame those brands who rely on marketing to sell second rate products at high prices because there is still a demand for such items.  Some people care not so much for the watch per se, but for the "status" it brings with owning one.  This is the market targetted by those brands. Unfortunately, as Alex said, legit brands will think that "if this pretender can hawk his stuff at stellar prices, shouldn't we sell the real stuff at a higher price (after all, we in business for profit and not just for the love of the craft).  Unfortunately, luxury goods do not (and cannot?) come cheap.  Pricing also plays an important part in how people perceive the brand. As Alex also mentioned, compared to some of the "marketing-based" brands out there, the high end brands do seem to give more bang for the buck.  Unfortunately, in recent years, it seems that we need to keep shelling out more bucks for the same amount of bang... On a slightly different topic, I noticed that, at least here in Japan, Historiqe 1921 is prices about 1.8 times more expensive than the Traditionelle manual wind.  The two watches are mechanically the same and although the Historique does seem to require more work and materials for the unique casing, it is hard to justify the big price difference....Any thoughts on this? Have a great weekend! Kazumi
Marketing and gold! The American 1921 will be
03/06/2009 - 19:54
made in about 100-150 pieces each year which explains the high price based on what the market can support. The case is a bit more complicated and has more gold which can also account for a very small percentage of the price difference
My response to this post:-
03/06/2009 - 13:12
I will respond in points, below: a) A lot of emerging economies have seen newly minted rich/millionaires during the past 10 years or more, in countries such as China, India, Russia etc.  Many of these people want what they think is the best money can buy.  Also, many brands such as Frank Muller etc. took advantage of this growth and entered these markets early.  b) Perhaps, they do not know what separates a VC/PP from Frank Muller; or what separates in-house movement from external etc. etc. c) In many cases, the available literature in the market (magazines etc.) are just rubbish.  Watch reviewers or critics or luxury critics etc. do not know horology and the brands well enough to write reviews.  So, a significant part of the customer base does not have access to accurate or unbiased information. I find this very true in India (where I am from). d) One has to carefully look and compare the advertisements of different manufacturers.  In a PP advert, the watch occupies a very small (%) of the total page, and is set against a black or dark-grey background.  If one does not know PP, they will just flip the page.  A VC advert is also not very appealing - the watches look nice, but the overall advert is very ordinary.  Same with JLC.  NOW, look at Chanel, Van Cleef, and Frank Muller. Chanel ocupies 2 pages of magazines at times, and the watch in the advert is so in-your-face - same with Van Cleef. and other non-watchmakers or brands.    I think many of the customers who do not know watches get more attracted to these more in-your-face adverts than the discreet adverts of VC/PP and the like.  Perhaps, VC needs to change its advertising??? Especially for the QDL. They can definitely portray all their timepieces in a much more attractive way. e) Overall, I think many of these new brands took advantage of the (huge-but rather ignorant) market by way of better advertising, and also by entering emerging markets earlier on - helping serve demand and in turn increasing their prices.    
gulity for making watches price so high :) ......
03/06/2009 - 15:30
this leads to my watch collecting story: brought up in the small island in Singapore, the marketing by the luxurious watch dealer Sincere was so strong that myself and a fellow school mate (now my best friend and a fellow wis who sworn by PPs)  stood outside the window of their boutique to drool at the FMs in junior college uniforms. to us, the FMs are very handsome art-decor best looking tonneau watches which non other brand then offered that look and the brand celebrated mr franck muller as a master watchmaker (whiz kid) that modified a rolex to a grand complication. we thought all watches were made by him !!!  that was 1987 when the brand just started not too long and seriously, we still think the watches look pretty compared to PPs,VCs then. we complained that both VCs and PPs did not use their heritage to their advantage as that look belonged to a typical  vintage PP or VC.  to us these brands are too old for us too, FM has a connection to us as a young and vibrant brand which boasted an independent. both of us did not bought the FMs till 10 years later as we made progress in our careers and even then we haven't anything close to as good looking as FM for budget around usd 7000. of course we did not learnt much about watch movements and their costs as we were not reading anything beside the watch brochures. the purchases were based entirely on looks. a "master banker" meant a great deal to me aspiring to be a banker!   and naturally as the collection years piled , both of us learnt a great deal more from literature and fora, and we disposed of the FMs. still, i make foolish mistakes buying into looks and to me is inevitable as i need to look at "it", however, i am a little more careful. and naturally through the years, we can differentiate what is quality.  this is how we grow up , making mistakes, but hopefully not too grave and never twice.
I didn't follow FM completely but some of his inventions
03/06/2009 - 17:14

are genuine like crazy hour and some other complications. Read his interview once...

He's a great watchmaker & businessman as well.

Very nice story. Thanks for sharing...
03/06/2009 - 17:36
Actually, I never bought an FM but aside from the quartz Tag Heuer I bought while I was still studying, the first watches I bought were actually Bvlgari watches.. At the time, I knew nothing about watches and I was probably influenced a lot by my better half who is a staunch supporter of that Jeweller (thanks to my wife, I think I still know the names of most of their jewelry lines).  Anyway, I had a couple of inexpensive (SS) Bvlgari watches and was even thinking of buying a Bvlgari diagono chronograph in YG. By this time I had already gotten my standard issue Rolex datejust and was clearly into the WIS path.  Soon I discovered watch fora like the PuristS and Timezone...and got some exposure to VC as a brand.  As luck would have it, one of the stores that my wife had dealings with carried VC and I ended up buying an OS chronograph instead..(and the rest is history I guess...all in the span of 5-6 years really).  Still, in one of my early posts at the PuristS, probably in the VC forum perhaps, I recall I was even naive enough to mention that I was toying with the idea of buying the Bvlgari chrono just because it looked kinda nice.  Of course I didn't get any feedback and I realize now how polite the members were (i.e. If you can't say anything nice, don't say anything at all).  Luckily, I didn't get that chrono and I have parted with my Bvlgari watches since then.   Still, I must confess that even now I am still in love with the very slim and simple Cartier Santos Dumont (in RG and with Piaget movement)... ...just some thoughts on a late Friday night (its actually Saturday already). Kazumi 
I plead guilty too had a Havana at one point :-) (nt)
03/06/2009 - 19:49
I guess this is why Patek is the "king"
03/06/2009 - 18:04
From the other watchsite:5970P Latest Auction Result HKD7,000,000 est:USD902,000What is this crisis is everyone talking about? Sure?   If I were after the money, I'd go for Patek too...solid investment!  
It was a charity auction
03/08/2009 - 03:10
Please bear in mind that this particular auction was for charity; the entire proceeds go straight to the charity in question.  There was no buyer's commission, and as I understand it, Patek generously donated the watch as well.
Yes, you're right. My bad, thanks.
03/08/2009 - 03:51
But it's not only this particular 5970P, it's the entire Patek in auction market, they mostly only go up... 
Stop Alex, you only get me depressed... nt
03/07/2009 - 02:58
The goose is cooked...
03/07/2009 - 11:09
Is there any turning back from this craze? Will the prices go down once the richies start counting their money because of the economical downturn? This definitely is a bubble that will burst sooner or later, I hope. I am not interested in the newcomer brands at all. What they have to do to get noticed is beef up their product with design and complications no WIS will accept nor even consider spending money on. I agree with the others, a certain customer audience spends the money on triple tourbillons and stuff of that kind. But this group of people is limited so the hype will wind down some time down the road... They will also get horology eduacted in time and eventually turn to real values     On the other hand I want you to look at QdI... How many of us directly asked the question or wondered why the watch was priced so high. I guess VC didn't avoid, on the contrary, took advantage of the high pricing of watches and went ahead to harvest on its novelty...