If you look at the price tag of some watches, it might cause you to raise an eyebrow now and again. Though I can honestly say this still happens to watch collectors from time to time as well. Why do some watches cost as much as they do? Watches can easily be divided into two categories: new and pre-owned, and their prices vary considerably. There are a number of reasons for the hefty price tags on some luxury watches.
From Raw Materials to a Watch
Watch movement parts, Image: Bert Buijsrogge
Behind the scenes in a watchmaking atelier, Image: Bert Buijsrogge
Creating a new watch, or any type of consumer product, starts with design and prototyping. Depending on the complexity of the piece, it can sometimes take several years to develop. From there, actual models are created, which have to be tested over and over again. When these processes are done, production can finally begin. Before an actual watch can be sold, a lot of expense has been made, which then has to be made up. Thus, it’s understandable that watches with in-house movements have higher prices than watches with standard or (slightly) modified movements.
For those who have yet to visit a watch manufactory, the production facilities look like a surgical clean room. Special clothing and shoe covers must be worn at all times, apart from in the offices, of course. Systems are in place to prevent dust as much as possible. In addition to these special working conditions, the tools and machines needed to create the watches from raw materials are extremely expensive to buy and maintain – and like any tool, they only have a certain lifespan.
Then comes the actual watchmaking, which is probably what most people imagine when you talk about making watch; the assembly of hundreds of tiny delicate parts by hand. Many professional hands have to perform a lot of difficult tasks before a watch runs for the first time.
Marketing and Promotion
IWC Pilot Timezoner Chronograph, Image: Bert Buijsrogge
By the time a new watch has been produced, a lot of money has been spent, yet not a single piece has been sold. This is where marketing steps in. Product images and marketing campaigns are created to promote the new watch. It’s not uncommon to host a launch event for international press, which could be anywhere in the world. Marketing is an essential part of the business; otherwise, nobody would hear about the watches or buy them, and the watch companies would go under very quickly
Finally, to get the watches to the (potential) customers and/or collectors, they are distributed to individual retailers. In order for retailers to make a living and give you the best experience possible, there is a share of the suggested retail price that goes to their business.
If you combine all of these elements, the price is more understandable, though as mentioned, it’s sometimes even difficult for collectors to understand. Prices have gone up so fast over the past few years, it’s getting to the point where you have to ask yourself whether what you get is worth the price. In the end, you’re the one who has to decide whether you want to spend ‘x’ amount of money on a certain watch. Despite these growing prices, the watch business is strong, timepieces are still changing ownership, and plenty are being sold by dealers.
Demand Pushing Prices
Apart from the base price of a watch, demand for a timepiece influences its price. Watches that are highly sought after will sell for higher prices. Retailers keep the retail price as the selling price, but lucky early buyers tend to sell straight away for an easy profit. Although they are typically considered pre-owned, these watches often come with all the stickers still in place. Good examples of this are the new ceramic Rolex Daytona and the Omega Speedy Tuesday. Either you are one of the lucky ones to get a new watch at the dealer, or you’ll find yourself paying several thousand over the suggested retail price.
The same goes for the rest of the pre-owned market. If you buy a watch that is in high demand, you will likely get a good price for it if you decide to sell. Models that are produced in unusual, non-standard materials can be particularly interesting for collectors, and thus have a higher value; for example, the A. Lange & Söhne watches that were made in non-precious metals. Although their true retail value would be lower than the models in precious metals, in reality, they sell for more since they are very rare.
Emotional Value
Luxury watches are simply expensive goods, whether it’s a NOMOS for less 2,000 euros, a Daytona for 11,000 euros, or Patek Philippe for 300,000 euros. Also, so long as your cell phone still has battery, nobody really needs an expensive watch to tell the time. But luxury items, per definition, are not necessary and exist for the pure beauty and pleasure they offer. If you buy a popular model from a popular brand and later decide to sell it, you will hardly lose money and may even make a profit. Thus, you can consider a beautiful fine watch an investment piece. While luxury watches are indeed expensive, it’s relative to why they are expensive in the first place.
In the end, it comes down to what a watch is worth to you. If you get pleasure out of it, it might justify spending the money. Though watches seem to getting more and more expensive, I strongly believe you should wear them no matter what. The fact that they are increasing in price is just a welcome bonus.
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