Before you start reading, let’s clear the air on the subject. By “Luxury Watch” I do not mean what (I think) a lot of Nigerians perceive as Luxury (N100,000 – N250,000). I’m referring to watches that cost tens to hundreds of thousands of dollars (N5,000,000 – N200,000,000 +), Yes, I mean “houses on wrists”as some Nigerians will like to reason, and with particular reference to Swiss Watches.
Watches made in Switzerland are perceived to be best in the world. To a large extent this is true, most of the high-end luxury watch brands are made in Switzerland and their level of detail is “mind blowing”. Switzerland is also the motherland (origin) of watch making with the first ever wristwatch on record made by Swiss manufacturer Patek Philippe in 1868 for Countess Koscowicz. The history of portable timepieces predates this, however, it is interesting to note that Patek Philippe remains the “godfather” of the watch industry till date.
Patek Philippe wristwatch - Made in 1868 for Countess Koscowicz
Traditionally Swiss watches have a reputation of being incredibly precise, consistent, compact and very durable. The extensive research in gears made by Swiss watch makers resulted in gears that are incredibly good, which is why even though mechanical watches are made of almost purely gears they are precise and versatile. While the application of gears is almost as old as civilisation, designing a gear is a very complicated task.
Here are Basic Cost Factors why these timepieces are as expensive as they are:
As small as watches are, some are extremely functional with several complications. The volume of research required to produce the movements of such watches is enough to make a college professor shudder.
Manufacturers like Patek Philippe, Rolex and Omega spend staggering amounts on research, engineering, manufacturing and testing. In certain cases it could take years to perfect a watch model and yet it might only be produced in very limited quantity.
Watches are typically made of Ceramics (in recent years), Gold, Platinum, Steel and Titanium. Jewel bearings in Mechanical watches are made of diamond, ruby, and sapphire. In addition Watch Dials, Bezels and even bands could be encrusted in gem stones.
These materials that comprise each timepiece are of the highest quality and are expensive. Some luxury watch makers like Rolex, Omega, Hublot, UlysseNardin and others even go to the extent off making their own metal alloys.
As simple as some watches appear on the outside, the complexity of the mechanism is truly amazing with hundreds and even over a thousand individual parts. The process of assembling all these parts together alone is extremely time consuming and requires a high level of professionalism. That coupled with the fact that a lot of these movements are hand-made by the professionals with decades of experience alone start to give some insight into the cost structure.
- Craftsmanship and Labour costs
Every now and then we hear of consultants who charge in thousands of dollars per hour due to their level of experience, expertise and efficiency. In the watch making business, rather than this being the exception, it is the norm. Switzerland's labour force is among the priciest in the world. The craftsmanship required in watch making naturally demands equally high pay.
- Production Time
It takes more time to develop a new watch movement from inception to final release than it takes to build your dream house. When you consider the research, production and testing processes involved in watch making you’d realise it is not a job for the weak hearted or financially lean. As we all know time is money and this simple case of time shows exactly how expensive “time” is.
First class and economy are not the same even though they are on the same flight. Just as first class seats are limited, luxury watches are not made for everyone. While midrange brands like Casio, Swatch and Timex produce in millions, some brands like Breguet, Chopard and Patek Philippe only produce couple tens of thousand pieces per annum. You can only produce so many pieces when they are handmade. The development costs of midrange watches are spread over millions of pieces, while that of high end luxury watches are spread over thousands of pieces. Rarity comes at an unavoidable cost.
To sell luxury watches you also need to create the look and feel, from product displays to packaging, to the right store ambience. Then you sell the idea in a massive marketing campaign. While marketing campaigns are inevitable to move products and make money – and indeed they do lead to sales – however they cost a lot of money. This expense has to be factored into the pricing of each watch model.
Swiss watches are legendary, while precision and quality may be achieved by almost any serious watchmaker today, the heritage of Swiss Brands have created a continuous demand for these products and naturally there is a premium attached to these brand names. People buy Swiss watches as a source pride and a status symbol. However Brand heritage and perception of quality does not play that much a big factor in determining their prices.
- Market Economics
When you combine the factors listed above with the fact that there are basic channels a product will pass through from the manufacturer before it gets to the consumer you instantly have retail prices at well over 2x production cost. This is not peculiar to watches, it is the same for all products that must go through a distribution chain.
I sure hope you dream of owning one or more of these luxury watches in your lifetime. J
By: O. O. A. Shitta.