Something is worth exactly what someone will pay for it. If someone is willing to pay a million dollars for a Timex Marlin, that’s what it’s worth. If someone’s willing to pay $10 for a Richard Mille (my bid) and no one will pay a dime more (which they shouldn’t), it’s worth $10. Of course none of that addresses the key question: is an expensive watch worth it? . . .
What’s an expensive watch?
What’s expensive for me might not be expensive for you or vice versa. So let’s define an “expensive watch” as anything that costs $20k and up.
Why Are Expensive Watches So Expensive?
Accurate timekeeping and cool complications (chronographs, perpetual calendars, moon phase, etc.) that were once big ticket items are now available in inexpensive G-SHOCKs, Seiko Astrons and smartwatches – some boasting the aforementioned exotic materials.
There are two main reasons why watchmakers charge $20k and up for a wristwatch: money and marketing.
1. Making and selling an expensive watch costs a lot of money
The trick to making money is to take in more than you spend. High-end watchmakers spend a lot of money, and it ain’t on materials.
Take a good close look at a $20k watch – and I mean a really close look. Clock the meticulously finished surfaces. The work is performed by hand by highly-skilled and, in the case of Swiss watches, unionized craftsmen. Slowly.
Even when watch parts are made by machines – as they are with Grand Seiko and Rolex – the computerized equipment is expensive, the facilities housing them aren’t cheap, and expert machinists aren’t a dime a dozen. And there’s still a massive amount of hand assembly and quality control.
An expensive watch has to be designed – considering what’s already been done, what’s could be done and what will sell. There aren’t a whole lot of people who have the technical know-how and artistic vision to design a Hublot Big Bang Ferrari 1000 GP. They like to work in nice offices for big salaries using the latest computers.
By the same token, someone’s got to see the watch through the design, prototyping and production stages- a project management challenge that can span years. And that’s just the making-the-thing part of the program.
Although the internet has reduced the costs of marketing, the savings aren’t significant at the $20k-and-up watch level. Watchmakers in that rarified air spend a huge wads of cash on high end events, watch fairs, advertising, company owned boutiques, quaffing champers with celebrities, enablers and customers, and more.
If I said that marketing can account for half the cost of a $20k-plus timepiece would you be surprised? Offended? The truth hurts.
2. Watchmakers charge $20k for an expensive watch because they can
The second part of the cost equation is instructive. When you buy an Audemars Piguet you’re not just paying for a watch, you’re paying for the entire company: executives, employees, buildings, travel expenses, etc. More than that, perhaps above all, you’re buying their reputation. Think of it this way . . .
All watchmakers are subject to the law of supply and demand. If NET-A-PORTER charges $50k for a Royal Oak Automatic 37mm 18-karat frosted white gold it’s because they can. The price has less to do with the cost of production than it does the amount of demand. And that demand depends on AP’s reputation.
Grand Seiko also sells $20k-and-up timepieces. But their relative lack of reputation – despite astounding product quality and an illustrious brand history – is reflected in the relative lack of demand for their products. (You can bet that limited edition watches in that price range are limited by consumer interest.) The same “problem” afflicts Jaeger-leCoultre.
Not so Patek Philippe, Audemars Piguet Royal or A. Lange & Söhne. A brand’s reputation is also model specific; all these companies have watches that are as good as their halo timepieces (e.g., the Patek Philippe Nautilus) that stand zero chance of making the same money (e.g., the AP Code 11.59).
As our man Adams pointed out, price is all about marketing. Watchmakers charge what they can on a cost-plus basis. The retail price reflects their reputation vis-a-vis the competition. An Audemars Piguet Royal Oak is a better watch than other watches or other of their products – not to mention dozens of competitors – only in the sense that consumers believe it is.
Is an expensive watch worth it?
I don’t suppose the answer to our central question will come as much of a surprise. We can talk about depreciation, but really? A $20k-and-up watch is worth it if you think it’s worth it.
The issue is clouded by a simple fact: there’s a huge selection of “as good” watches well below that price point. In fact, there have never been so many excellent timepieces in the $10k – $20k range – especially if you’re willing to buy pre-owned.
Ultimately, what you’re surrendering, what you can’t get below $20k for a new watch, is elaborately hand-finished movements. Details that are largely invisible to the naked eye. (That said, transparent casebacks are standard fare and you can buy a jeweler’s loupe for under $20.)
I’ve been saving up for a Vacheron Constantin Overseas, reserved for me for a hair under $20k. It’s worth it because I want it. Ultimately, it’s as simple as that.