I paid £2800 for an Omega Speedmaster Moonwatch Pro in 2012. According to the Bank of England's online inflation calculator, that's £3913.51 in today's money, but to buy the 'same' watch new now costs £6,600. That's almost 2.5x the price it 'should' be. The price rise also means I have to pay a far higher price to insure it now, which kinda spoils the ownership experience. Not only that: when I took my watch in for a service after 5 years, the price was £500, which 'should' now be £649.46 - but when I asked about the price of a service a year ago, I was told by Watches of Switzerland that it was going to cost £865. There is only one explanation for this kind of price hiking and that's Greed - pure and simple.
This is assuming costs don't change apart from inflation, so its not correct to to only include inflation when material, labor, and other costs can change at different rates.
It's pretty normal for a company to mark up accessories far higher than their core product. Look at an Apple iPhone silicon case at $50. What's that cost them, $3? The core product has competition with other brands. But if you want the "official accessory" for that product you love, there's only one place you can buy it.
Margins for items are a case by case. Video games for example - consoles are sold at smaller margins or even a loss. They make the money back through subscriptions and accessories like controllers.
4x? Christopher Ward has an 3x on every watch they sell- Omega needs to have atleast a 5-10x Markup depending in the model. A C65 is 1300€ - a Seamaster heritage is 5x that price lol
You're not wrong. Leather goods and other clothing / apparellel are where the real rip off are. There's still good bespoke stuff out there, but off the shelf is a major price boondoggle😊
Exactly- there is no particular design content, no engineering, no technology, no performance benefits. At least watches they have at least the last three of these.
I would not say that it is scandalous because it is simply good business or rather excellent business given that people are buying these in droves ☝🏽 They buy the brand not the bag 😉
For the price of some of these watches you can buy a car that took billions to develop, has dozens, if not hundreds of suppliers, consists of many thousands of individually produced parts that all take specialized high-tech machinery to produce, has software and microchips and complex engines made of high-performance materials and if all is added together it takes thousands of manhours to assemble that car. Then you have luxury watches that can cost as much as a luxury car and contain barely evolved versions of technology that already existed 100 years ago. Yeah, watches are sure as hell overpriced. Ridiculously so. That's why they're luxury products.
Yes, but look at what the margin is on that car at that price. The average net profit for automobiles is barely 7.5%. Unless we are talking about Ferrari and the like.
Watches are not overpriced there huge price reason is just for rich individuals to show how different they are from the people and can shit on others by having a watch that cost more than a regular car, a car that cost more than a house, and a house that cost more than 100houses
Buying a watch where most of the cost is spent on a fancy store and expensive psychologically manipulative marketing, does not make me feel smart. It makes me feel like a sucker.
It’s clear but that watch full of marketing now has high value to you; it has become precious, and perceived value is so much more than its real production costs including packaging ☝🏽
@@kaunas888 you’re not being manipulated. The products worth and value are two different things. You are buying because you think it’s worth paying that much to have a watch that not many others have and that people will know when you show them. If everyone could afford a Patek, would you still want one?
I feel the exact opposite. Personally, I see no value whatsoever in visiting a watch boutique. The dealers are shady, sleazy, and greedy. They tend to know zero technical specs, because the truth is they’re just salary/commission workers and have no real interest in the product. Also, they’re used to dealing with customers who only care about luxury and appearances, so for a true watch nerd, conversing with an AD is a painful experience 99 times out of 100. Lastly, I don’t need to be sucked up to. My ego is just fine when I’m being left alone. It’s the horological equivalent of joining a fraternity in college, where you’re basically paying to feel better about yourself due to the attention you’ll receive. Hard pass. Knock a couple thousand off and just sell the watch online.
I agree but you have to remember that the largest customer demo for luxury watches are middle age and older, and those people are much more likely to want to visit a physical store. Plus there are benefits to seeing and trying on a watch before purchasing it.
I think you bring up good points but I've also had some fantastic AD experiences with sales staff but I get it's hit or miss. I mainly buy pre owned market so totally respect what your saying.
Good points. I find it cringe to deal with an AD salivating over me buying a watch through them. That said, there nothing like seeing a watch in person and trying it on before you buy. I've seen pictures of watches online that are not impressive in person and vice versa.
Pre quartz, the purpose of owning a watch that cost a few quid, was that it actually kept time. Back then cheap watches were crap and a good Rolex for time keeping was money well spent. Nowadays even cheap watches keep accurate time. Owning an expensive watch is a 'luxury' to be enjoyed, if you like exquisitely made mechanical devices.
@@folksurvivalvery well said. This is exactly what I tell my mates about electric cars. Yes they’re likely to be faster (or much faster) than similarly priced ICE cars, in the same way that a $10 Casio is more consistently accurate than my Superlative Chronometer can ever be 😁 (although not by as big of a margin as some might think; mine’s gaining about 30-45 seconds a month)
Except, they are not exquisitely made. They just claim to be. Mechanical engineering and production is so well established over the last 7 decades, that what they do now is pretty routine and not exceptional. It was unusual and exceptional many decades back. No longer.
As a journalist, your attention to the problem at hand and the many different ways you approach it is utterly fantastic. People get lost and confused in videos like this because the point can be a moving target but your awareness of the topic makes for such a compelling and informative video. Thanks for doing great, and different, work than most other content creators in the space.
Thanks for that. I'm still working on getting videos like these "right". Conveying this much information, cutting the superfluous stuff and getting a message across is hard. Especially when also including details - I'm not really a details guy, so sometimes I skip over things that I feel are unneccessary where viewer may think "this needs more explanation / How did he get to that conclusion?". It's a learning experience and I have great respect for those that do the more "journalistic" things professionally. It's hard 😊😊
The profit figures need a more in depth look I think. Having worked at an Omega, Longines, Tissot, Rado, Tag, Mont Blanc, Rotary, Bremont retailer- all of the watches are bought by the retailer for about half of the retail price for all of these brands. £5000 Omega is bought by us at £2500. It’s more in the cheaper brands. £300 Tissot is bought for around £110-£120. Obvs the retail price does have 20% VAT in uk too. And we pay 20% on the price we buy for. Jewellery is much larger… £3000 diamond ring costs the jeweller about £1000 or less.
So in the early 2000’s when a Seamaster was £1050. The cost to the AD was about £550. So back then it’s ok to assume that it cost Omega about £200-300 to make and market one…
Mike, you really have outdone yourself, remarkable video. Your insights in the watch industry, but also business in general are worth watching every second. Thx!
Since I work in the watch industry for over 30 years-though never for Rolex-I can imagine that their prices are calculated at a markup of x10. Compared to other brands, Rolex invests very little in R&D simply because they don't need to. Their designs are classic and time-tested, requiring minimal innovation. We also have to consider the substantial cash reserves they hold. So, when you compare them to other brands, especially those producing steel watches, a x10 markup is very likely. The combination of low R&D costs and significant cash flow makes it feasible for Rolex to operate with such high profit margins.
@@tudorserban111which movements exactly?. Sky dweller aside, their movements are very Vanilla nothing special or unique....so what exactly are they offering for the cost except value retention?
@@JRB-l7o Thin, reliable, easy to service, +-2 sec/day accuracy. Wake me up when the competition is able to make a < 12mm thin integrated chronograph. This is not about complications, it's about refining day to day watches.
@@tudorserban111 They focus more on fit than most other watch brands. Their watches are very comfortable on wrist, and based on materials used and value retention, you could definitely argue that most of their watches are fairly priced for what you get, at least in the standard range.
Reality: most people die 8 years into retirement. Enjoy your life, buy nice things, enjoy nice times, support a nice world. Put the garbage in the trash. 👌
@@michele_ meaning he is not sponsored by any brand and therefore tries to sell for them. He just speaks his honest opinion without any bias. When you watch enough watch TH-camrs you will understand.
100% agree with all of your analysis. As always your analysis is straight-talking, self-aware and so simple to follow. Back in 2015 I was seriously considering getting a JLC Reverso Duo one day, now I just can't afford one. If the product had meaningfully changed I would understand but it's the same watch it was back then.
You did a good job pointing out that the 'manufacturing price' is not the price that it actualy costs the company to make a watch. Most people forget that
In my opinion, price is irrelevant in the game of "luxury". Your cell phone or Casio keeps excellent time. The Citizen or Seiko Quartz on many models are actually BETTER than a Rolex in terms of just keeping time and they look decent as well. Rolex marketing says for only $29K more, you can get a Daytona that almost keeps as good time....AND they throw in a bonus band which has a slightly better finish to it. And people wait months and feel lucky to get the watch. Summary: I don't think Rolex is overpriced at all. People want to FLEX their substandard timepiece. They want to FLEX their status in life. Rolex provides exactly that. A $400 quartz watch doesn't do it. In the end, Rolex is worth the price for Flexers.
@@JohnBowl14690 to show other flexers. I actually try to reserve judgement on people who wear rolex, since hey, at least they're wearing a watch, and some very honorable people like rolex (for some earthly reason, when omega has cooler shit.)
In 1980 when I was 18 my take home salary was about £300 - £350. It was possible to buy a Rolex 5513 submariner for £360. The date version was £450. An Omega speedmaster was £300 and Tudor snowflake submariner was £210. So ordinary workers could achieve one of these watches. Today you need a mortgage to buy one of these. I notice they use some more expensive materials like ceramics but seriously £10k for a watch that you dare not wear as there are people out there that will literally chop your hand off.
@verynormalman the Tudor black bay is around £4k. The point I was really getting at is that back in the day an 18 yo office junior could buy a Tudor or Rolex for the equivalent of a month's salary. How many 18yos earn £40 -£50k today? In fact there are many many people earning under £30k. It's only really professionals that earn £40k+
Minimum wage for a 21 year old working 40 hours in the UK means a take home pay of £1700 ish. You could get a used black bay for that or save up 2 months and get a new Tudor or used Omega. With everything going up in real terms higher percentage wise, Rolex etc have become more luxury- hence higher price.
@@kfkwAL7 Yes but it's not just like saving up for 2 months is it? Those people making 1700 a month must presumably pay for rent, food and clothing. Insurance, social expenses, etc. Realistically, someone in that position would need to save for years and then be faced with the prospect of spending those precious funds on such a silly purchase as a luxury watch when they might have other priorities, like marriage, travel, a house or a host of other things that life offers. It's not just a whimsical thing for most people who don't earn large amounts of money, to buy a watch worth 3x their salary. It's jewelry, that keeps time. Most people, living in the real world of limitations and bills, quickly sort that out.
They use the same materials in $50 Chinese watches. A ceramic bezel costs $1. A sapphire crystal costs $1. The 'special' 904L steel is a cheap commodity product widely used in industry.
You don't buy a rolex because it is affordable you buy it because it is absurdly expensive. Luxury brands invest a lot of money to make their products expensive. These investments (to make their products more expensive) range from maintaining factories and workshops with the capacity to manufacture 100 times more watches per year than they produce, to paying tens of millions to sponsor an America's Cup boat. If you think that these investments do not make their watches better, well yes, you may be right, but it does make their watches *exclusive*, which is , by far, their most desired characteristic.
Exactly we love the craftsmanship but let’s be for real. High end products are a flex no matter what. Wearing a Rolex say hey I can afford a Rolex. Of course you will love it but the price is a little crazy..
Great video. The only thing I might add would be that prices are going up every year, I feel more than inflation or cost of total production. I think that the price increases are necessary to retain the exclusivity. Some research has shown that the more the luxury companies put up the prices the more revenue they make, somewhat paradoxically.
That's just poor brand recognition and or marketing, if you tell people Breitling AD has 30 watches in stock, no one cares if you tell people a Rolex AD has 30 watches going I bet nearly all of those watches will be sold in one day.
@@Signal11th $5,000 per watch assuming they are open 30 days a month that is $150,000 a month turnover. They wouldn't be in business if they were losing money. I am sure there is some ripple effect as well. I noticed a new Breitling boutique in my city. I thought it was bizarre, why open a Breitling boutique in a city that has jewelry stores that sell your watches anyway in a country with very moderate median income levels? I don't have an answer to that but presence must have some intrinsic value i.e. it benefits recognition and therefore sales in other stores in different cities in the same country. Then there is the tourists....
Basically take out the very high prices of operating in Switzerland (one of the most expensive places to do business in the world), the huge marketing and advertising budgets, the comfy padded management costs and the fancy shops...and they could sell the same watch for 20% of the cost. That is basically what AliExpress does.
Luxury watch retail prices are typically 6-8x manufacturing cost. For Rolex it is closer to 20x. Rolex could literally move the factory to China and make identical steel watches for
Awesome video, thanks so much. As someone who used to consume, and to a certain extent be consumed by, the same TH-cam watch content & panel shows as everyone else I find your well thought out and interesting videos so refreshing. I feel more a part of the watch universe and less like I have to own an $11k timepiece after discovering your channel and that's pretty cool...
@@83dude there are two types of commenters: 1) commenters who comment 2) complainers who only comment negativity Thanks for pointing out which category you belong to. Kinda „cringe“, don’t you think?
Superb analysis! A commentator recently said that your channel is more Business Analysis masquerading as Watch Enthusiasts. It’s both and more. I’m going to share this post with several clients who seem to be at an inflection point in their growth journey. More importantly for me, this post is entertaining, while also nuanced and insightful.
As always, a terrific video full of enlightening perspectives. Thank you. You used the term "Veblen good" which is not in the common lexicon, even for a seasoned marketing executive like myself. The transcript even got the word "Veblen" wrong. I knew what it was, but I'm guessing a lot of others might not which is why I put the correct word/spelling in this comment. Keep doing these. Start a Patreon and I'll join.
I appreciate the spelling but I would've appreciated the definition more: "A Veblen good is a type of luxury good, named after American economist Thorstein Veblen, for which the demand increases as the price increases, in apparent contradiction of the law of demand, resulting in an upward-sloping demand curve."
@@LucaTheStar Well, I figured if it was important enough to know what it meant, a Google search was not an unnecessary burden - provided you knew the spelling of the search term - you're more likely to remember it if you have to dig a bit. But yes, that is the definition - taught in most marketing 101 classes in college.
Thanks. I actually cut the veblen explanation from the video for time. It's a topic that gets me riled up because it's one of those things where there's a theory out there and then a person/company starts to think that they can manipulate a product into becoming a veblen overnight and that's just not how it works. Sure - Cristal champagne was briefly a veblen good but it very rapidly collapsed from that status. True veblens are incredibly rare 😊
i enjoy the casual aspect of your presentation. at first, i thought it might signal a rather blase' approach to your videos. then i watched 5 or 6 of them. your videos are technically advanced compared to MANY channels (even 'professional' ones), and your commentary is CONSISTENTLY thoughtful, balanced, and informative. thank you so much for your work. subscribed.
Welcome aboard. I try at least to bring something that adds value or is a different perspective to the table. If I just succeed every now and again, I'm happy 🙂
Awesome discussion as always, Mike! Love how you break things down and put things into perspective. All those fancy marketing and flashy boutique do cost plenty of funds, but they play a large part in why we developed affinity towards these brands in the first place and why we feel good wearing the products. In the end. It is this enjoyment that we derive from the products that is the reason why we opt for our luxury good of choice.
Thought-provoking (and excellent) commentary as always. PS. I think you might be quoting Fax Cone of FCB fame when he said “50% of advertising is wasted. Trouble is we don’t know which 50%…”. That was according to David Ogilvy who created Ogilvy & Mather: titans both of Madison Avenue’s legendary luminaries of advertising…
I really admire your content, Great analytical ability, with interesting and non-obvious perspectives, and an entertaining yet not over-stimulating way of presenting it, compared to many other TH-cam channels. I’m just starting to learn more about watches, it's been a year, and your videos have greatly increased my interest. Thank you for taking the time to do this!
In 1999 I was starting to look for my first luxury watch. It took over a year to find my very first luxury diver…the Omega 300M with the Chronograph dial and blue wave pattern. I wore that watch for 23 years. Then resized it and now it’s my wife’s daily wear (her choice). I don’t sell watches. I gift them occasionally. But way back in ‘99 we decided what number was acceptable. And every 5 years or so, we sit and discuss the new cost we’d deem okay for a watch. A watch is worth what you FEEL it’s worth to you. A Rolex for me, isn’t “special enough” to justify their cost. I love the look. They are beautiful. But in my heart and mind, just not worth the work I need to put out to earn enough to buy it. Over these 20+ years of collecting, I find myself more at home or comfortable with high end Seiko over Omega or Rolex. When you travel the world a lot, you find you can’t wear true high end watches in most places. Too dangerous and almost guaranteed someone will take it. Just “KNOW THYSELF” and own what you love. I’ll always own an Omega. But I’m more at home with Seiko…
I was in Japan and several people were wearing Rolexes. I usually travel with my Panerai since most people do not recognize it. I do not even wear my Rolexes to work as people always make comments. They want to know how I can afford such a watch.
I travel with my G-Shock for exactly that reason. Probably going to be OK but why invite the risk? Not just my watch but passports etc. At home there is regularly security and insurance that you cannot replicate overseas.
Thanks so much, Mike! A master class in economics and marketing. Please don’t take this the wrong way, but you are brilliant and I continue to appreciate your content!
Excellent video! Super informative and provides a great perspective. Shows how you can put across imp points without weird background music and flashy graphics.
Yet another great video. Really appreciate your thoughtful views explaining your thinking. I feel like I’ve learned something watching your videos, as opposed to just hearing an opinion, you lay out facts and figures. Thanks for your hard work.
The AD's are a big contributor to the high prices. Take a $10,000 Rolex for example. Rolex sells that watch to the AD for $6000. The AD gets a 40% discount, so Rolex is working with $6000 of revenue on those watches. This is pretty standard for all AD relationships. If the brands reduce the number of AD's (or eliminate them) they can sell direct and increase their margins, which would hopefully yield fewer price increases in the future. Another contributor is consumer demand. Until demand drops, prices will remain high
Part of the mystique in creating a Veblan or even luxury good is to defy rule #1 in retail. What's rule #1? Make it easy to buy. So the AD strategy is intended to do just the opposite - make it more difficult to obtain. It's counter intuitive - just like the Veblan price/demand theory/observation. To some it even appear to be a gimmick or trickery. But it's obviously working for Rolex.
If only there was a way to cut out the middle man so that rolex could pass on the savings directly to the consumer. Oh well too bad that doesn't exist.
AD network adds another layer of cost - there is margin to play with to reduce msrp if selling direct. Unfortunately Nike tried this with disastrous results.
I owned an omega seamaster for 20 years wore it everyday bought for £700 sold it for £1500 twenty years later but that model was then almost 5k new do I regret selling no would I buy an omega again also no my taste has changed and thanks to excellent channels like this my eyes are opened to unbiased honest truth not just because you sell them or are sponsored by them .
Gotta also pass on the praise here, your videos are always insightful, well thought out, with a delivery that makes it easy to understand. Even if you may not be 100% accurate, the logic is always there. Fast becoming my favourite watch TH-cam channel.
You missed whole sale price vs retail. Omega sells their watches to AD’s at 35per to 45per retail. An AD told me this. He was allowed to buy one watch per year from his boutique at cost price. So, 10x for Omega is probably more accurate.
This point was touched on briefly(?) but I think is really the main/key point (though I don’t know the percentages). If there is a local distributor between the brand and the AD (as with some brands) there will be additional costs/margins there also - this is just how retail works unfortunately 💰💰💰
@@JieKe-r3s The most pathetic thing in the world is to buy a replica. Sorry, the most pathetic is buying a "high- end" replica. I bet your "high end" replicas have an even higher margin than the real thing. Making garbage is pretty cheap and you are paying out the nose for garbage. Well done.
What a great episode. I have no business background, (a watch collecting 68 yo Professor of medicine) and this all makes sense. This also makes me feel better about my 10yo Aqua Terra , and my 8 yo 39mm Op. And newer, and more expensive is not always better. I have paid much more for much less education in my life time. Your episodes are gems. It’s nice to “chat” with someone with differing perspectives.
I love this analysis! I think Oris is the mid-market JLC. They've increased their prices by almost a $1000 on their SW200 models, but they haven't provided any upgrade at all. Sure, they've "refined" them within the past few months, but can anyone point to any real improvements? I think not. I suspect they read the landscape of complaints against them and came out with some "smoke and mirrors" just to justify the price increases. Maybe that could be a separate video? To point out which companies are taking a 3rd route of using smoke and mirrors to justify their price increases? 🤔
For Oris, I think the deal is that they've gone in house on most models and to ensure there's not a big jump to the inhouse models they've had to raise prices on the SW200 models to close the gap. If the gap is to big, they in house models likely wouldn't sell .😀
It doesn’t matter what it costs to make. They charge what they want and some people are happy to pay it. If you are worried about what it costs to make then don’t buy it.
Rolex and the others do make a quality product. However, they are priced for the market they want to be in. None of them want their product to be seen being worn on the wrist of your lowly local grocery store clerk or even the grocery store manager. Prices are adjusted to make sure none of the lower classes can afford them.
Absolutely no one is arguing that Rolex cannot market their watch at whatever price point they want. And by that understanding, "overpriced" is kind of meaningless. What is being argued, whether everyone realizes or not, is that the price is way beyond the cost of manufacture. The "real" cost is the cost of keeping out of the hands of most people. Statistically that means most people on this platform. This is the "price" that pays for being able to flaunt wealth at the lower classes. A nice ostentatious way of showing how much better, more special, and extra awesome you are than others. A way to really rub their dirty little working class noses in it. Our host here claims he doesn't care for naysayer's. That wearing this stuff isn't just shallow. Pure gaslighting. Of course he does, if his peer group constantly remarked how wearing a yacht master was pretentious and boorish, he'd soon be leaving it at home. Of course it's shallow, just an ego buff, trying to quiet the inner monologue that points out you'll be rotting in the same ground as the homeless guy who lives in a dumpster in 30 more years when all human lifespans expire. At the end of the day they dump your body in a hole just like every other person who ever walked this earth over its last million years, the number of mansions, Ferraris and Rolexs you bought not withstanding. But hey, we are ALL a little hypocritical, and it's easy to spot the mote in your brothers eye. Welcome to being human.
Great video. Really enjoy the way you present your points and back up opinions with facts. As someone who lives in the U.S. and has owned my own businesses, I've never understood the mindset of "profit is bad". I can't speak directly to the AD experience, I live in a rural part of Georgia and don't have any within a couple hours drive. But I do understand the value prop that boutiques and AD's bring to the market. Not everyone will appreciate or even want to deal with them but there are always going to be a segment of customers that want that experience and all those things, as you mention, take money. Again, love the channel. Thanks.
Man, great, great video. 😊 This is so insightful and years ahead of all the other TH-camrs. 99% of them won’t even understand what you are talking about. I really enjoyed it.
I‘ve said it before, and I say it again: there is just some sort of a meditative quality to your videos! And I love your „corporate“ way of analysing things. That all being said, having in mind your view on watches and the fact that you said it more than once that you like the 1-4K „bracket“, I would love to hear your opinion on the new automatic INOX from Victorinox. Just saw it today: new and better bracelet, new and at least more interesting dial, a color matched date wheel, and hardened steel for the bezel. And it jumped into the „over 1K“ bracket, at least here in my neck of the woods. I kinda liked it, at least compared to some other models that just jumped in price with a newer release, without bringing anything.
Rolex buyers have to spend thousands extra to buy their watches from a fancy shop...which most of the time frustrates and demeans them with artificial scarcity and phantom waiting lists.
Excellent video Mike! It’s so hard to put a definitive value on luxury goods, if you really desire something and after purchasing, it still makes you feel good about owning it, then it is worth every cent!
Great discussion Mike and many thanks for taking the time in the research of this hot topic. Now, this begs the question, who and where is absorbing the loss of money for a watch that is sold in the grey market? For example, Jomashop in NYC has an Omega Globemaster for sale at $5,625.00 USD but it retails at $7,500 USD, so that is nearly a drop in price of $2,000 USD that has caused someone, somewhere to lose a substantial amount of money. In this case specific case, the numbers simply don't add up. Would love your input on this as I find this subject very intriguing. Cheers!
Nobody is losing any money there. The AD buys from Omega at 50% MSRP, sells it at 60% to the gray marketer who sells it at 75% to you. (And in your example it's precisely 75% of the original price)
And Omega sees exactly the same profit as if it was sold at the dealer for 90%. The dealer might be willing to take 10% rather than 40% because of rapid turnaround, no sales rep salaries, and increased volume may get them better pricing from Omega or allocation of more of the most desired models they can shift at 100%.
AD's. Unsold stock at AD level is going to get sold below retail just to recoup some of the initial outlay. Rather lose a bit on that Omega Deville dress watch by selling it at a loss than keeping it on the shelf and carrying the entire cost. Watches of switzerland made only 10% profit last year - just as a point of comparison. It's pretty much a given "fact" that many AD's wouldn't be profitable if they lost Rolex in their stores.
Loved it. The AD, TH-camrs, and Journalists do the most for the watches. You need to build a community to sustain the interest. How much engineering do watch designers learn? The same in reverse for engineers. Glauschette (spelling) shifting the chronograph to one side gave a reason to look if only for the novelty. It also just worked better.
One of the other things i learned recently is that Rolex, Richemont and other luxury brands are shouldering the costs of training a new crop of much needed watchmakers, at least here in the US. A dying breed if ever there was one but vital for the continuation of our enjoyment of these anachronistic time pieces.
@@blackjackpinokoLol! A watchmaker and ‘watch repairer’ are not necessarily the same thing 😂. An Apple Care tech will be able to fix issues with your phone, doesn’t mean they can design and build an iPhone.
They are watch repairers who swap just parts. You can train one in as little as 3-6 months. A watchmaker is a highly skilled tradesman who can design and manufacture an entire watch from scratch. The industry is slowly transitioning to non-serviceable movements because they are much cheaper to make than to service service. It will literally just be movement swaps for most brands in a few years.
That’s the point of luxury watches. It used to be because of the craftsmanship but it’s really just about being showing your wealth. Rolex makes a million watches a year, there’s nothing special about Rolex but they’re always sold out.
fantastic video, it spoke to me on so many levels + I learned a few new things about this miraculous world of economics. glad ive been on u since the first thousands subs. cant wait to see you invited on other big watch channels talking about your journey or discussing your beliefs cheers from vienna!
My word, I really enjoy your well researched market analysis, and have become my favorite in that genre; I think this chat was one of your best. We'll done! Look forward to more.
As one expert of counerfeit goods once said: "most good Gucci replicas have leather quality way better than the original product". In a free market, the price is 'right' as long as there is demand at that price. People buy brand, prestige - not necessarily quality. Sometimes they become 'Veblen goods', where demand rises with price...
First time viewer Mike. I think this should be required watching for anyone considering a luxury watch. A luxury watch (to me) is anything over $2000USD. I'm a practical person but I like quality and durability - I don't think they are mutually exclusive. Do you need a Rolex, do you even need a wristwatch - no you do not. You have a phone which is much more accurate than any watch and probably more reliable, I would say 5 9s at least. Like you said in the video, it's kind of a reward for doing something big and that's why a lot of people buy a Rolex or Patek or (insert your desired watch here). I think that is a good thing. I couldn't live without a digital watch and sadly, when the battery dies, I buy another. My Zenith on the other hand is in the shop right now getting an overhaul. I don't want to discount the feeling I have when I wear that watch - it's not word worthy - it's a feeling. The beauty of it, the sleekness the mechanical motion going on inside of it; it's a human made device that makes me think about the watchmakers who made it, where the metals inside came from, where the leather came from, etc. The escapement and the mainspring is just another reminder of my humanity and my beating heart. When I see these vids on YT with these "watch people" running to and fro to make deals on watches, it's annoying. This video was enlightening and I thank you for it. Finally, and sorry for blabbing (I'm at lunch) let's not forget the used watch market. Buying new is great and all but let the rich people buy them first and then you'll get it next year. Trust me, AP, IWC, Omega and all those companies will make more watches. Be patient, save your money, have a jeweler or watchmaker you trust and you'll get your watch.
"Whatever the market will bear" refers to the highest price consumers are willing to pay for a product or service, regardless of its production cost or intrinsic value. The phrase highlights how prices in a free market are determined by supply and demand, with sellers aiming to charge as much as the market allows without losing customers. It originated in the 19th century during the rise of capitalism and industrialization, reflecting the idea that market forces, rather than just production costs, drive pricing decisions.
Awesome discussion as always, Mike! Love how you break things down and put things into perspective. All those fancy marketing and flashy boutique do cost plenty of funds, but they play a large part in why we developed affinity towards these brands in the first place and why we feel good wearing the products. In the end. It is this enjoyment that we derive from the products that is the reason why we opt for our luxury good of choice. Also love your take on how many of these brands havent premiumized their product as they raise their prices!
It’s all about marketing and labors. Especially Western countries labor cost. That’s insane. Chinese labors and machines are way cheaper than western machines. And they are working the same. Hight price doesn’t means more quality. Usually means you got ripped off.
The starting point is totally wrong. 20% profit margin is engineered by adding costs. One need to look at the balance sheet before saying the they actually make 20% margin. Look at the management salaries and bonuses, pension plans, company cars and events including what they call marketing expenses but in reality are just trips to the alps for executives etc...
Great video. Personally I believe that the profit is higher to some degree. I can just talk about the omega seamaster 300M for example. At a local AD I got ~10% discount just by asking nicely. I am not a regular customer there. I do not believe this discount would be possible with the margin numbers you stated. Of course this is also just an assumption. Thanks for the amazing content!
Yes, you are correct. His numbers are BS. I work in large company and I see how my employer is doing magic with numbers, nobody outside of company has no clue about real profit.
Thanks for the feedback. In the video I was conservative as to what Omega profit was. I didn't want to go overboard. It doesn't change the overall Swatch result that is those 11% or Richemont that is 20%. Those are real numbers and not any kind of BS. But could Omega be above 20% sure? 30% possibly. Analysts rarely throw out higher estimates than 30-35%. As for the AD? Watches of switzerland made a profit of 11% last year. They might make a shitton on those rolexes but they also have to stock a whole lot of stuff that doesn't move. Variety is good for us, but costs the AD's quite a bit. As some say - Most AD's would go out of business if they didn't have Rolex in the window. 😊
Honestly, companies like Rolex and Omega should not have high R & D costs; most of their models have been around for decades with only minor evolutionary changes.
The 3235 hasn’t been around that long, the 3135 was the workhorse for decades. A thinner movement from Omega would be nice - or just use solid case backs and single barrels like in the NTTD
People who complain about profit have likely never owned a business…….speaking as a veterinarian and hearing I’m only in it “for the money”…. As I save for my first true luxury watch however, I do wish Omega would skimp a bit on that great big box….
I had typed out that exact first phrase. I agree completely. You won't be disappointed by Omega, I just picked up a titanium world timer and I was very pleasantly surprised, above and beyond what I was expecting, and I was expecting a lot.
@@TheSlowoldman I’m waiting on the new white speedy pro to be available in Canada and hoping I can wear that 42mm…. Otherwise it’s an aqua terra 38mm in black or Atlantic blue.
100% ... It's utterly bewildering to me that many people fail to understand that cost of materials + profit ≠ price. There's R&D, labour, taxes (and duties), capitol costs, marketing, packaging, ...
Another excellent insightful discussion, thank you! Ultimately, the market decides if something is overpriced or not. If the market/consumers buy the product at the listed price, then it is not overpriced.
For the reasons you said I don’t find apealing ali express watches. They are nothing to me, I’d rather look at my phone to tell the time. On the other hand I know I am irrational with some of my watch purcheses, but this hoby is irrational by itself. Nobody knows what watch I wear and how much I payed, cause nobody cares. Only I care and it makes me happy. And for that feeling I will overpay (pay for branding) with no regret
This is a great discussion. In terms of how much profit margin Rolex, Omega have built into the watch I think it’s important to note Rolex doesn’t sell the stainless Sub for $10k, they sell it to an AD for probably closer to $5k. So Cost of Goods on a 5x model would be closer to $1k for instance.
Glad you enjoyed the discussion. Things are reasonably commonly accepted. AD's markup somewhere between 40-60% on the price they pay for a watch. So at 50% a 9K Sub go for 6K to the AD. What else is reasonably established? Richemont spends 35% of all costs on marketing and other non production overhead. LVMH. 33%. Swatch 34%. So. 65% is profit + production cost. It's not unreasonable to assume Rolex is spending 35% on marketing as well. That would mean 3.900 is profit AND production cost for that Sub. What else do we know for a fact? LVMH - profit is 20%. Swatch is 11%. Richemont is 20%. Work that all in and the production cost would be 2.700 for a Sub. Now. Obviously, Rolex likely makes more than 20% profit. at 30% the production cost is 2.100. At 40% it's 1.500. At 50% it's 900. At 65% the production cost is 0. The assumption boils down to what you believe that profit margin is. Even for Rolex I haven't seen any estimates going higher than 40%. 1.500 is the lowest I would go in terms of production cost. Personally I'd say closer as I said in the video - somewhere around 1.800 - 2.500. I also base this on knowing quite clearly what a couple of other smaller brands have as actual production costs. There's no way Rolex makes their watches cheaper than them. At the end of the day it's guess work when it comes to Rolex - the others not so much. Cheers 🙂🙂
Right, the parts are machine made and finished (to pretty high standard) and the watchmaker picks them out of a bin to build a movement. I feel sure there's less than an hour of watchmaker's time in a Rolex...
@@thewheelieguy The Rolex 'watchmaker' is a women with a 9th grade education working on a production line. In many cases are only doing a single operation such as fitting the hands.
Actually, from a manufacturing perspective, Rolex is a value purchase. I am a CNC manufacturer myself, mainly working in titanium, and could make watch parts all day every day if I wanted to. But it’s not my jam. That said, even for me to realize Rolex’s overhead is laughable. I’d guess 100 million dollars of manufacturing space and equipment to make a submariner. As far as a manufacturer producing things goes, there is no single company more admirable than Rolex. They make every single part, down to the metal smelting itself & they are privately owned which is truly commendable. Finally, every single CAD/CAM programmer / machinist I know (who does well enough to be adequately compensated) wears a Rolex. It isn’t because of any non tangible value. Aesthetics aside, they (and myself) choose Rolex because the fit, finish & tolerances are measurably 2nd to none. You can spend more, but you can’t do better.
This is a great video. My current hobby is making luxury luggage that for the in some ways pays homage to Louis Vuitton. People recommend I go into business because they only cost $300-500 in materials to make. But as you pointed out correctly, it would cost a lot more to go into and market the product let alone the costs of setting up a production facility, sourcing suppliers, and rigorous quality control, even if we are talking about internet sales, the price for the finished product would be over $5,000 USD.
The Blancpain fifty fathoms case: They must know that say a 40 mm would be desirable and sell well, and the people in charge are not dumb. So why don't they do it? I've always guessed that it is because they are a Swatch brand. Competition with Omega might not be wanted.
@@Bu-22 I agree with your counterarguments, and I've played them out in my head too. They weaken my guess, but I try to make it work by thinking that the Swatch group cares less about tiers in this case and more about maximising income and protecting their most important brand. Maybe they would rather sell three Omegas than one Blancpain FF. Maybe they have better margins on the Omegas. It is strange how Blancpain doesn't take advantage of the great possibilities that they have - there have to be some good reasons. I don't believe they are stupid. Omega, on the other hand, is not shy about the moon story and they offer a lot of variants...
what pains me is that seiko, bulova, tissot, citizen and orient sell products for less in USA(a developed country) and more in India(a poor country). Guess we have to choose our hobbies basis the country we are born!
That's because of tariffs and trade agreements! For instance, flights from Europe to the US are a third more expensive than if one travels from the US to Europe!
Congratulations Mike. This was a real dissection of the theme. A very rational and honest approach to this matter which was quite informative for me. Another aspect you mention is the importance of the physical shops. I only bought two watches by Internet, yet on both cases I had the "animal" before in my hands. It is very important to me the materialization. It can be both deceptive or encorageous. Cheers.
I paid £2800 for an Omega Speedmaster Moonwatch Pro in 2012. According to the Bank of England's online inflation calculator, that's £3913.51 in today's money, but to buy the 'same' watch new now costs £6,600. That's almost 2.5x the price it 'should' be. The price rise also means I have to pay a far higher price to insure it now, which kinda spoils the ownership experience.
Not only that: when I took my watch in for a service after 5 years, the price was £500, which 'should' now be £649.46 - but when I asked about the price of a service a year ago, I was told by Watches of Switzerland that it was going to cost £865.
There is only one explanation for this kind of price hiking and that's Greed - pure and simple.
There's a mug born every minute.
I had a Rolex submariner in the 90s, got it serviced by Rolex cost £150.
💯💯💯💯💯💯💯💯💯
That's just your garbage asf socialist UK governments inflation
This is assuming costs don't change apart from inflation, so its not correct to to only include inflation when material, labor, and other costs can change at different rates.
If Omega are selling a rubber strap for £690, then I think its fair to assume they're making more than 4x on their watches.
It's pretty normal for a company to mark up accessories far higher than their core product. Look at an Apple iPhone silicon case at $50. What's that cost them, $3? The core product has competition with other brands. But if you want the "official accessory" for that product you love, there's only one place you can buy it.
Thr question is why do they need to@@smorebrands
Margins for items are a case by case. Video games for example - consoles are sold at smaller margins or even a loss. They make the money back through subscriptions and accessories like controllers.
4x? Christopher Ward has an 3x on every watch they sell- Omega needs to have atleast a 5-10x Markup depending in the model.
A C65 is 1300€ - a Seamaster heritage is 5x that price lol
@@raupenimmersatt6906 You don't think it's reasonable to assume it costs significantly more to manufacture a Seamaster than a C65?
If people are raging about 20% margins they should look up Dior's latest scandal around bags... Costs €57 to make and they sell them for €3500.
You're not wrong. Leather goods and other clothing / apparellel are where the real rip off are. There's still good bespoke stuff out there, but off the shelf is a major price boondoggle😊
@@Mike.thiswatchthatwatch what makes it more egregious is how they treat and pay the leather goods artisans... ironically, like cattle
@@Mike.thiswatchthatwatch Bespoke can be a con as well, like organic food.
Exactly- there is no particular design content, no engineering, no technology, no performance benefits. At least watches they have at least the last three of these.
I would not say that it is scandalous because it is simply good business or rather excellent business given that people are buying these in droves ☝🏽 They buy the brand not the bag 😉
For the price of some of these watches you can buy a car that took billions to develop, has dozens, if not hundreds of suppliers, consists of many thousands of individually produced parts that all take specialized high-tech machinery to produce, has software and microchips and complex engines made of high-performance materials and if all is added together it takes thousands of manhours to assemble that car. Then you have luxury watches that can cost as much as a luxury car and contain barely evolved versions of technology that already existed 100 years ago. Yeah, watches are sure as hell overpriced. Ridiculously so. That's why they're luxury products.
Yes, but look at what the margin is on that car at that price. The average net profit for automobiles is barely 7.5%. Unless we are talking about Ferrari and the like.
Exactly!
Watches are not overpriced there huge price reason is just for rich individuals to show how different they are from the people and can shit on others by having a watch that cost more than a regular car, a car that cost more than a house, and a house that cost more than 100houses
People that buy a $30k watch don’t usually drive around in a $30k car
No one is forcing you to buy one... why so upset?
Buying a watch where most of the cost is spent on a fancy store and expensive psychologically manipulative marketing, does not make me feel smart. It makes me feel like a sucker.
🫡👀🎳🫡💯😂
It’s clear but that watch full of marketing now has high value to you; it has become precious, and perceived value is so much more than its real production costs including packaging ☝🏽
Becasue you are (no offense)
@@kaunas888 you’re not being manipulated. The products worth and value are two different things. You are buying because you think it’s worth paying that much to have a watch that not many others have and that people will know when you show them. If everyone could afford a Patek, would you still want one?
Casio is king
I feel the exact opposite. Personally, I see no value whatsoever in visiting a watch boutique. The dealers are shady, sleazy, and greedy. They tend to know zero technical specs, because the truth is they’re just salary/commission workers and have no real interest in the product. Also, they’re used to dealing with customers who only care about luxury and appearances, so for a true watch nerd, conversing with an AD is a painful experience 99 times out of 100. Lastly, I don’t need to be sucked up to. My ego is just fine when I’m being left alone. It’s the horological equivalent of joining a fraternity in college, where you’re basically paying to feel better about yourself due to the attention you’ll receive. Hard pass. Knock a couple thousand off and just sell the watch online.
Exactly this. You took the words right out of my mouth.
I agree but you have to remember that the largest customer demo for luxury watches are middle age and older, and those people are much more likely to want to visit a physical store. Plus there are benefits to seeing and trying on a watch before purchasing it.
I think you bring up good points but I've also had some fantastic AD experiences with sales staff but I get it's hit or miss. I mainly buy pre owned market so totally respect what your saying.
Good points. I find it cringe to deal with an AD salivating over me buying a watch through them. That said, there nothing like seeing a watch in person and trying it on before you buy. I've seen pictures of watches online that are not impressive in person and vice versa.
@@jlg395 well said 🤝
Short answer: Yes
Long answer: Yyeess
A Lange Zeitwerk is overpriced for me. I feel 10K would be reasonable for my wallet .😂😂
Pre quartz, the purpose of owning a watch that cost a few quid, was that it actually kept time. Back then cheap watches were crap and a good Rolex for time keeping was money well spent. Nowadays even cheap watches keep accurate time. Owning an expensive watch is a 'luxury' to be enjoyed, if you like exquisitely made mechanical devices.
Yeah a cheap $10 Casio is more accurate than a $10,000 Rolex now.
@@folksurvivalvery well said. This is exactly what I tell my mates about electric cars. Yes they’re likely to be faster (or much faster) than similarly priced ICE cars, in the same way that a $10 Casio is more consistently accurate than my Superlative Chronometer can ever be 😁 (although not by as big of a margin as some might think; mine’s gaining about 30-45 seconds a month)
Wait until your mates with electric cars trying selling them. The depreciation is nuts.
@@johnkraus4 False.
Except, they are not exquisitely made. They just claim to be. Mechanical engineering and production is so well established over the last 7 decades, that what they do now is pretty routine and not exceptional. It was unusual and exceptional many decades back. No longer.
As a journalist, your attention to the problem at hand and the many different ways you approach it is utterly fantastic. People get lost and confused in videos like this because the point can be a moving target but your awareness of the topic makes for such a compelling and informative video. Thanks for doing great, and different, work than most other content creators in the space.
Thanks for that. I'm still working on getting videos like these "right". Conveying this much information, cutting the superfluous stuff and getting a message across is hard. Especially when also including details - I'm not really a details guy, so sometimes I skip over things that I feel are unneccessary where viewer may think "this needs more explanation / How did he get to that conclusion?". It's a learning experience and I have great respect for those that do the more "journalistic" things professionally. It's hard 😊😊
It’s definitely Haaaaaaard
The profit figures need a more in depth look I think. Having worked at an Omega, Longines, Tissot, Rado, Tag, Mont Blanc, Rotary, Bremont retailer- all of the watches are bought by the retailer for about half of the retail price for all of these brands. £5000 Omega is bought by us at £2500. It’s more in the cheaper brands. £300 Tissot is bought for around £110-£120. Obvs the retail price does have 20% VAT in uk too. And we pay 20% on the price we buy for. Jewellery is much larger… £3000 diamond ring costs the jeweller about £1000 or less.
So in the early 2000’s when a Seamaster was £1050. The cost to the AD was about £550. So back then it’s ok to assume that it cost Omega about £200-300 to make and market one…
Thank you for this. I had no idea how this all worked.
And the retailer needs to also pay for his shop, employees and so on
Mike, you really have outdone yourself, remarkable video. Your insights in the watch industry, but also business in general are worth watching every second. Thx!
Thanks for watching 😀😀
Since I work in the watch industry for over 30 years-though never for Rolex-I can imagine that their prices are calculated at a markup of x10. Compared to other brands, Rolex invests very little in R&D simply because they don't need to. Their designs are classic and time-tested, requiring minimal innovation. We also have to consider the substantial cash reserves they hold. So, when you compare them to other brands, especially those producing steel watches, a x10 markup is very likely. The combination of low R&D costs and significant cash flow makes it feasible for Rolex to operate with such high profit margins.
sounds pretty smart to me. Dumb people hate smart people. Most watch people are dumb. And jealous of other's success.
I don't think the bulk of Rolex's R&D cost goes into design. It goes into movements. And spec wise Rolex is king. That's not a cheap achievement.
@@tudorserban111which movements exactly?. Sky dweller aside, their movements are very Vanilla nothing special or unique....so what exactly are they offering for the cost except value retention?
@@JRB-l7o Thin, reliable, easy to service, +-2 sec/day accuracy. Wake me up when the competition is able to make a < 12mm thin integrated chronograph. This is not about complications, it's about refining day to day watches.
@@tudorserban111 They focus more on fit than most other watch brands. Their watches are very comfortable on wrist, and based on materials used and value retention, you could definitely argue that most of their watches are fairly priced for what you get, at least in the standard range.
Short Answer: Yes
Long Answer: Life if short, get what you need, but make some room for getting what you want
Love this , solid advice
Life is short waste ur money on meaningful Experience
It’s impossible to know what meaningful experiences are.
Well except for building a family but I don’t think you meant that
@@IvanAntolici agree. Procreation is the only objectively meaningful thing to do. Life is only meaningful if life keeps going.
Reality: most people die 8 years into retirement.
Enjoy your life, buy nice things, enjoy nice times, support a nice world.
Put the garbage in the trash. 👌
Spot on analysis. This is my favourite TH-cam channel for watches. No BS, no hidden agendas. Well done man!
Hidden agendas?
@@michele_ meaning he is not sponsored by any brand and therefore tries to sell for them. He just speaks his honest opinion without any bias. When you watch enough watch TH-camrs you will understand.
TH-camrs mother. 👍🏻
Very kind. Thanks a ton... 😊😊
I disagree. It's a gambler analyzing a casino.
100% agree with all of your analysis. As always your analysis is straight-talking, self-aware and so simple to follow. Back in 2015 I was seriously considering getting a JLC Reverso Duo one day, now I just can't afford one. If the product had meaningfully changed I would understand but it's the same watch it was back then.
That's okay. JLC don't want 'poors' like us as customers!🤣
Happy you like my approach 😊😊
You did a good job pointing out that the 'manufacturing price' is not the price that it actualy costs the company to make a watch. Most people forget that
Profit often gets boiled down to some sort of nebulous size. There's just no reality where Omega is selling a 1 dollar watch for 6.000 dollars 😀😀
In my opinion, price is irrelevant in the game of "luxury". Your cell phone or Casio keeps excellent time. The Citizen or Seiko Quartz on many models are actually BETTER than a Rolex in terms of just keeping time and they look decent as well. Rolex marketing says for only $29K more, you can get a Daytona that almost keeps as good time....AND they throw in a bonus band which has a slightly better finish to it. And people wait months and feel lucky to get the watch. Summary: I don't think Rolex is overpriced at all. People want to FLEX their substandard timepiece. They want to FLEX their status in life. Rolex provides exactly that. A $400 quartz watch doesn't do it. In the end, Rolex is worth the price for Flexers.
@@JohnBowl14690 to show other flexers. I actually try to reserve judgement on people who wear rolex, since hey, at least they're wearing a watch, and some very honorable people like rolex (for some earthly reason, when omega has cooler shit.)
In 1980 when I was 18 my take home salary was about £300 - £350. It was possible to buy a Rolex 5513 submariner for £360. The date version was £450. An Omega speedmaster was £300 and Tudor snowflake submariner was £210. So ordinary workers could achieve one of these watches. Today you need a mortgage to buy one of these. I notice they use some more expensive materials like ceramics but seriously £10k for a watch that you dare not wear as there are people out there that will literally chop your hand off.
@verynormalman the Tudor black bay is around £4k. The point I was really getting at is that back in the day an 18 yo office junior could buy a Tudor or Rolex for the equivalent of a month's salary. How many 18yos earn £40 -£50k today? In fact there are many many people earning under £30k. It's only really professionals that earn £40k+
Minimum wage for a 21 year old working 40 hours in the UK means a take home pay of £1700 ish. You could get a used black bay for that or save up 2 months and get a new Tudor or used Omega. With everything going up in real terms higher percentage wise, Rolex etc have become more luxury- hence higher price.
ceramic is not an expensive material actually. all r marketing
@@kfkwAL7 Yes but it's not just like saving up for 2 months is it? Those people making 1700 a month must presumably pay for rent, food and clothing. Insurance, social expenses, etc. Realistically, someone in that position would need to save for years and then be faced with the prospect of spending those precious funds on such a silly purchase as a luxury watch when they might have other priorities, like marriage, travel, a house or a host of other things that life offers. It's not just a whimsical thing for most people who don't earn large amounts of money, to buy a watch worth 3x their salary. It's jewelry, that keeps time. Most people, living in the real world of limitations and bills, quickly sort that out.
They use the same materials in $50 Chinese watches. A ceramic bezel costs $1. A sapphire crystal costs $1. The 'special' 904L steel is a cheap commodity product widely used in industry.
Always on point Mike, another great video!
Love the reasoned train of thought behind it.
Have a great week end!
Thanks, you too 😊😊😊
You don't buy a rolex because it is affordable you buy it because it is absurdly expensive.
Luxury brands invest a lot of money to make their products expensive.
These investments (to make their products more expensive) range from maintaining factories and workshops with the capacity to manufacture 100 times more watches per year than they produce, to paying tens of millions to sponsor an America's Cup boat.
If you think that these investments do not make their watches better, well yes, you may be right, but it does make their watches *exclusive*, which is , by far, their most desired characteristic.
Exactly we love the craftsmanship but let’s be for real. High end products are a flex no matter what. Wearing a Rolex say hey I can afford a Rolex. Of course you will love it but the price is a little crazy..
Great video. The only thing I might add would be that prices are going up every year, I feel more than inflation or cost of total production. I think that the price increases are necessary to retain the exclusivity. Some research has shown that the more the luxury companies put up the prices the more revenue they make, somewhat paradoxically.
My friend works for Breitling, they sell about one watch a day in their store. That’s a LOT of overheads per watch.
That's just poor brand recognition and or marketing, if you tell people Breitling AD has 30 watches in stock, no one cares if you tell people a Rolex AD has 30 watches going I bet nearly all of those watches will be sold in one day.
@@Signal11th $5,000 per watch assuming they are open 30 days a month that is $150,000 a month turnover. They wouldn't be in business if they were losing money. I am sure there is some ripple effect as well. I noticed a new Breitling boutique in my city. I thought it was bizarre, why open a Breitling boutique in a city that has jewelry stores that sell your watches anyway in a country with very moderate median income levels? I don't have an answer to that but presence must have some intrinsic value i.e. it benefits recognition and therefore sales in other stores in different cities in the same country. Then there is the tourists....
@@Signal11thOr that Breitling’s design and size means they appeal to a much smaller number of people…
Breitling makes the best watch for the $$.
@Thousands of $ for many quartz watches? Not sure about that…
Really insightful...not just on the watch industry, but into marketing as a whole. Well done.
Thank you kindly 😀😀
Basically take out the very high prices of operating in Switzerland (one of the most expensive places to do business in the world), the huge marketing and advertising budgets, the comfy padded management costs and the fancy shops...and they could sell the same watch for 20% of the cost. That is basically what AliExpress does.
Luxury watch retail prices are typically 6-8x manufacturing cost. For Rolex it is closer to 20x.
Rolex could literally move the factory to China and make identical steel watches for
Awesome video, thanks so much. As someone who used to consume, and to a certain extent be consumed by, the same TH-cam watch content & panel shows as everyone else I find your well thought out and interesting videos so refreshing. I feel more a part of the watch universe and less like I have to own an $11k timepiece after discovering your channel and that's pretty cool...
Happy you felt it was worth your time 😀😀
Another excellent insight. Thanks, it’s good to have a channel that isn’t expressly trying to sell us anything and does an objective overview.
Just trying to add a perspective. Thank you 😊
This is the BEST channel if you ACTUALLY have an interest in watches and you’re not just chasing „The Hype“!
Please never stop! Phenomenal.
Cringe,how desperate are you?
Very kind of you - much appreciated 😀😀
@@83dude there are two types of commenters:
1) commenters who comment
2) complainers who only comment negativity
Thanks for pointing out which category you belong to.
Kinda „cringe“, don’t you think?
@@king_of_queens there's a 3rd type of commenter, the one who believes that TH-camrs are his best friend and that they'll go on picnics together
@@83dude okay, you just proven to be category 2
Live long and prosper. You seem to need some positivity.
Superb analysis! A commentator recently said that your channel is more Business Analysis masquerading as Watch Enthusiasts. It’s both and more. I’m going to share this post with several clients who seem to be at an inflection point in their growth journey. More importantly for me, this post is entertaining, while also nuanced and insightful.
I brought my oris from a dealer for 40 percent of so they lost money 😂
Kind of you - I'm just a nerd, nerding. 😂😂
Most informative and intelligent discussion of this topic that I’ve seen. (Sound of mic/camera drop)
Lol. Thanks 😂😂
As always, a terrific video full of enlightening perspectives. Thank you. You used the term "Veblen good" which is not in the common lexicon, even for a seasoned marketing executive like myself. The transcript even got the word "Veblen" wrong. I knew what it was, but I'm guessing a lot of others might not which is why I put the correct word/spelling in this comment. Keep doing these. Start a Patreon and I'll join.
I appreciate the spelling but I would've appreciated the definition more: "A Veblen good is a type of luxury good, named after American economist Thorstein Veblen, for which the demand increases as the price increases, in apparent contradiction of the law of demand, resulting in an upward-sloping demand curve."
@@LucaTheStar Well, I figured if it was important enough to know what it meant, a Google search was not an unnecessary burden - provided you knew the spelling of the search term - you're more likely to remember it if you have to dig a bit. But yes, that is the definition - taught in most marketing 101 classes in college.
@@David_Best Yeah, that's fair. This is my fault for assuming that everyone loves convenience as much as me.
Thanks. I actually cut the veblen explanation from the video for time. It's a topic that gets me riled up because it's one of those things where there's a theory out there and then a person/company starts to think that they can manipulate a product into becoming a veblen overnight and that's just not how it works. Sure - Cristal champagne was briefly a veblen good but it very rapidly collapsed from that status. True veblens are incredibly rare 😊
i enjoy the casual aspect of your presentation. at first, i thought it might signal a rather blase' approach to your videos. then i watched 5 or 6 of them. your videos are technically advanced compared to MANY channels (even 'professional' ones), and your commentary is CONSISTENTLY thoughtful, balanced, and informative. thank you so much for your work. subscribed.
Welcome aboard. I try at least to bring something that adds value or is a different perspective to the table. If I just succeed every now and again, I'm happy 🙂
Love how your MBA, management consultant brain works and communicates the results of an analysis.
nerd brain more like it 😀
Awesome discussion as always, Mike! Love how you break things down and put things into perspective. All those fancy marketing and flashy boutique do cost plenty of funds, but they play a large part in why we developed affinity towards these brands in the first place and why we feel good wearing the products. In the end. It is this enjoyment that we derive from the products that is the reason why we opt for our luxury good of choice.
I just wanted to add some rationality and logic to the discussion 😊😊😊
Thought-provoking (and excellent) commentary as always.
PS. I think you might be quoting Fax Cone of FCB fame when he said “50% of advertising is wasted. Trouble is we don’t know which 50%…”. That was according to David Ogilvy who created Ogilvy & Mather: titans both of Madison Avenue’s legendary luminaries of advertising…
Thank you - I couldn’t for the life of me remember the source of the quote, but yes - that’s likely it 😀
I really admire your content, Great analytical ability, with interesting and non-obvious perspectives, and an entertaining yet not over-stimulating way of presenting it, compared to many other TH-cam channels.
I’m just starting to learn more about watches, it's been a year, and your videos have greatly increased my interest.
Thank you for taking the time to do this!
In 1999 I was starting to look for my first luxury watch. It took over a year to find my very first luxury diver…the Omega 300M with the Chronograph dial and blue wave pattern. I wore that watch for 23 years. Then resized it and now it’s my wife’s daily wear (her choice). I don’t sell watches. I gift them occasionally. But way back in ‘99 we decided what number was acceptable. And every 5 years or so, we sit and discuss the new cost we’d deem okay for a watch. A watch is worth what you FEEL it’s worth to you. A Rolex for me, isn’t “special enough” to justify their cost. I love the look. They are beautiful. But in my heart and mind, just not worth the work I need to put out to earn enough to buy it. Over these 20+ years of collecting, I find myself more at home or comfortable with high end Seiko over Omega or Rolex. When you travel the world a lot, you find you can’t wear true high end watches in most places. Too dangerous and almost guaranteed someone will take it. Just “KNOW THYSELF” and own what you love. I’ll always own an Omega. But I’m more at home with Seiko…
You travel to wrong countries 😊 In Central and Eastern Europe you are more safe than in Italy, France or GB.
I was in Japan and several people were wearing Rolexes. I usually travel with my Panerai since most people do not recognize it. I do not even wear my Rolexes to work as people always make comments. They want to know how I can afford such a watch.
I travel with my G-Shock for exactly that reason. Probably going to be OK but why invite the risk? Not just my watch but passports etc. At home there is regularly security and insurance that you cannot replicate overseas.
Seiko are great my friend. I love Omega too. Those two are a terrific choice. I'd rather an omega than a Rolex..
I like your approach with an analytical mind. I don’t think any other TH-camr can see the market the way you see it.
the biggest cost is marketing to "prove" that their watch is true luxury and worth whatever the pricetag says ;)
Thanks so much, Mike! A master class in economics and marketing. Please don’t take this the wrong way, but you are brilliant and I continue to appreciate your content!
Just a nerd sharing thoughts, thanks 😊😊
Brilliant, insightful, fascinating. As usual.
Very kind, thanks 😊😊
Excellent video! Super informative and provides a great perspective. Shows how you can put across imp points without weird background music and flashy graphics.
Fantastic video as usual. Your example of brands such as Seiko increasing prices without offering any improvement is spot on. Keep up the good work.
Yet another great video. Really appreciate your thoughtful views explaining your thinking. I feel like I’ve learned something watching your videos, as opposed to just hearing an opinion, you lay out facts and figures. Thanks for your hard work.
Thanks for that - Appreciate it 🙂
The AD's are a big contributor to the high prices. Take a $10,000 Rolex for example. Rolex sells that watch to the AD for $6000. The AD gets a 40% discount, so Rolex is working with $6000 of revenue on those watches. This is pretty standard for all AD relationships. If the brands reduce the number of AD's (or eliminate them) they can sell direct and increase their margins, which would hopefully yield fewer price increases in the future. Another contributor is consumer demand. Until demand drops, prices will remain high
Part of the mystique in creating a Veblan or even luxury good is to defy rule #1 in retail. What's rule #1? Make it easy to buy. So the AD strategy is intended to do just the opposite - make it more difficult to obtain. It's counter intuitive - just like the Veblan price/demand theory/observation. To some it even appear to be a gimmick or trickery. But it's obviously working for Rolex.
The DeBeers diamond family perfected this model of always producing just under the demand level
If only there was a way to cut out the middle man so that rolex could pass on the savings directly to the consumer. Oh well too bad that doesn't exist.
AD network adds another layer of cost - there is margin to play with to reduce msrp if selling direct. Unfortunately Nike tried this with disastrous results.
40% discount on a Rolex supplied to the ad. It’s 2024 it’s nowhere near that.
what a refreshing subject! Thanks Mike. Really Really Enjoyed this one.
Awesome, thank you 😀
Your videos are so well made, your arguments are all on point, I absolutely adore watching your videos
Happy to hear it - thanks 😊
I loved this. A very intelligent articulation of the many interrelated factors involved in product development and commercialization. 👍👍👍
Glad you felt it resonated 😀
I owned an omega seamaster for 20 years wore it everyday bought for £700 sold it for £1500 twenty years later but that model was then almost 5k new do I regret selling no would I buy an omega again also no my taste has changed and thanks to excellent channels like this my eyes are opened to unbiased honest truth not just because you sell them or are sponsored by them .
20 years ago 700 pounds is so much money
Gotta also pass on the praise here, your videos are always insightful, well thought out, with a delivery that makes it easy to understand.
Even if you may not be 100% accurate, the logic is always there.
Fast becoming my favourite watch TH-cam channel.
Thanks. Definitely not 100% accurate - I'm more of a "high level" kind of guy, but in broad strokes I think my arguments hold up. Cheers 😊😊
You missed whole sale price vs retail. Omega sells their watches to AD’s at 35per to 45per retail. An AD told me this. He was allowed to buy one watch per year from his boutique at cost price. So, 10x for Omega is probably more accurate.
Luxury watches have high profit margins. I always choose high-end replicas, which are cheap and have first-rate quality.
This point was touched on briefly(?) but I think is really the main/key point (though I don’t know the percentages). If there is a local distributor between the brand and the AD (as with some brands) there will be additional costs/margins there also - this is just how retail works unfortunately 💰💰💰
@@JieKe-r3s The most pathetic thing in the world is to buy a replica. Sorry, the most pathetic is buying a "high- end" replica. I bet your "high end" replicas have an even higher margin than the real thing. Making garbage is pretty cheap and you are paying out the nose for garbage. Well done.
Why? You could just buy a good watch that is not a replica and is cheaper
@@JieKe-r3s Fake watches for fake people
What a great episode. I have no business background, (a watch collecting 68 yo Professor of medicine) and this all makes sense. This also makes me feel better about my 10yo Aqua Terra , and my 8 yo 39mm Op. And newer, and more expensive is not always better.
I have paid much more for much less education in my life time. Your episodes are gems. It’s nice to “chat” with someone with differing perspectives.
I love this analysis! I think Oris is the mid-market JLC. They've increased their prices by almost a $1000 on their SW200 models, but they haven't provided any upgrade at all. Sure, they've "refined" them within the past few months, but can anyone point to any real improvements? I think not. I suspect they read the landscape of complaints against them and came out with some "smoke and mirrors" just to justify the price increases. Maybe that could be a separate video? To point out which companies are taking a 3rd route of using smoke and mirrors to justify their price increases? 🤔
For Oris, I think the deal is that they've gone in house on most models and to ensure there's not a big jump to the inhouse models they've had to raise prices on the SW200 models to close the gap. If the gap is to big, they in house models likely wouldn't sell .😀
Love your channel and on point analysis,even yiur assumptions are well supported and articulated ❤
Thank you
Glad you like them!
It doesn’t matter what it costs to make. They charge what they want and some people are happy to pay it. If you are worried about what it costs to make then don’t buy it.
Rolex and the others do make a quality product. However, they are priced for the market they want to be in. None of them want their product to be seen being worn on the wrist of your lowly local grocery store clerk or even the grocery store manager. Prices are adjusted to make sure none of the lower classes can afford them.
Absolutely no one is arguing that Rolex cannot market their watch at whatever price point they want. And by that understanding, "overpriced" is kind of meaningless. What is being argued, whether everyone realizes or not, is that the price is way beyond the cost of manufacture. The "real" cost is the cost of keeping out of the hands of most people. Statistically that means most people on this platform. This is the "price" that pays for being able to flaunt wealth at the lower classes. A nice ostentatious way of showing how much better, more special, and extra awesome you are than others. A way to really rub their dirty little working class noses in it.
Our host here claims he doesn't care for naysayer's. That wearing this stuff isn't just shallow. Pure gaslighting. Of course he does, if his peer group constantly remarked how wearing a yacht master was pretentious and boorish, he'd soon be leaving it at home. Of course it's shallow, just an ego buff, trying to quiet the inner monologue that points out you'll be rotting in the same ground as the homeless guy who lives in a dumpster in 30 more years when all human lifespans expire. At the end of the day they dump your body in a hole just like every other person who ever walked this earth over its last million years, the number of mansions, Ferraris and Rolexs you bought not withstanding.
But hey, we are ALL a little hypocritical, and it's easy to spot the mote in your brothers eye. Welcome to being human.
Great video. Really enjoy the way you present your points and back up opinions with facts. As someone who lives in the U.S. and has owned my own businesses, I've never understood the mindset of "profit is bad". I can't speak directly to the AD experience, I live in a rural part of Georgia and don't have any within a couple hours drive. But I do understand the value prop that boutiques and AD's bring to the market. Not everyone will appreciate or even want to deal with them but there are always going to be a segment of customers that want that experience and all those things, as you mention, take money. Again, love the channel. Thanks.
Thanks for watching 🙂
Man, great, great video. 😊 This is so insightful and years ahead of all the other TH-camrs. 99% of them won’t even understand what you are talking about. I really enjoyed it.
Glad you enjoyed it
Probably the best watch industry analysis I've seen so far. Excellent and congratulations.
Thanks 🙂
I‘ve said it before, and I say it again: there is just some sort of a meditative quality to your videos! And I love your „corporate“ way of analysing things. That all being said, having in mind your view on watches and the fact that you said it more than once that you like the 1-4K „bracket“, I would love to hear your opinion on the new automatic INOX from Victorinox. Just saw it today: new and better bracelet, new and at least more interesting dial, a color matched date wheel, and hardened steel for the bezel. And it jumped into the „over 1K“ bracket, at least here in my neck of the woods. I kinda liked it, at least compared to some other models that just jumped in price with a newer release, without bringing anything.
Victorinox is a guility pleasure. No street cred. No nerd cred, but I quite like them 😊
Rolex buyers have to spend thousands extra to buy their watches from a fancy shop...which most of the time frustrates and demeans them with artificial scarcity and phantom waiting lists.
😂😂😂😂 I went to a Rolex store in Australia and there was not a single watch there. Not even on display.
@@Mandology575 There probably weren't any customers either.
Excellent video Mike! It’s so hard to put a definitive value on luxury goods, if you really desire something and after purchasing, it still makes you feel good about owning it, then it is worth every cent!
Agree (and thanks) 😀😀
Great discussion Mike and many thanks for taking the time in the research of this hot topic. Now, this begs the question, who and where is absorbing the loss of money for a watch that is sold in the grey market? For example, Jomashop in NYC has an Omega Globemaster for sale at $5,625.00 USD but it retails at $7,500 USD, so that is nearly a drop in price of $2,000 USD that has caused someone, somewhere to lose a substantial amount of money.
In this case specific case, the numbers simply don't add up. Would love your input on this as I find this subject very intriguing.
Cheers!
I agree. Joma often has 30-40% off Swiss watches. That is basically the AD profit margin.
Nobody is losing any money there. The AD buys from Omega at 50% MSRP, sells it at 60% to the gray marketer who sells it at 75% to you.
(And in your example it's precisely 75% of the original price)
And Omega sees exactly the same profit as if it was sold at the dealer for 90%. The dealer might be willing to take 10% rather than 40% because of rapid turnaround, no sales rep salaries, and increased volume may get them better pricing from Omega or allocation of more of the most desired models they can shift at 100%.
AD's. Unsold stock at AD level is going to get sold below retail just to recoup some of the initial outlay. Rather lose a bit on that Omega Deville dress watch by selling it at a loss than keeping it on the shelf and carrying the entire cost.
Watches of switzerland made only 10% profit last year - just as a point of comparison.
It's pretty much a given "fact" that many AD's wouldn't be profitable if they lost Rolex in their stores.
Loved it. The AD, TH-camrs, and Journalists do the most for the watches. You need to build a community to sustain the interest. How much engineering do watch designers learn? The same in reverse for engineers. Glauschette (spelling) shifting the chronograph to one side gave a reason to look if only for the novelty. It also just worked better.
One of the other things i learned recently is that Rolex, Richemont and other luxury brands are shouldering the costs of training a new crop of much needed watchmakers, at least here in the US. A dying breed if ever there was one but vital for the continuation of our enjoyment of these anachronistic time pieces.
Watch repairer is not a high paid job. Technical college level credential.
@@blackjackpinokoLol! A watchmaker and ‘watch repairer’ are not necessarily the same thing 😂. An Apple Care tech will be able to fix issues with your phone, doesn’t mean they can design and build an iPhone.
They are watch repairers who swap just parts. You can train one in as little as 3-6 months. A watchmaker is a highly skilled tradesman who can design and manufacture an entire watch from scratch.
The industry is slowly transitioning to non-serviceable movements because they are much cheaper to make than to service service. It will literally just be movement swaps for most brands in a few years.
There's that too. 😊
Love your channel. Thank you for bringing your own expertise to bear, and for doing the onerous work of reading years of company reports!
Company reports are notoriously boring 😊😊
That’s the point of luxury watches. It used to be because of the craftsmanship but it’s really just about being showing your wealth.
Rolex makes a million watches a year, there’s nothing special about Rolex but they’re always sold out.
fantastic video, it spoke to me on so many levels + I learned a few new things about this miraculous world of economics.
glad ive been on u since the first thousands subs.
cant wait to see you invited on other big watch channels talking about your journey or discussing your beliefs
cheers from vienna!
Awesome, thank you 😊😊
This is fast becoming my favourite TH-cam channel for watches. So insightful. Thank you.
Happy to have you around 😀
My word, I really enjoy your well researched market analysis, and have become my favorite in that genre; I think this chat was one of your best. We'll done! Look forward to more.
Thanks - Will try to oblige😀😀
As one expert of counerfeit goods once said: "most good Gucci replicas have leather quality way better than the original product". In a free market, the price is 'right' as long as there is demand at that price. People buy brand, prestige - not necessarily quality. Sometimes they become 'Veblen goods', where demand rises with price...
Agree
First time viewer Mike. I think this should be required watching for anyone considering a luxury watch. A luxury watch (to me) is anything over $2000USD. I'm a practical person but I like quality and durability - I don't think they are mutually exclusive.
Do you need a Rolex, do you even need a wristwatch - no you do not. You have a phone which is much more accurate than any watch and probably more reliable, I would say 5 9s at least. Like you said in the video, it's kind of a reward for doing something big and that's why a lot of people buy a Rolex or Patek or (insert your desired watch here). I think that is a good thing.
I couldn't live without a digital watch and sadly, when the battery dies, I buy another.
My Zenith on the other hand is in the shop right now getting an overhaul. I don't want to discount the feeling I have when I wear that watch - it's not word worthy - it's a feeling. The beauty of it, the sleekness the mechanical motion going on inside of it; it's a human made device that makes me think about the watchmakers who made it, where the metals inside came from, where the leather came from, etc. The escapement and the mainspring is just another reminder of my humanity and my beating heart.
When I see these vids on YT with these "watch people" running to and fro to make deals on watches, it's annoying. This video was enlightening and I thank you for it.
Finally, and sorry for blabbing (I'm at lunch) let's not forget the used watch market. Buying new is great and all but let the rich people buy them first and then you'll get it next year. Trust me, AP, IWC, Omega and all those companies will make more watches. Be patient, save your money, have a jeweler or watchmaker you trust and you'll get your watch.
"Whatever the market will bear" refers to the highest price consumers are willing to pay for a product or service, regardless of its production cost or intrinsic value. The phrase highlights how prices in a free market are determined by supply and demand, with sellers aiming to charge as much as the market allows without losing customers. It originated in the 19th century during the rise of capitalism and industrialization, reflecting the idea that market forces, rather than just production costs, drive pricing decisions.
If people buy, yes - then it's the right price 😊
This reviewer consistently has a great scope of analysis for the watches he reviews.
This is a tough game. You can’t be intimidated. You can’t be frightened. And as far as I’m concerned, the ‘Rolex’ can go straight to Hell.
I wouldn't buy one, if they were only 30% of what they cost. I've got a TAG and going to purchase a Breitling Avenger, piss on Rolex and Omega.
Mike, nothing to add such a good analysis, just brilliant …
Kind words- Thank you 😀
YES, absolutely, overpriced af.
Great analysis…obviously well researched and well communicated. Thank you!🙏🏼
Thanks for watching 😀😀
That seamaster keeps showing at the video is quite appealing.
for good reason 😊😊
Awesome discussion as always, Mike! Love how you break things down and put things into perspective. All those fancy marketing and flashy boutique do cost plenty of funds, but they play a large part in why we developed affinity towards these brands in the first place and why we feel good wearing the products. In the end. It is this enjoyment that we derive from the products that is the reason why we opt for our luxury good of choice.
Also love your take on how many of these brands havent premiumized their product as they raise their prices!
I like stores when it comes to buying expensive stuff 😊😊Does it cost me more? For sure. Worth it, mostly 😊
@@Mike.thiswatchthatwatch 💯
It’s all about marketing and labors. Especially Western countries labor cost. That’s insane. Chinese labors and machines are way cheaper than western machines. And they are working the same. Hight price doesn’t means more quality. Usually means you got ripped off.
What a great and well-thought-out video from a man with significant business experience. Thank you.
Glad it was helpful 😀😀
The starting point is totally wrong. 20% profit margin is engineered by adding costs. One need to look at the balance sheet before saying the they actually make 20% margin. Look at the management salaries and bonuses, pension plans, company cars and events including what they call marketing expenses but in reality are just trips to the alps for executives etc...
Mike thank you so much , I have a new perception on watches and watch buying .
Just adding a perspective 😊😊
Great video. Personally I believe that the profit is higher to some degree. I can just talk about the omega seamaster 300M for example. At a local AD I got ~10% discount just by asking nicely. I am not a regular customer there. I do not believe this discount would be possible with the margin numbers you stated. Of course this is also just an assumption.
Thanks for the amazing content!
Yes, you are correct. His numbers are BS. I work in large company and I see how my employer is doing magic with numbers, nobody outside of company has no clue about real profit.
Thanks for the feedback. In the video I was conservative as to what Omega profit was. I didn't want to go overboard. It doesn't change the overall Swatch result that is those 11% or Richemont that is 20%. Those are real numbers and not any kind of BS. But could Omega be above 20% sure? 30% possibly. Analysts rarely throw out higher estimates than 30-35%.
As for the AD? Watches of switzerland made a profit of 11% last year. They might make a shitton on those rolexes but they also have to stock a whole lot of stuff that doesn't move. Variety is good for us, but costs the AD's quite a bit. As some say - Most AD's would go out of business if they didn't have Rolex in the window. 😊
One of the best videos on the subject. A very well thought and researched essay. Top marks !
Thanks 😀😀
You're videos are the best in the youtube biz. I watch from beginning to end and learn something. Keep it up.
Happy to hear that 🙂🙂🙂
Great content, as always.
The guy stands up
Much appreciated 😀
Honestly, companies like Rolex and Omega should not have high R & D costs; most of their models have been around for decades with only minor evolutionary changes.
The 3235 hasn’t been around that long, the 3135 was the workhorse for decades. A thinner movement from Omega would be nice - or just use solid case backs and single barrels like in the NTTD
@@martinjc9699 Rolex movements are just evolutions of Aegler designs dating back 120 years. The R&D on 'new' designs is negligible.
I wish they would throw more R&D into an upgraded movement like the Ti movement in the olympic aqua terra 😀
This is a very thoughtful, unbiased thought exercise. Nicely done.
I tried at least 😀
What people don’t usually consider about capitalism is that if there is no motivation to make profit, there is no motivation to innovate.
Same pay for less effort would also be a nice innovation motivator.
Not all profit comes from innovation.
@@fhujf I think you are missing the point.
You are 100% spot on on the JLC analysis & what a shame they are doing to the Master/entry level collection now
People who complain about profit have likely never owned a business…….speaking as a veterinarian and hearing I’m only in it “for the money”….
As I save for my first true luxury watch however, I do wish Omega would skimp a bit on that great big box….
I had typed out that exact first phrase. I agree completely. You won't be disappointed by Omega, I just picked up a titanium world timer and I was very pleasantly surprised, above and beyond what I was expecting, and I was expecting a lot.
@@TheSlowoldman I’m waiting on the new white speedy pro to be available in Canada and hoping I can wear that 42mm…. Otherwise it’s an aqua terra 38mm in black or Atlantic blue.
100% ... It's utterly bewildering to me that many people fail to understand that cost of materials + profit ≠ price. There's R&D, labour, taxes (and duties), capitol costs, marketing, packaging, ...
They can lose the big box IMO as well.... 😂
Another excellent insightful discussion, thank you! Ultimately, the market decides if something is overpriced or not. If the market/consumers buy the product at the listed price, then it is not overpriced.
For the reasons you said I don’t find apealing ali express watches. They are nothing to me, I’d rather look at my phone to tell the time. On the other hand I know I am irrational with some of my watch purcheses, but this hoby is irrational by itself. Nobody knows what watch I wear and how much I payed, cause nobody cares. Only I care and it makes me happy. And for that feeling I will overpay (pay for branding) with no regret
If I knew that I overpaid I would feel regret...not satisfaction.
This is a great discussion. In terms of how much profit margin Rolex, Omega have built into the watch I think it’s important to note Rolex doesn’t sell the stainless Sub for $10k, they sell it to an AD for probably closer to $5k. So Cost of Goods on a 5x model would be closer to $1k for instance.
Glad you enjoyed the discussion.
Things are reasonably commonly accepted. AD's markup somewhere between 40-60% on the price they pay for a watch. So at 50% a 9K Sub go for 6K to the AD.
What else is reasonably established?
Richemont spends 35% of all costs on marketing and other non production overhead. LVMH. 33%. Swatch 34%.
So. 65% is profit + production cost. It's not unreasonable to assume Rolex is spending 35% on marketing as well. That would mean 3.900 is profit AND production cost for that Sub.
What else do we know for a fact? LVMH - profit is 20%. Swatch is 11%. Richemont is 20%. Work that all in and the production cost would be 2.700 for a Sub.
Now. Obviously, Rolex likely makes more than 20% profit. at 30% the production cost is 2.100. At 40% it's 1.500. At 50% it's 900. At 65% the production cost is 0.
The assumption boils down to what you believe that profit margin is. Even for Rolex I haven't seen any estimates going higher than 40%. 1.500 is the lowest I would go in terms of production cost. Personally I'd say closer as I said in the video - somewhere around 1.800 - 2.500. I also base this on knowing quite clearly what a couple of other smaller brands have as actual production costs. There's no way Rolex makes their watches cheaper than them. At the end of the day it's guess work when it comes to Rolex - the others not so much.
Cheers 🙂🙂
I think that the cost of a Sub is closer to $1200. They are not hand made.
I guess some people think they are all made and assembled by experts in white suits, not robots.
Exactly right.
Right, the parts are machine made and finished (to pretty high standard) and the watchmaker picks them out of a bin to build a movement. I feel sure there's less than an hour of watchmaker's time in a Rolex...
@@thewheelieguy The Rolex 'watchmaker' is a women with a 9th grade education working on a production line. In many cases are only doing a single operation such as fitting the hands.
Actually, from a manufacturing perspective, Rolex is a value purchase. I am a CNC manufacturer myself, mainly working in titanium, and could make watch parts all day every day if I wanted to. But it’s not my jam. That said, even for me to realize Rolex’s overhead is laughable. I’d guess 100 million dollars of manufacturing space and equipment to make a submariner. As far as a manufacturer producing things goes, there is no single company more admirable than Rolex. They make every single part, down to the metal smelting itself & they are privately owned which is truly commendable. Finally, every single CAD/CAM programmer / machinist I know (who does well enough to be adequately compensated) wears a Rolex. It isn’t because of any non tangible value. Aesthetics aside, they (and myself) choose Rolex because the fit, finish & tolerances are measurably 2nd to none. You can spend more, but you can’t do better.
This is a great video. My current hobby is making luxury luggage that for the in some ways pays homage to Louis Vuitton. People recommend I go into business because they only cost $300-500 in materials to make. But as you pointed out correctly, it would cost a lot more to go into and market the product let alone the costs of setting up a production facility, sourcing suppliers, and rigorous quality control, even if we are talking about internet sales, the price for the finished product would be over $5,000 USD.
The Blancpain fifty fathoms case: They must know that say a 40 mm would be desirable and sell well, and the people in charge are not dumb. So why don't they do it? I've always guessed that it is because they are a Swatch brand. Competition with Omega might not be wanted.
@@Bu-22 I agree with your counterarguments, and I've played them out in my head too. They weaken my guess, but I try to make it work by thinking that the Swatch group cares less about tiers in this case and more about maximising income and protecting their most important brand. Maybe they would rather sell three Omegas than one Blancpain FF. Maybe they have better margins on the Omegas. It is strange how Blancpain doesn't take advantage of the great possibilities that they have - there have to be some good reasons. I don't believe they are stupid. Omega, on the other hand, is not shy about the moon story and they offer a lot of variants...
@@aurelius388 the movement differential between Blancpain and omega are galaxies apart.
It's a wierd decision - that's all I can say 😊😊
Excellent video as always, thanks for sharing such detailed research!
Thanks for watching 😀😀
what pains me is that seiko, bulova, tissot, citizen and orient sell products for less in USA(a developed country) and more in India(a poor country). Guess we have to choose our hobbies basis the country we are born!
Same for hamilton and mondaine!... Even brands like timex are charging more in India than US, Canada and UK!!!
It's simply about where the watches are manufactured and what the import duty is. Indian government charges heavily on almost all imports.
Blame your government, not the brands
Import tax
That's because of tariffs and trade agreements!
For instance, flights from Europe to the US are a third more expensive than if one travels from the US to Europe!
Congratulations Mike. This was a real dissection of the theme.
A very rational and honest approach to this matter which was quite informative for me.
Another aspect you mention is the importance of the physical shops. I only bought two watches by Internet, yet on both cases I had the "animal" before in my hands. It is very important to me the materialization. It can be both deceptive or encorageous.
Cheers.
THanks - That was my intent, to add some rationality to something that often gets a bit "emotional" 😀😀
You want that watch, pay that man his money? Nobody twisted my wrist.
Bringo.
true 😊