In-Depth What’s Up With Watch Prices (Besides The Actual Prices)?

It's something you can feel too. At Watches & Wonders, A. Lange & Söhne and F.P. Journe focused on a single release, both priced well into the six figures and close to seven in the case of Journe's "hand watch." Even larger brands are doing it: Last year, Patek swapped its steel Nautilus for a $70,000 version in white gold. Rolex has added precious metals and two tones to even unexpected sport watches like the Explorer. And did you see those ridiculously gem-set Rolex watches from Watches & Wonders? (We talked about them on Hodinkee Radio, but alas, no photos allowed.)

At the same time brands are making more expensive watches, they're also making fewer watches overall. In 2022, the FH reported that Swiss exports totaled 15.8 million units, just above the all-time low of 13.8 million in 2020. It's nearly half of the 28 million units exported in the halcyon pre-Apple Watch effect days of 2015. As customers continue to clamor for watches at retail, brands seem interested in more exclusivity, not less. All we want is a steel Daytona at retail; instead, Rolex gave us a gem-set one in platinum – or that's what it can feel like, at least.

Export volumes would've been even lower if not for the MoonSwatch phenomenon – according to Swatch Group, it moved one million units of the bio-ceramic Moonwatch lookalike. Since the introduction of the Apple Watch, it's perhaps the lone bright spot for the Swiss watch industry at the entry level. According to Morgan Stanley, this helped make Swatch Group the leader in export volume in 2022, moving nearly 5 million units, mostly across its mid-luxury brands like Omega, Longines, and Tissot, in addition to Swatch.

Watches with an export value under CHF 500 have been hit the hardest, with export value having fallen by more than half since 2015. While the Apple Watch is often given much of the credit (or blame) for decimating the low end, others have taken the opposite position, instead giving the smartwatch credit for bringing attention back to the wrist.

An executive I recently spoke with at Piaget for a separate story credited the Apple Watch for increasing the "wrist awareness" of consumers. High-end brands like Piaget are healthy as ever, riding the wave of increased interest in expensive watches that has spread over the past decade, turbo-charged by the pandemic.

Similarly, long-time watch exec at first Jean-Claude Biver declared the Apple Watch a "crisis" for the Swiss watch industry, but eventually changed his tune, even saying the Swiss watch industry should pay Apple for every single sale it makes as a thanks for bringing awareness to the wristwatch.

The health at the top shows in the world of high-end indies too. When Rexhep Rexhepi released his Chronomètre Contemporain I in 2018, it was priced at around $60,000. Last year, he released his Chronomètre Contemporain II with a price of more than double, around $135,000 (granted it's a better watch with a Hagmann case and dead-beat seconds mechanism). While some may have experienced sticker shock, I'd even argue the RRCCII was underpriced, given that the first Chronomètre Contemporain to appear at auction last month sold for almost $1 million. But can you imagine the comments if a youngish 36-year-old watchmaker had released a three-hander with a nearly seven-figure price tag?

At the same time, demand continues to grow. Those in the luxury business point to the quickly growing number of millionaires and billionaires – according to Credit Suisse, there were more than 62 million millionaires in 2021, nearly double the number in 2014. And what do those millionaires want? Nice cars and clothes and handbags and watches and….

It's a dynamic playing out in every luxury category, and watches are no different. "The global smorgasbord of luxury products has never been more in demand," Robb Report recently wrote, detailing the lengths these brands go to to woo very, very important clients. It's why even a brand like Panerai will sell a $40,000 watch (2x its retail price) that "requires" the customer to take an extreme mountaineering trip, or Tiffany & Co. rents out a $50 million New York townhouse to host a party displaying its new jewelry collection.

Biver, for his part, launched his namesake brand with a half-million dollar tourbillion minute repeater. A lot of people called it ridiculous, but considering the new brand is only producing about 12 watches a year, as long as Biver can pick off a dozen or so of those millionaires around the world (they're everywhere!) – and given he's been in the business his whole life you can bet he knows a few.

This isn't the first fundamental shift vets like Biver have seen. When he took over a flailing Blancpain in 1983 in the throes of the quartz crisis, he revived the brand with a similar approach, re-focusing it on traditional watchmaking (read: expensive), in contrast to those new, accurate quartz watches, with the slogan "since 1735 there has never been a quartz Blancpain, and there never will be."

For most Americans through the 20th century, a drawer full of U.S.-made wristwatches from Hamilton, Bulova, or Timex kept time just fine. Meanwhile, Rolex watches were premium tool watches. In the '50s and '60s, Rolex differentiated itself from these affordable brands by focusing on the quality of its build, materials, and timekeeping: waterproof oyster case; "perpetual" full-rotor automatic movements that were also accurate and chronometer-certified. This is what "premium" products do: they differentiate on quality. Sure, it might cost more, but you get what you pay for.

But when quartz watches came along in the 1970s, mechanical watch brands like Rolex couldn't differentiate on quality anymore. Battery-powered watches simply kept time better. So instead of positioning themselves as premium products, mechanical watch brands had to re-position as true luxury brands. Instead of a focus on quality, a luxury brand focuses on its story – the artisanship and craftsmanship that go into its products or the history and heritage that make them unique.

The trick is to tell a story of timeless objects that are passed down, and the exclusivity and prestige that comes with owning them. Think about some of the most famous ad campaigns of this luxury era: Patek's "you never actually own a Patek Philippe, you merely look after it for the next generation, or Rolex's "if you were doing X, you'd wear a Rolex" (where X might be flying the Concorde, speaking at the United Nations, or the more cringe-worthy hunting big game). Selling a lifestyle, not a tool with a function; that's luxury.

This even led to an actual rebirth in traditional Swiss watchmaking – independents flourished in the '90s and houses like Audemars Piguet and Patek Philippe re-focused on traditional watchmaking and complications with a renewed interest in the craft of watchmaking.

Of course, quality has continued to increase with this luxurious shift, but prices have gone up faster. Plastic crystals were swapped for sapphire, aluminum bezels for ceramic, and the move towards in-house everything came with a perceived increase in quality. For example, in the 1950s, you could pick up a steel Submariner for $150 (about $1,500 taking into account inflation); by the '70s MSRP had increased only modestly to $230. But in the '80s this started to change, jumping to $1,325 (about $3,900 adjusting for inflation). This jumped again to $3,350 by 1996 and $6,000 by 2008. Today, a Submariner costs $9,100.

Over the course of a few decades, the Swiss watch industry had transformed from one made up of disparate third-party suppliers spread across mountain towns into an increasingly verticalized industry in the mold of other luxury goods, with marketing departments tasked with ginning up demand across the world.

This move towards in-house meant vertical integration and consolidation: it was an era of building up luxury conglomerates, and watches weren't immune, outside some of the largest independent houses. Nicholas Hayek formed Swatch Group in 1983 and it continued to gobble up brands through the '90s (including our dear Blancpain). LVMH acquired TAG Heuer, Zenith, Bulgari, and Hublot; Richemont formed in 1988 and its acquisitions included Cartier, IWC, Jaeger-LeCoultre, and Vacheron.

While those Submariner prices illustrate how Rolex has occupied the luxury space for a while, other brands that have traditionally served the mid-range luxury space admirably have moved upmarket. While not Swiss, Grand Seiko is the most noticeable, but even Tudor, with the introduction of METAS-certified movements from its new manufacturer, seems set on increasing its average price point.

When I spoke with new Bremont CEO Davide Cerrato, a man who's spent time at a number of brands in this segment – Panerai, Tudor, Montblanc – he called this mid-priced segment the "most competitive" in the industry. While he's a product guy, he said he loves the commercial challenge of "delivering real, intrinsic value at this price point."

As these large Swiss brands have moved upmarket, it's left an opportunity for smaller makers, like Chicago's Oak & Oscar, founded by Chase Fancher in 2015. On average, the brand's prices have stayed under $2,000. Fancher says that his customers are buying his watches because they connect with its design and the story of him and the small team he's built.

"Even the word – 'conglomerate' – it's not sexy," Fancher said of the larger Swiss brands. "If you see a watch in a jewelry case and the salesperson doesn't know a whole lot about it, it's not going to get you excited. These larger companies that sell in the traditional retail model – it's expensive not only on margin, but for training, for sales associates. Telling their story becomes so watered down." By going straight to the consumer through digital, Fancher says he's able to be more efficient in finding his owners.

By the way, even at his lower price point, Fancher says the Apple Watch doesn't impact his business, agreeing with those Swiss execs that it's been a net positive in getting people to think about watches again. The Apple Watch hasn't killed the mechanical watch industry; it's only killed Fossil. Morgan Stanley too, has recognized this, reporting recently that the Apple Watch no longer represents a threat to Swiss watches because of the industry's re-focusing on higher-end products.

"The whole industry is under massive supply stress right now," Sylvain Berneron said. Berneron is the creative director at Breitling, but he's also working on an exciting project under his own name. He told me his lead times for raw gold bars right now are four months; before the pandemic, this would've been two to four weeks, maximum. Meanwhile, the lead time for movement bridges and even spring bars is eight months.

When supply is constrained and it's difficult to make or mine more of that thing, Economics 101 will tell you one thing happens: prices go up. Those price increases eventually get passed on to the consumer, and so they have. With high inflation affecting every corner of the world right now, the watch world is far from alone in this regard. 

The other explanation for the shift upmarket is obvious: Most watch brands are owned by public groups with quarterly earnings to hit and shareholders to please. Swatch Group (its three largest brands by revenue: Omega, Longines, Tissot), Richemont (Cartier, IWC, Vacheron Constantin), and LVMH (Hublot, TAG Heuer, Zenith) are the big ones. Quarterly profits are a public company's raison d'etre, which means a steady march of increasing revenues and cutting costs so that profits maintain an upward trajectory.

But "profitability" as the simple and cold explanation doesn't capture much of the market. Independent, private non-profit Rolex alone is 30 percent of the industry, and three more independent brands are among the six largest Swiss houses: Patek Philippe, Audemars Piguet, and Richard Mille. Perhaps it's no coincidence that these brands, theoretically devoid of the quarterly demands of shareholders, are also some of the fastest-growing over the last few years.

While those Submariner prices dating back to the '50s illustrate Rolex's growth into one of the most successful luxury brands in the world, its price increases over the past few years are relatively modest compared to others: At release in 2016, a steel Daytona was $12,400. This year's new ceramic Daytona has an MSRP of $15,100. It might be nearly impossible to get new, but if you can manage it, Rolex actually makes a hell of a watch for its retail price. Instead, Rolex's strategy (intentional or not) seems to be to shift buyers towards precious metal and two-tone watches instead of steel, both through the new watches it releases and those offered as available by authorized dealers. The export figures that show the consistent growth of precious metals, two-tone, and other non-steel materials illustrate that Rolex isn't alone.

These independent brands also have something else in common: Their products were already expensive, exclusive luxury items. With interest in their products only growing, they seem intent on becoming more exclusive. But in this chase to woo VVIPs, there's the possibility that large Swiss watch brands are leaving behind the entry point into their products, especially for the next generation.

Fancher also said the price segment has become much more competitive compared to when he started in 2015. Perhaps others have become wise to the opportunity. Last year, we wrote about how this segment was actually thriving, with larger independent brands like Oris and Nomos paving the way for smaller ones like Oak & Oscar, Farer, Baltic, AnOrdain, and on and on.

Just this month, watchmaker Theo Auffret joined with Guillaume Laidet to create the Argon SpaceOne, a project that's raised nearly a million dollars on Kickstarter in less than 30 days. For just €1,500, the SpaceOne is a totally unique space-age design with a jumping-hour mechanism developed by Auffret (using a Soprod movement).

And perhaps this price segment is more interesting with all of these small, independent voices than it might be if large conglomerates dominated the space. As Fancher said, the traditional retail model is expensive, and all of those costs quickly weigh down creativity. Nowadays, consumers are also just smarter. If we spend two grand (or really any amount) on a watch, we want to know as much of that as possible is going into the actual product on our wrist. It's easier to feel that with a small operation where the founder is front and center, much moreso than an often faceless conglomerate.

But leaving the entry-level space for small brands also comes with risk. Sylvain Berneron, the Breitling creative director developing his own watch, is planning an initial launch of just 24 pieces. While his watch is set to be more expensive, it's still illustrative: he's already dealing with long lead times, and you know what happens when a bigger order from a bigger brand comes in? His order can get shuffled straight to the bottom of the list. This can make it difficult to survive for any brand that isn't vertically integrated or that doesn't have the resources of a larger conglomerate.