The luxury sports watch category is hotter than ever. Just try and get your hands on an Audemars Piguet Royal Oak or a Patek Philippe Nautilus at a retailer and you’ll understand what we mean. More and more brands are responding to this unabating trend for luxury sports watches, including more recently independent watchmakers and more accessible brands. This results in a quite large spectrum of retail prices for this type of watches, ranging for instance from EUR 650 for a Tissot PRX Powermatic 80 to more than EUR 50,000 for a Laurent Ferrier Auto Sport. Here’s a guide to get a better idea of the different price options – focusing entirely on retail prices and not second-hand value, for a more objective comparison.
Behind the notion of price are some concepts of accounting (costs) but also marketing, psychology and brand perception. The price, at some point, does reflect the costs of production and the costs necessary to run a company. But when it comes to luxury goods, notions such as the psychological price (the maximum price the target is willing to pay, or in some cases the minimum price at which the target would be interested in buying). There is also the positioning of the product, which has an influence on the price strategy – where do you want your product to be seen, with what other products you want to compete with.
Brand value – the perception of luxury
Pricing is very important for luxury brands. As extreme value is a primary objective, this must be reflected in the pricing strategy. In this respect, exclusivity is essential. Price is about perception. The fact that the Patek Philippe 5711 has been almost unobtainable for years has fueled the demand and has driven second-hand prices to insane levels (with flippers who are there to make a quick profit and have no passion for watches). The price of some watches also contributes to making these typical membership badges for the wealthiest – the so-called feeling of belongingness and esteem. Strapping a Patek Philippe, an Audemars Piguet or a Richard Mille to your wrist is definitely a statement; and it has probably highly contributed to the success of these brands with a certain cast. “Social value” is part of the deliverables with any luxury item. You belong to a certain group and the exclusivity and price of the product do say something about how well you’ve made it.
In addition, we have seen that the high-end watch market is the most dynamic today and during the pandemic, the brands that suffered most were often those with weak story-telling, poor differentiation and lower price positioning. In this regard, the luxury sports watch market is in high demand and dominated by some emblematic and highly-priced products, and it seems understandable that some brands are positioning (with reason or not) their watches in upper price categories. As we’ve seen, the multiple price increase on the 5711 or the 15202 didn’t change anything to their attractivity. In fact, it could even have made them even more desirable.
More tangible is the product value
Naturally, this price cannot be just intangible; it needs somehow to be connected to the product itself and its specifications. It is simply a matter of consistency. Luxury is about value creation. When holding an accessible steel luxury watch and an Audemars Piguet Royal Oak next one to the other, there is an undeniable difference. The impressive finishing all-around of a 16202ST (or 15202ST) really stands out. The movements used in a Tissot PRX or the Maurice Lacroix Aikon are reliable workhorses. But they have neither the same pedigree nor the same decoration and finishing as their high-end counterparts. The underlying question is, however, to know if an 8K Zenith Defy Skyline offers 12 times more pleasure and quality than a Sub-1K Tissot, and if a 50K Laurent Ferrier will reward you 4 times more than a 13k Chopard Alpine. Again, there’s no ideal answer here, it’s all about perception and each will have a different answer.
The scale of production has also a clear impact on the price. Tens of thousands of the ubiquitous Calibre SW-200 powering the Aikon are produced every year while a few units of each Laurent Ferrier in-house movement are hand-crafted. And the same applies to the production of all components, in particular cases and metal bracelets, which require different production techniques depending on the scale of production.
In the end, the production costs of a high-end luxury sports watch largely exceed the retail price of the most accessible watches in the category, and there’s is an inverted correlation between the level of production and the price of a watch – or in that matter, of any manufactured good.
Some of these watches also come with additional features. For instance, interchangeable bracelets or micro-adjustment for the buckle/bracelet. Interestingly, some “accessible” watches such as the Aikon or the Frederique Constant Highlife are fitted with interchangeable bracelets while some high-end options do not. This user-friendly adaptability brings tangible value. And yes, the Maurice Lacroix or Frédérique Constant interchangeability systems are not as sharp as the one used for the Vacheron Constantin Overseas, but they are effective and perfectly do their job. Then again, the audio system in a Mercedes S-Class is probably much better than that of a Toyota Corolla, but in the end, both play music. The level of expectation is simply changing when the price range goes up.
We can only applaud the emergence of affordable options in this highly successful category. These offer stunning value for the money. The Aikon has been a game-changer for a brand like Maurice Lacroix. The Tissot PRX had a great effect on Tissot’s sales in 2021 and should continue this year. On the other hand, these can probably not be seen as investment watches, like an Audemars Piguet or a Patek Philippe. Their starting price is simply too low and their availability too high.
In the end, there are probably no good or bad choices. Watches in general are a matter of personal perception, emotion and pleasure. Luxury is not just the sum of rational, tangible features.
Costly Mistakes can be made
What’s next? We expect to see jumps in prices in the coming months, given the current demand. Most brands – particularly in the high-end segment – are struggling to cope with the demand. Waitlists are getting longer and longer, and the concepts of allocation or refusal of sales are becoming the latest theories to explain to salespersons.
In addition, obtaining parts from suppliers has become highly complex for watch brands; maybe not so much for Patek and AP who produce more in-house, but the especially smaller brands are faced with delivery issues. But also note that the pandemic still has an effect on production. In that context, the temptation to increase prices will be high. Brands are companies that have been founded to create value, and in this instance, the current ultra-high demand will give the idea to some brands to cash in.
We, at MONOCHROME, urge brands to remain reasonable and fair. If increases in the pricing policy are normal and expected, large and recurring price corrections confuse customers and are prejudicial over the long run. The most powerful, longstanding brands have always been consistent in this respect… Consistency is key!