In a recent post, I discussed the notion that the “retail price” of a hyped watch is pretty irrelevant when it comes to your purchase decision on that watch. This got me thinking… perhaps there is a way for brands to capitalise on this, and approach the pricing and selling of hyped watches differently.
The retail price is rather irrelevant in my opinion. Back to our favourite reference, supply and demand; The market price isn’t picked out of thin air, and these watches are selling at these extreme prices – so clearly it is ‘worth it’ to some people.screwdowncrown.com
The status quo
I won’t dwell on this section, since the majority of people reading this will be familiar with the state of play today. Strangely, however, there has been a notable shift in the overall market within the last 12-18 months. Before this, there were hyped watches like the Nautilus, as well as readily available watches in the same ‘class’ as the hyped alternative such as the Vacheron Constantin Overseas. Perhaps due to the number of people seeking alternatives to the Nautilus, and owing to the genuine quality of the Overseas, people quickly realised what a bargain the Overseas was, and flocked to buy it – this led to the Overseas also becoming hyped, and the Vacheron Executive team turning into egotistical maniacs – I’ve written about this too, and a notable Kuwaiti collector of Vacheron watches (@watch_1505) has made entire videos about how poorly they behave towards long standing Vacheron collectors in the Middle East. Anyway, I digress…
What changed in the last 12-18 months, is that a large percentage of popular watches have seemingly moved into ‘hype’ territory, and this rings true all the way from entry-level pieces up to 6-figure pieces. Sure, there are still mass-produced options which aren’t hyped such as the Omega Speedmaster, but that is likely because Omega just hiked their retail prices so high, that it annoyed people… and while it might be a technically superior watch to a Daytona, people know they aren’t losing money on a Daytona, plus they also know they can buy a pre-owned Speedmaster and save some money. Omega could probably try and solve this by limiting production, but I’m not sure that would have the desired outcome as a standalone action.
To add to this, I also observe people buying what they believe to be the ‘next value proposition’ and then vociferously promoting it within their circles, with the hope that they will grow to become one of the early adopters of a future hype model – not only does this make them look good, but it also allows them to profit from the watch should they choose to sell it later on. This seems to be the new game to play – nothing wrong with it, just an observation. Incidentally, this makes it even more important to be wary of who you follow on social media, and question the intent of their posts and messages – not advocating for cynicism, just healthy skepticism! By way of example, a seriously prominent Patek Philippe collector was basically marketing a $300 cheap quartz watch for no apparent reason… if you fall for this sort of nonsense then you ought to be parted from your hard-earned money, because you’re a fool. Again, pardon the digression!
So in short, all the “hyped stuff” is unavailable, and everyone seems to be saying they “really love that hyped stuff, even before the hype”. Alternatively they’re buying other non-hyped stuff and promoting it to the point that it becomes hyped and unavailable. So, as we know, the need to keep buying watches doesn’t simply die – what the hell are we to do? As more people move into the hobby, this seems like a one-way street to buying fewer watches.
An new way
Now, people always argue about the watch brands ‘missing out’ on some of that grey market premium on hyped watches… the problem with simply raising prices is that they aren’t easily reduced. Once they go up, they stay up. Imagine if Patek reduced the RRP of a watch – this is just bad press, purposely ‘devaluing’ their own products. Thus, brands have to make these moves carefully, observing the impact of any changes on their entire catalogue, and factoring in how their products compare with their competitors’ products etc… I wrote about this a while ago here.
Now, if they can’t hike prices too much, how do they share in there market hysteria? My idea is for brands to create their own auction system for sales. I will say upfront, I haven’t given this any deep thought, but I figured I would share this post and you readers could pick it apart. Here’s how it would work… At a boutique-level, interested buyers would submit binding bids on a weekly or monthly basis. The brand can declare at the beginning of each month, how many pieces are available for purchase, to allow buyers to bid accordingly. The system would be run by an independently audited tech firm, to ensure no internal gaming was taking place. If brands wanted to supply a ‘preferred client’ directly at the official “MSRP”, they can still do so – those pieces would simply not be included in the monthly auction process.
So for example, let’s take a Nautilus 5711/1A … retails for around £30k, and resells for £100k+. I know it’s discontinued officially, but assume it wasn’t – Patek could simply make it an ‘auction-only’ watch, in the same way that Vacheron made the Overseas range of watches ’boutique-only’. Then they take names and bids, and basically sell all the production to the highest bidders. You might get lucky with a few low bids from time to time, but overall, Patek takes the lion’s share of all that grey market premium, right?
These watches can still have an official “MSRP” on paper, but essentially the brand is declaring “we know this is a hype watch, and we want a slice of the pie“. Sure, it might seem a bit crass for a brand to want more money so openly, but its no different to giving a Tiffany Nautilus to rappers and other high profile people for maximum publicity. These brands exist to take your money, and it’s all sugar-coated with the history, and tradition, and all that other stuff we lap up… but in the end, they want your cash. It’s exactly why they ‘reward’ big spenders with hype watches. So why waste everyone’s time? Just auction it!
I realise this wouldn’t work with the likes of Rolex, for example – who sell to authorised dealers, many of whom use this system to bundle other brands to clients (e.g. buy a Hublot and I’ll sell you a GMT Master)… in this case Rolex can manage the auction system, and maintain the AD margin of 30-40%. So for example, they allocate 20 Daytonas to Watches of Switzerland, they all sell for varying amounts… totalling say, £600,000. So Rolex does a reconciliation with WoS and gives them their 30% margin, and takes the rest as ‘cost’ for WoS. This is all just numbers and transactions – systems may not exist to run this, but they can be easily built, I believe,
My previous post talked about the future of peer-to-peer buying and selling, cutting out the middlemen. In many ways, this is the same idea, but for retail sales. Another benefit is when something is no longer ‘hyped’ or the brand sees the hype dying, they can shift back to selling at MSRP quite easily… what this does, is separates the brand’s own classification of the watch in their catalogue, from the market’s view of what the watch is worth.
The question is, how does a brand decide what constitutes a ‘hyped’ product? Again, I think this is fairly straightforward. First, let’s use an example: I bought my Vacheron 4500V at a discount, and about 3 months later, there was a waitlist in the London boutique of between 6-12 months based on their usual production/delivery schedule. A few months later, this waiting time grew to 24 months. I have no idea what it is today, but given that everyone knows it is worth a lot more than MSRP, they just walk in and add their name to the list, just like they do with steel Rolexes. I would therefore suggest that once ‘normal’ delivery timescales move beyond 6-12 months, the piece can officially be classified as ‘hyped’. Enough people want the watch, to the point the brand can’t deliver to new clients for over a year – if that isn’t hype, I don’t know what is.
Anyway, this was meant to be a quick post, yet I managed to ramble on too long… and again, I am aware the idea likely has holes in it… but I look forward to your feedback and suggestions to improve it.
Header photo credit: A Blog to Watch