... said the Cheshire Cat to Alice, in the Lewis Carroll classic, when she lamented that she didn't wish to mingle among the crazy. In describing my impressions of the current-day watch market. I have to say I feel a little bit like Alice who fell into the rabbit hole and landed in Wonderland.
I certainly do not wish to bite the hand that, literally, fed me this past week. As an accredited member of the media, I was well cared for by the folks at Baselworld 2014 (BW2014): complimentary admission (worth $165 all by itself); soup, sandwiches and beverages every day for lunch (saving me from a fate of energy bars that I had brought from home to avoid the mafia prices for food by the fair concessioners); and a very nice media center with work stations, Wi-Fi, and restrooms.
But I have to be honest: Prices for new watches are simply ridiculous.
I knew going into BW2014 that prices on new mechanical watches are incredibly higher -- sometimes by a factor of 10 times or more -- than a vintage piece by the same manufacturers. I gladly concede that some of this is due to better materials (both movements and cases), and just plain old inflation. A nice Omega Seamaster in stainless steel that cost $145 in the year 1955 would be roughly equivalent to $1,266 in 2014.
But try to find an Omega Seamaster in the 2014 catalog for anywhere near that price. The most basic stainless steel Seamaster with an automatic movement and a leather strap will run you about $5,400 at full manufacturer's suggested retail price (MSRP).
And the reason for that became abundantly clear at BW2014:
I have no way to prove this, but I feel fairly certain that once upon a time in the not too distant past (let's say the 1950s) that marketing/advertising made up 10 or maybe 15% of a watch's retail price. Today, that percentage is 50% or better for the vast majority of the brands (with a few exceptions), and I challenge anyone to prove me wrong. An industry insider at BW2014 told me, off the record, that it's not unusual for a watch company to take their total cost of the actual material that goes into a watch, and multiply that by a factor of eight or even 10 to arrive at MSRP.
Modern watch marketing is filled with components that company founders and their second- and even third-generation heirs could not possibly have imagined ... celebrity endorsers, high profile (and high cost) sports sponsorships, movie tie-ins, and image advertising in high priced luxury magazines. One watch company, Jacques Lemans (which I have never heard of, by the way), is using Kevin Costner as its celebrity endorser.
Kevin frickin' Costner.
I mean, c'mon Kevin. You're a likable enough guy. Loved you in "Dances With Wolves," and "Tin Cup," among other movies. But for Christ's sake, stick to what you know, will you? Did you really need a quarter million dollars (or whatever they gave you) and a free watch?
So I really don't know where this is all headed, but I'm of the firm belief that the Swiss watch industry, after nearly being extinguished by the quartz revolution of the 1970s and early '80s, is headed for another crisis, but this one of sheer gluttony. There are simply way too many diners at the table grabbing for a slice of a pie that isn't nearly as big as industry promoters are making it out to be.
Many people seem to think that Asia is the new pie in which everyone will stick their forks. I have my doubts. Yes, Asia certainly has the sheer population. But the number of people there who can afford a $100,000 watch, or a $10,000 watch, or even a $1,000 watch, is very small.
The other troubling phenomenon that is taking place is the decision by many watch companies to open their own "boutiques" -- small stores where only their own product is offered. This is just plain bad news for the consumer, and more bad news for the independent jewelry store industry. So not only will customers pay exorbitant prices for watches, they won't even have a chance to compare features and value among multiple brands.
So to sum up, I feel tremendously fortunate to have had this chance to visit Wonderland. Every watch aficionado should try to make this pilgrimage once in his or her lifetime. But having seen what is happening in the world of modern watches, I'm even more content to play in my little garden of vintage wrist watches, and steer clear of the rabbit hole.
"We're All Mad Here ..."
April 2, 2014 1:55 PM