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The Cost of Luxury: How the Luxury Watch Industry is Slowly Killing Itself

Published on 22 April 2021 at 12:20


The quartz crisis of the 1970’s saw the creation of the first mainstream battery watches. Before that, watches were made by teams of skilled watchmakers, requiring years of training and experience. The advent of the quartz movement meant that watchmakers could now mass produce cheap, yet exceedingly accurate watch movements. Almost 75% of Swiss watch houses were forced to close their doors by the early 1980’s as a result.

 

Those who survived either adapted or embraced the past, emphasising the superior craftsmanship of a handmade watch and creating the idea of exclusivity. Although this saved many watch brands and took them smoothly into the 21st century, this obsession with exclusivity is slowly killing the watch industry. It has created an industry desperate for watchmakers, an industry more concerned with horology for the sake of horology as opposed to innovation, and an industry that has managed to successfully alienate almost their entire potential market.

 

Watchmaking as a profession has seen a sharp decline in the number of individuals entering, as well as a rise in the numbers leaving the profession. This is not due to a lack of work, far from it. Luxury watch ownership has never been higher. Instead, watch companies have made access into the industry almost impossible. Access to parts for repairers outside of their network is unheard of, with most forced to purchase broken movements for inflated prices and use their parts for scrap.

 

Traditional watchmakers, although very skilled in handmaking replacement parts, simply cannot compete with the level of refinement achieved by modern day CNC machines and computers. Watch brands and movement manufacturers tend to keep part specifications a secret to further complicate the process. On top of this, the specialised equipment required for manufacturing and repairing is very difficult to acquire. Most independent repairers have been forced to rely on machinery built in the 1930’s and older, simply due to the overwhelming costs of new machines.

 

This forces people to send their watches back to the manufacturers for repairs, essentially giving many brands a monopoly on these repairs. With most Swiss watches requiring a service every 3-5 years, this is somewhat of a cash cow for brands. Thus, they have the ability to charge a premium, as given the declining number of watchmakers, limited parts availability and an inability to manufacture new parts, they have very little competition.

 

However, an inevitable by-product of this method of achieving exclusivity is the entry costs into watchmaking as a profession are insurmountable. Repairers can simply no longer afford to take on apprentices and teaching oneself is simply not an option. The focus on exclusivity also means many watch brands have devised their own curriculums and qualifications for training meaning those few who are able to train as apprentices cannot work anywhere as they simply do not possess the “right” qualifications, regardless of their ability.

 

The decline in watchmakers has also created a situation where aspiring watchmakers are forced to attend specialised schools but as fewer people attend, the higher the fees go in order to compensate, thus creating a negative feedback loop. As a result, most of the manufacturing and repair centres of major brands have retreated to Switzerland.

 

Swiss watch schools have not taught to capacity since the early 1990’s, with most schools graduating less than half the number they could teach. Many companies such as the Swatch Group who own brands such as Omega and Rado are now being forced to cover the costs of students training as well as pay students to simply attend watch schools. Most leave the company after their minimum 3 year contract at the company expires. This obsession exclusivity hasn’t just made owning Swiss watches a pipe dream for most, but it has starved the companies of the most basic requirement for making watches, trained watchmakers and machinery.

 

Rising costs have led to the creation of brands whose focus is entirely upon very wealthy clientele. Functionality, accuracy and longevity once were the primary focus of watchmakers. Now, watches from these brands typically have dazingly complicated movements, featuring Remontoirs, Tourbillions, dual escapements, all of which serve little purpose in a modern-day wrist watch. Diamonds and precious metals are also popular with these companies in an effort to drive up appeal and price through artificial means. Many of these brands have popularised the “limited release” model of marketing, further artificially increasing prices by intentionally limiting the number of their watches available for release. 

 

Rolex is arguably the most famous user of this method of sales. Although possessing one of the most modern assembly and manufacturing centres in the world as well as access to large amounts of capital and talent, they limit the number of watches produced every year, instead creating a completely unnecessary waiting list for perspective buyers that is usually around 3-5 years long. Second hand prices for these Rolex watches can sometimes reach double the retail price, resulting in the creation of the “buy-to-invest” model of watch sales. Wealthy collectors purchase as many of a certain watch as they can, wait for the price to rise then sell them back onto the market at spectacular prices. 

 

This increasing focus on exclusivity and wealthier clientele has meant innovation has taken a back seat in the watch world. Innovation in the watch world is surprisingly stagnant. Most brands rely on movements created by large specialised movement manufacturers, mainly the Swiss brand ETA. ETA have no need to innovate as they are already guaranteed large volumes of sales as so few manufacturers can actually make their own movements. Omega, Oris, Tissot, Rado, Cartier, are just some of the many huge brands that rely on ETA to make the beating hearts of their watches. Instead, innovation is usually limited to new case materials or designs as opposed to creating new and exciting methods of time-keeping

 

The irony of this situation is that Seiko, the brand that nearly killed the Swiss watch industry in the 1970’s with its quartz movement, now are one of the few companies actually able to innovate anymore. Their recent creation of the spring-drive movement should have been a momentous occasion for watchmaking. A movement that incorporates mechanics and electronics to produce one of the most accurate mechanical movements ever made, a movement that completely redesigned how watches keep time from the ground up was met with a collective “meh”. Sales of the spring-drive have been lacking since its debut. Rather than rise to the challenge, Swiss watchmakers opted to simply ignore it.

 

Finally, the obsession with exclusivity has forced the general public into the hands of “Fashion Watch” companies like Daniel Wellington and MVMT for their watches. These companies purchase poor quality watches from China for less than £10 and sell them at almost 15 times this cost. The real shock is that people are buying them.

 

In fact, Daniel Wellington was the most profitable company in Europe in 2017. Companies that usually dominated this £100-£300 market such as Seiko, Citizen, Timex simply cannot compete with DW’s effective social media marketing strategies. The result has been a drop off in sales for these companies and a flood of poor-quality, mass-produced watches onto the market. DW showed the watch industry that most people simply don’t care about needlessly complicated watches, they simply want a watch that looks good and tells time. 

 

Thankfully, there has been some mild pushback to this rising threat, with Seiko, Orient and Casio turning their manufacturing might to making high quality offerings at the same price points as many of these fashion watch brands. Seiko’s “Presage” and “Cocktail Time” series proved immensely successful. They demonstrated that not only was the public still in love with the mechanical watch, but manufacturing precise and reliable mechanical movements at very low costs was doable and profitable.

 

Casio doubled down on their reputation as tough digital watches. They produced diving watches, watches rated for spaceflight and retro watches, all for under £100. This proved so popular in fact that Gold Casio digital watches can command second hand prices in the hundreds, a far cry from their £30 starting price. Orient’s “Bambino” line up has taken the watch world by storm, offering mechanical watches similar to the Bauhaus style of Daniel Wellington, for half the cost.

 

It seems that for now, the luxury watch industry is more concerned with the number of complications, diamonds and precious metals it can fit into a watch and how many times it can resell the same watch with a different name and a higher price. The obsession with exclusivity has destroyed the repair business as well as crippled major brand’s ability to recruit and train new watchmakers. More people are buying cheap fashion watches due to lack of alternatives and any real innovation is simply stifled and ignored. Ironically, it seems the brands that nearly destroyed the luxury watch industry are really the only ones that can now save it.

 

 


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