Some people just don't get it...

[ryan.uk]

I have a very good pal/colleague who just can't get his head around why anyone would pay umpteen thousands of pounds for a watch.

I've had many a good debate with him on the topic. We've gone through the art of horology, history, pedigree, materials, finish, even status - however he does always manage to beat me down and I'm left thinking in many aspects he's right.

His argument is that with your general non-PM piece, the materials can't be worth all that much.

He'll say the materials are worth around 10% of the cost.

He'll argue that viably you can put a fair proportion down to R&D and build work - the movements are solid, accurate and nicely finished, largely by hand and have benefited by Rolex investing in advancing their technologies. But how much of your ticket price goes to that? Let's say another 20-30%.

Then what are you left with? A bit towards sales (boxing/packaging/transportation), a bit towards advertising and sponsorships (certainly none towards after-sales support or customer service), so perhaps another 10-20%.

His killer argument is that a large, perhaps the most significant chunk, of what you pay is purely towards the brand for a luxury timepiece.

I've seen myself, let's say 'less scrupulous', pieces on my worldly travels that are near identical to 'more scrupulous' pieces that sell for hundreds (if that), not thousands - which somewhat backs up my pals comments.

This post is just to see if anyone has a great 'gotcha' argument I can put back to him - I'm left saying that I am happy with my luxury watches, and comfortable if a large part of what I pay goes just to 'the brand'.

I know that a bit of what you pay is just a 'price of entry' to the luxury watch market and will happily sit as non-depreciable value. Similar to how a 'luxury' German car compares to a decent Ford saloon say.

You can buy similar looking timepieces for peanuts that maybe have reasonable automatic movements, but you don't get the real deal, you don't get the attention to detail, you don't get platinum-laced bezel graduations, white gold indices and sapphire crystal glass, you don't get a guarantee that the OEM will be able to service that watch for the rest of your life, and many generations thereafter, and frankly you don't get to put a timepiece on your wrist and know in yourself that it's a Rolex, or a PP, or an AP or whatever your fancy is.

Just wonder if anyone has got any good insight in to or can validate what the actual cost make-up of a luxury timepiece actually is (or maybe we don't actually want to know ).

[kdphan]

Some people are okay with a timex while others want a PP

No right or wrong IMO, it's a personal choice when it comes to watches.

[TuckerHorology]

Don't mean to come off as rude but I face palmed reading this

[ryan.uk]

Originally Posted by TuckerHorology

Don't mean to come off as rude but I face palmed reading this

That's fair enough; are you face-palming because it's obvious to you? That you know you pay thousands just on the brand, or that you think the opposite and that the timepieces are worth their weight in materials?

I'm just wondering - I've never studied a financial report from a luxury watchmaker so I'm utterly clueless as I'm sure you can tell.

[TuckerHorology]

Originally Posted by ryan.uk

I have a very good pal/colleague who just can't get his head around why anyone would pay umpteen thousands of pounds for a watch.

I've had many a good debate with him on the topic. We've gone through the art of horology, history, pedigree, materials, finish, even status - however he does always manage to beat me down and I'm left thinking in many aspects he's right.

His argument is that with your general non-PM piece, the materials can't be worth all that much.

He'll say the materials are worth around 10% of the cost.

He'll argue that viably you can put a fair proportion down to R&D and build work - the movements are solid, accurate and nicely finished, largely by hand and have benefited by Rolex investing in advancing their technologies. But how much of your ticket price goes to that? Let's say another 20-30%.

Then what are you left with? A bit towards sales (boxing/packaging/transportation), a bit towards advertising and sponsorships (certainly none towards after-sales support or customer service), so perhaps another 10-20%.

His killer argument is that a large, perhaps the most significant chunk, of what you pay is purely towards the brand for a luxury timepiece.

I've seen myself, let's say 'less scrupulous', pieces on my worldly travels that are near identical to 'more scrupulous' pieces that sell for hundreds (if that), not thousands - which somewhat backs up my pals comments.

This post is just to see if anyone has a great 'gotcha' argument I can put back to him - I'm left saying that I am happy with my luxury watches, and comfortable if a large part of what I pay goes just to 'the brand'.

I know that a bit of what you pay is just a 'price of entry' to the luxury watch market and will happily sit as non-depreciable value. Similar to how a 'luxury' German car compares to a decent Ford saloon say.

You can buy similar looking timepieces for peanuts that maybe have reasonable automatic movements, but you don't get the real deal, you don't get the attention to detail, you don't get platinum-laced bezel graduations, white gold indices and sapphire crystal glass, you don't get a guarantee that the OEM will be able to service that watch for the rest of your life, and many generations thereafter, and frankly you don't get to put a timepiece on your wrist and know in yourself that it's a Rolex, or a PP, or an AP or whatever your fancy is.

Just wonder if anyone has got any good insight in to or can validate what the actual cost make-up of a luxury timepiece actually is (or maybe we don't actually want to know ).

My bad I should have explained,

First off his argument starts with all estimated numbers. But more importantly, when you purchase a Rolex or any high end Swiss timepiece here's what your money is going towards

-Obvious but very important: Materials quality
Rolex for example uses extremely high quality materials from the inside out. They really don't cut any corners and this extreme precision and quality contributes to its value

-Attention to detail: Rolex watchmakers attention to detail and precision in the watchmaking process

-Movement Quality: Rolex movements may not always be extremely complicated but they are precise, accurate, durable, long-lasting, and relatively easy to service.

-Servicing: Owning a real Rolex serves essentially as a certificate, allowing you to have that watch serviced by Rolex, who will ensure that watches are serviced in a guaranteed perfect manner (despite some rare but unfortunate stories we have heard on TRF)

-Value retainment: As well as know if you buy a new watch you will lose some value the moment you walk out of the store a good portion of the time. But if you buy from a trusted seller you can often find deals on watches that will retain their value. So the watch is by no means a terrible investment.

-ROLEX: As you said, brand appeal absolutely contributes to the cost and value of these watches because it increases demand.

-History: Rolex has been around for over 100 years and has been mastering the watchmaking process in Geneva since 1919. This in itself is extremely valuable in my opinion, each watch they produce has a story and background. The Datejust for example was the first wristwatch with an automatically changing date function. Day-Date was the first wristwatch in history to display the day and date on the dial. There is significant history behind various Rolex models.

-They last forever: Yeah I said it, forever. Your watch could one day be owned by your child's, child's, child.

In the end price is driven by demand and there is a demand for these watches. This all is in some ways my opinion but in many ways grounded fact. Tell your friend to watch a Patek Phillippe being assembled and maybe he will appreciate watches more, but then again maybe not which is fine

[RonSwanson]

I agree that there are diminishing returns, an $8000 ceramic sub is not 40x better than a $200 Seiko skx. It is however noticibly superior in every single way, even to the untrained observer. It is hard to say weather or not it is "worth" $8000, as I do not own a watch company. I do however appreciate the brand recognition, history, the toughness of the movement, the innovative materials throughout, and the brilliant oyster bracelet and clasp. I cannot think of a single watch with this feature set,and hat high of quality for less money.

In short the sub is worth it because there is no adequate substitute available for less money.

[ryan.uk]

Originally Posted by TuckerHorology

My bad I should have explained,

First off his argument starts with all estimated numbers. But more importantly, when you purchase a Rolex or any high end Swiss timepiece here's what your money is going towards

-Obvious but very important: Materials quality
Rolex for example uses extremely high quality materials from the inside out. They really don't cut any corners and this extreme precision and quality contributes to its value

-Attention to detail: Rolex watchmakers attention to detail and precision in the watchmaking process

-Movement Quality: Rolex movements may not always be extremely complicated but they are precise, accurate, durable, long-lasting, and relatively easy to service.

-Servicing: Owning a real Rolex serves essentially as a certificate, allowing you to have that watch serviced by Rolex, who will ensure that watches are serviced in a guaranteed perfect manner (despite some rare but unfortunate stories we have heard on TRF)

-Value retainment: As well as know if you buy a new watch you will lose some value the moment you walk out of the store a good portion of the time. But if you buy from a trusted seller you can often find deals on watches that will retain their value. So the watch is by no means a terrible investment.

-ROLEX: As you said, brand appeal absolutely contributes to the cost and value of these watches because it increases demand.

-History: Rolex has been around for over 100 years and has been mastering the watchmaking process in Geneva since 1919. This in itself is extremely valuable in my opinion, each watch they produce has a story and background. The Datejust for example was the first wristwatch with an automatically changing date function. Day-Date was the first wristwatch in history to display the day and date on the dial. There is significant history behind various Rolex models.

-They last forever: Yeah I said it, forever. Your watch could one day be owned by your child's, child's, child.

In the end price is driven by demand and there is a demand for these watches. This all is in some ways my opinion but in many ways grounded fact. Tell your friend to watch a Patek Phillippe being assembled and maybe he will appreciate watches more, but then again maybe not which is fine

This is a great response - thank you very much for taking the time

My mate is a real pain to debate with as 'he's always right' - so when you're having an impassioned conversation with him about something, you're left feeling that you can't get the point across. He's public-schooled and very intelligent, but sometimes I think he sees the world in a very two-dimensional way.

You're right too; he should go watch a PP being assembled - let's hope he has a year as I think I read that they take that long to put together each reference by hand.

Originally Posted by RonSwanson

I agree that there are diminishing returns, an $8000 ceramic sub is not 40x better than a $200 Seiko skx. It is however noticibly superior in every single way, even to the untrained observer. It is hard to say weather or not it is "worth" $8000, as I do not own a watch company. I do however appreciate the brand recognition, history, the toughness of the movement, the innovative materials throughout, and the brilliant oyster bracelet and clasp. I cannot think of a single watch with this feature set,and hat high of quality for less money.

In short the sub is worth it because there is no adequate substitute available for less money.

Brilliant Ron, I think you can see it from the objective viewpoint as can I.. I can't 'justify' the cost, all I can do is be happy to pay it to have something that to me is noticeably superior to a copy-cat, and to buy in to all that history and pedigree. As you say, anything less really is a substitute; maybe just to you, me and those on TRF or those with an interest in timepieces, but a substitute no less.

Also, like Tucker says, whether it's 'emperor's new clothes syndrome' or whatever, when you buy a Rolex, a PP etc.. they hold their value because we all collectively agree they should, irrespective of the materials used in many cases.

[Rudy40]

I don't know if you can really actually justify those numbers if you really think about it...First off I say Rolex pays there staff really good money. Every single piece of this watch right down to the tiny screw is QC two or three times...Every piece is detailed by hand! The best of the best of materials...What piece is out There? For hundreds of dollars? That has the same materials...the same attention to detail...and has a pedigree of over 100 years of Swiss watchmaking. It's about having that piece of mind on your wrist that you have a great heritage of Swiss watch making... There is no better..unless it's another Swiss watch maker..
For me ...my first piece was a objective ...a goal...a present to myself ..to state finally I made it..
No better feeling having a watch that has that kind of heritage and history of fine Swiss watch making...the feel ...the sound...the buttery wind...the precision...you can't buy that for couple hundred bucks😎

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[Etschell]

i dont feed the trolls or argue with people.

some people spend the vast majority of their disposable income on a car payment and mortgage, which i find laughable.

[Star Ferry]

Originally Posted by Etschell

some people spend the vast majority of their disposable income on a car payment and mortgage, which i find laughable.

x2. a lot of people are chained to their house and car. It's pretty sad.

[Cru Jones]

your friend doesn't see the value in watches. that's fine. i'd just leave it at that. pretty simple.

(and in 20 years, you'll still have the watch, and he'll be on fancy car number 5 and have spent much more money. whatever makes one happy. YOLO!)

[ryan.uk]

Originally Posted by Rudy40

I don't know if you can really actually justify those numbers if you really think about it...First off I say Rolex pays there staff really good money. Every single piece of this watch right down to the tiny screw is QC two or three times...Every piece is detailed by hand! The best of the best of materials...What piece is out There? For hundreds of dollars? That has the same materials...the same attention to detail...and has a pedigree of over 100 years of Swiss watchmaking. It's about having that piece of mind on your wrist that you have a great heritage of Swiss watch making... There is no better..unless it's another Swiss watch maker..
For me ...my first piece was a objective ...a goal...a present to myself ..to state finally I made it..
No better feeling having a watch that has that kind of heritage and history of fine Swiss watch making...the feel ...the sound...the buttery wind...the precision...you can't buy that for couple hundred bucks😎

Sent from my SAMSUNG-SM-J320A using Tapatalk

Absolutely right Rudy - that's the argument right there; it's heritage, it's quality in materials and finish, it's that attention to detail on the most minuscule level, and it's like you say - a reminder to yourself (if no one else) that you have something special, that you value all these things and are proud to have achieved the acquisition of such.

Originally Posted by Etschell

i dont feed the trolls or argue with people.

some people spend the vast majority of their disposable income on a car payment and mortgage, which i find laughable.

Definitely a healthy way to live! What it is they say? 'don't argue with idiots; they'll bring you down to their level and beat you with experience'?

My own belief is that we only get one shot on this great floating marble, and if we do, then I'd like to enjoy wonderful things whilst I'm here - a fine watch or 20 included...

[Rudy40]

Houses & Most Cars besides antique cars...lose value over the years....But Rolex has a proven track record of maintaining most of there value hence you maintain condition,papers,etc...its like investment in Gold & Silver...so really it's a very smart investment as well...

Sent from my SAMSUNG-SM-J320A using Tapatalk

[ryan.uk]

Originally Posted by Cru Jones

your friend doesn't see the value in watches. that's fine. i'd just leave it at that. pretty simple.

(and in 20 years, you'll still have the watch, and he'll be on fancy car number 5 and have spent much more money. whatever makes one happy. YOLO!)

You're right, that's pretty much how we do end up leaving it - 'agreeing to disagree'.

I guess though, in future it would be good to be able to shut down his conjecture on the cost of materials and build - if I had some good insight that 5,000 of a 10,000 watch was materials, and a further 3,000 was on build, labour and R&D, then just 2,000 would be taxes, sales costs and finally profit.

That's a bit easier for someone like him to accept than 40-50% of the price paid being just profit, or 'paying for stupid crown logo' as he might put it.

Ultimately, the real question is 'do I care'; if I learned that 80% of all income from the sale of the watch was profit to Rolex.. would that stop me buying one? Meh.. probably not

[dominic.warren]

I don't believe your friend is right or wrong. For example my wife wants to book a Disney cruse for us and the kids. If we book now the cost will be at least $7000.00. Now lets break down what you get a room to sleep in food to eat and stuff to do. But what my wife and I are actually paying for is memories why our kids are young that we can never replace. We watch enthusiast see our watches like a parent sees their child the more you invest (time,knowledge and money) the better the return or at least we hope. Would people without kids understand? Who knows. All that matters is you do.

[Gert]

Originally Posted by RonSwanson

In short the sub is worth it because there is no adequate substitute available for less money.

I agree with all posts before.. Though the Ginault is IMHO a nice and adequate substitute for the SS Sub, for quite a lot less money.. Having said that, it is of course not the same as a Rolex, missing all it's history, heritage and proven value



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[ryan.uk]

Originally Posted by dominic.warren

I don't believe your friend is right or wrong. For example my wife wants to book a Disney cruse for us and the kids. If we book now the cost will be at least $7000.00. Now lets break down what you get a room to sleep in food to eat and stuff to do. But what my wife and I are actually paying for is memories why our kids are young that we can never replace. We watch enthusiast see our watches like a parent sees their child the more you invest (time,knowledge and money) the better the return or at least we hope. Would people without kids understand? Who knows. All that matters is you do.

I hear you Dominic.. I don't think he's right or wrong either which is why it's always a hard argument to have with him (and why I mischievously bought it up here on TRF with hopefully likeminded people).

I think the issue with a luxury watch, unlike a holiday or an experience is that the object at the heart of the argument is tangible. It's actually made of stuff and built by people and you come to own it.

Like with anything you own then (like a car, or a house), a degree of objectivity will come in to its purchase and enduring value.

You, I and most if not all on TRF would agree that a luxury watch is worth the money, but mostly (if it's not a PM piece) it's just a hunk of steel and a bit of embellishment.

With a diamond ring, you know that a good chunk of the cost is for an actual diamond, and a bit more still might be the value of the platinum or gold band. For the same price as my latest watch, I could've bought quite an inarguably impressive diamond ring.

With a SS watch.. very little of the value can be argued to be precious materials (though I'll be honest I have zero clue).

It's an interesting topic, which is why I entertain the argument with my pal... at what point do we go 'hold up a minute... you're taking the ***'? If my watch was 100 more? 1,000 more? 10,000 more?

People will pay 10,000+ more when they know their piece is fully hand-built and finished (Patek etc..), and 100,000+ more when it's covered in gems and precious metals - but where does the 'getting more stuff or hand-finished attention' stop, and 'just paying for the name' start?

By the way; the cruise sounds amazing.. hope you do get it booked and have a brilliant time You definitely can't put a price on happy memories.

[Dr.Brian]

Who cares? It's jewelry. Call it what it is. If you're into that kind of jewelry and can afford it, why not go for it.
Not unlike the Honda Accord vs BMW M5 comparison. They're both quality reliable 4 door family sedans. But I'm not really into cars, so I'm not going to spend 3x as much on a car. Twice, sure, but not 3x.
I also want to retire early, pay for my children's education, and travel. Competing priorities and variable weighting explain all of this discretionary spending.
If someone asks why I have a bunch of expensive watches, the answer would simply be, "becasue I like them."

[rr-nyc]

Some people like nice watches, other don't. Some like nice clothes, others don't. Some like nice cars, others don't.

You'll go crazy trying to argue one way or another. Live and let live

[1675-David]

That feeling you get every time you put it on is an emotional response you, either get it or you don't. I wouldn't worry about the opinions of others in something that is a very personal choice. I'm sure you friend has his own hankerings...

[GB-man]

He is largely right. I buy them because I love them and I can afford to do so. Life is short do what makes you happy.

[michaelodonnell123]

Originally Posted by RonSwanson

I agree that there are diminishing returns, an $8000 ceramic sub is not 40x better than a $200 Seiko skx. It is however noticibly superior in every single way, even to the untrained observer. It is hard to say weather or not it is "worth" $8000, as I do not own a watch company. I do however appreciate the brand recognition, history, the toughness of the movement, the innovative materials throughout, and the brilliant oyster bracelet and clasp. I cannot think of a single watch with this feature set,and hat high of quality for less money.

In short the sub is worth it because there is no adequate substitute available for less money.

Tudor!

[Etschell]

Here is how the distribution channel works (example so no one go crazy on me):

Cost for rolex to manufacture, $2k.
Markup to wholesale, $4k.
End buyer MSRP, $8k.

It isn't rocket science that Rolex and the AD makes a profit. This happens with car dealerships etc.

Ask him how much he paid for that coke he got at a restaurant. After he answers tell him the cost to the restaurant is 2 cents. That is far more offensive.

[ryan.uk]

Originally Posted by Etschell

Here is how the distribution channel works (example so no one go crazy on me):

Cost for rolex to manufacture, $2k.
Markup to wholesale, $4k.
End buyer MSRP, $8k.

It isn't rocket science that Rolex and the AD makes a profit. This happens with car dealerships etc.

Ask him how much he paid for that coke he got at a restaurant. After he answers tell him the cost to the restaurant is 2 cents. That is far more offensive.

You're definitely not wrong... big profits are obviously being made, but provided people are paying for it, and we all collectively agree the value; we're all good - and provided the manufacturers keep the supply around or ideally below the demand, it all helps in value retention to the consumer.

Dr.Brian makes a good point.. Jewellery; weirdly I don't think of my watch as jewellery, but of course, it is - and like with any jewellery; who decides what's valuable? Who decided that diamonds should be arbitrarily worth lots in the first place and not, instead, the teeth of 52-year-old milk-maidens from Bordeaux

If we (society) collectively agreed that such teeth, correctly aged and authenticated as coming from the specific region were valuable, we'd all be agreeing they were worth paying for and adorning our jewellery with them (I read something once very interesting in how De Beers keeps the costs of diamonds sky-high by stockpiling them and holding back supply; could be fake-news though).

'Discretionary spending' is a great phrase too - we apply our discretion to buy an expensive watch because, for whatever reason, we've decided it's worth it - and thankfully a lot of society agrees and collectively concludes that the perceived value is fair(ish).

Our problem, though, when buying a 'brand' and not general consensus-agreed precious metals or gems is that if there was some massive PR disaster for the brand (let's say we suddenly found out that all Rolex watches weren't made in Switzerland, it was all a facade and the watches were built in sweat-shops with poor conditions for the slave workers) - our perception of the value might change. That would be the world's longest con though

Sorry; I didn't mean to start a 'sociology' thread, but I think you've all helped me understand the argument a bit better. I'm someone who values watches, along with all of you here - he's not. It's as simple as that

[AndyWright]

Some people are just not cut out for the luxury brand mentality or they think they are being prudent while they actually leak money in the wrong areas of life. For example, I would rather eat at a great burrito place or pizzeria and have a luxury timepiece on my arm that brings me perpetual joy while maintaining its value. However, lots of guys blow their money in four-dollar-sign restaurants, slugging back 15 pound cocktails, all the while thumbing their noses at guys like me. In the long run, they spend hundreds, if not thousands more per month on stuff that goes down the shitter.

To each his own.

[mjclark32]

Originally Posted by Etschell

Here is how the distribution channel works (example so no one go crazy on me):

Cost for rolex to manufacture, $2k.
Markup to wholesale, $4k.
End buyer MSRP, $8k.

It isn't rocket science that Rolex and the AD makes a profit. This happens with car dealerships etc.

Ask him how much he paid for that coke he got at a restaurant. After he answers tell him the cost to the restaurant is 2 cents. That is far more offensive.

Pretty much exactly what I started to type before seeing your post, but I was going to use beer
I'll leave it at:
He's not wrong, but welcome to capitalism.

[ryan.uk]

Originally Posted by AndyWright

Some people are just not cut out for the luxury brand mentality or they think they are being prudent while they actually leak money in the wrong areas of life. For example, I would rather eat at a great burrito place or pizzeria and have a luxury timepiece on my arm that brings me perpetual joy while maintaining its value. However, lots of guys blow their money in four-dollar-sign restaurants, slugging back 15 pound cocktails, all the while thumbing their noses at guys like me. In the long run, they spend hundreds, if not thousands more per month on stuff that goes down the shitter.

To each his own.

Originally Posted by mjclark32

Pretty much exactly what I started to type before seeing your post, but I was going to use beer
I'll leave it at:
He's not wrong, but welcome to capitalism.

Both made me laugh Both very true

[ryan.uk]

Originally Posted by AndyWright

Some people are just not cut out for the luxury brand mentality or they think they are being prudent while they actually leak money in the wrong areas of life. For example, I would rather eat at a great burrito place or pizzeria and have a luxury timepiece on my arm that brings me perpetual joy while maintaining its value. However, lots of guys blow their money in four-dollar-sign restaurants, slugging back 15 pound cocktails, all the while thumbing their noses at guys like me. In the long run, they spend hundreds, if not thousands more per month on stuff that goes down the shitter.

To each his own.

What is it George Best said? "I made millions in my career, spent most of it on booze, birds and fast cars - the rest I just wasted"

[key]

I remember getting into a similar conversation with a friend/colleague, but as with any other luxury goods, there are diminishing returns for the money you pay.

For instance, a $10000+ hermes leather bag or a $5000+ Brunello Cucinelli jacket/coat isn't necessarily 10x better in terms of the sheer quality of the leather or fabric that are being used in them. They both definitely have better quality items than those from lower-end brands, but there isn't a linear correlation between the price difference and quality.

Hence, it all comes down to how much extra money you are willing to spend for that marginal quality difference, but hey, many people do and are willing to purchase from those higher-end brands, right?

[ryan.uk]

Originally Posted by key

I remember getting into a similar conversation with a friend/colleague, but as with any other luxury goods, there are diminishing returns for the money you pay.

For instance, a $10000+ hermes leather bag or a $5000+ Brunello Cucinelli jacket/coat isn't necessarily 10x better in terms of the sheer quality of the leather or fabric that are being used in them. They both definitely have better quality items than those from lower-end brands, but there isn't a linear correlation between the price difference and quality.

Hence, it all comes down to how much extra money you are willing to spend for that marginal quality difference, but hey, many people do and are willing to purchase from those higher-end brands, right?

Yep - completely right! I like that "no linear correlation between price and quality". In fact with a combination of good phrases from you lot, I think there's a good answer back to him:

"There's no linear correlation between price and quality, we all have discretionary purchase power to buy what we see individually or collectively as noticeably superior products, items or things we personally see as valuable to us for whatever reason - now; how are you enjoying that £5 beer you're drinking that cost 20p to make?"