What is the real cost of a watch?

Don’t forget service costs on the other side.

Those would fall in recurring costs. Where ADs make additional profit.

Which brings me to ask: What are the service profit margins?

Craftsmanship is valuable. But how much can a little piece actually cost to make?

I saw Rolex bezels on eBay for $1500+. Yes they made with exclusive materials but seriously? Where does the cost of the piece ends and profit begins? Not including markup.

Typically packaging, transportation, and warehousing takes up a third of the cost and if customer service and boutique experience let's say cost another third... I think you can figure out now what the real cost of a luxury watch is 😢

You solved my problem! There's the answer right there!

All kidding aside, your $100 watch that comes in a plastic bag, I would think, has more of the cost going into the actual manufacturing of the piece rather than the kit and experiences that accompany the piece. I don't know if I'm making sense?

True! Unless you get it serviced outside of the AD.

That's a hard to swallow pill.

It also gives new respect to guys like Mark from www.longislandwatch.com that offer fantastic pieces at reasonable prices. With all the effort and energy he puts into them.

I doubt there is any official information about this because that's kind of the whole deal around luxury products... Brand names make up for a substantial amount of the price, but just how much watch do you really get for your money will always be kept secret by these brands.

Some numbers I've seen thrown around: CEO of Christopher Ward, Mike France, said that most of the Swiss brands use similar components from the same manufacturers, but some of these luxury brands make up to a 3400% profit from manufacturing cost to RRP, while CW are able to sell 'The Twelve' at 1350€ RRP because they "only" mark up their watches by 3 times (300%), or 10 times less.

I can't remember in which exact episode, but George Bamford on AET said that about 75% of the price of a Rolex is the name and marketing but you're really buying $2000 worth of watch. I'd love to find the exact quote again, if anyone remembers which episode.

If I had a Rolex I would service it outside of an AD absolutely. It's just not my case...

But for some that's blasphemy! You know, authenticity and documentation.

I would wager the margins on Casios and lower cost brands are higher than luxury brands. Rolex and Omega are widely reported to have about a 40% markup, which means for a $10k watch the AD pays about $6k. Industry experts put the production somewhere around $2500-$4000 for the actual production of steel models. So we are talking somewhere between 2-3x. Everyone is making theirs, so a cheap glass of champagne is nominal.

If talking Casio or other mass produced brands? I’d wager 5-10x depending on model. Think of how many brands one can get right now for a couple bucks on Ali. All of those are being sold with a profit.

I don’t claim to be a math wiz, but I’d rather be in the 5-10x biz than the 2-3x business.

If you are talking real costs, wait until you factor in what we lose in opportunity costs. :-)

3400% profit is insane! (As in I'm not surprised but rather shocked that it's that large)

I have no doubt brands rely on their name to increase profit.

And people are ready and willing to pay those prices. Not that there is anything wrong with that. If you can afford it and receive what you want for the price you pay, I see no problem there.

I get the whole offer and demand thing. I get the whole you get what you pay for. (I use this line daily)

3400% profit is insane!

Luxury is a well-accepted scam. 😉

I’m with ya. I personally treat it just like my vehicles. Once it’s outside of warranty I take it to my trusted, reliable and cheaper family mechanic. Still maintain the scheduled services and accompanying paperwork, though, in the chance I do decide to resell.

And Casio has volume as opposed to Rolex et Al.

Plus the whole AD experience will generate return customers for various other items. Which will make additional returns on other items to average out expenses.

And you get as good a service as ADs could offer for a while lot less money. If local shops didn't offer good service, they wouldn't stay in business for long.

I do most of the service myself... On my car. Not my watches...

Well, it's never that simple. If "cost" means the manufacturing alone, the margins are huge. But a brand is built on marketing and depending on their strategy, it can cost a few thousands a year to a few billions

That’s really not surprising. You pay not just for the manufacturing cost of the watch but also the R&D, the employee salaries and most importantly marketing. Rolex and Omega pay huge sums of money to actors and sports personalities to sport their watches cause trust me they don’t feel “grateful” to get allocations of a particular watch. Luxury as is is a scam. You pay for the exclusivity and the bragging rights.

Hi all, really interesting comments. I don't know if any of you have watched this Pay Less Shoes prank, which I think pretty much answers why people would pay such prices for certain branded watches.

https://www.youtube.com/watch?v=JFXmIh4P2dM

I believe it all boils down to that simple economic principle of SUPPLY & DEMAND which dictates the pricing. We might be able to figure out the all costs associated with producing and selling a watch. But the asking price for one is really a product of the manipulation of the S&D principle. Marketing to create the Demand and controlling production to limit the Supply. 😢 As in the case of Rolex, Wilsdorf was not a watchmaker. He was a salesman.

I have heard on several podcasts that Mike France one of the big cheeses at Christopher Ward works to the formula of selling their timepieces at three times the cost of making them ( including advertising and R and D)

This is considerably less than all of the other mid tier and high end manufacturers. Also factor in CW sell online only so literally removing an entire level of costs.

That is how they offer pretty amazing value compared to the competition and why they are expanding so rapidly and attracting such interest despite only having been in the game for twenty odd years.

Such transparency is quite illuminating to us as purchasers!

With most brands and certainly all the high end stuff, like the car brands you are simply paying for the badge!

Sorry just read your observation and I had quoted the same CW figures! Glad we were both saying the same!!

So I take it what I saw on eBay either had a crazy markup or the seller was full of himself!

At least they don't add sand to the mix. Actually 🤔

It's a decent profit margin. I can't make that much on the parts I sell. Otherwise I'm not competitive with the market. But when you have heritage and a massive reputation, you can't charge those markups and people will still buy your things.

And then try and forget how much you paid for it!!

It wouldn't surprise me one bit. There are parts I sell through my business that have to be at a certain price. I can sell higher but never cheaper. If I sell cheaper, I can lose my right to sell this specific brand altogether.

I need Islanders in my collection. I would rather have my money go to him and the actual fabrication of my watch that pay markups that just go towards the experience.

I guess you didn't buy the expensive enough model... 🤷

I'm only half joking. 1. Because I don't know how it's supposed to go down 2. Because I'm too poor to experience it.

Yes, I had read something about that. The firm that owns the Rolex name and everything associated to Rolex is a charity venture of sort. I don't understand how that works...

I've heard of other brands also cutting the middle man. I can't seem to remember which... Cough cough... Vincero. And there's another total scam of a brand... The name is on the tip of my tongue... Scam?? Scametti? Spaghetti Scametti?

They are very high end luxury pieces at an affordable price because they cut the middle man.

I wouldn't want to be the middle man. I don't want to be cut up! 😕

Yes I think there are several non reputable brands trying to do what CW does but minus the transparency and quality. Definitely best avoided!