How much do you think the build cost of a $5k (at retail) luxury watch is?

In raw parts probably only a fraction of MSRP, but that doesn't factor in R&D for the movement if in house or the costs of the design team, marketing, etc. The sliders in each area also move depending on the brand

Be careful people, "$1-2000" means between $1000 and $2000.

I would love to hear from anyone that thinks the answer is even high three digits. Or I might hate it. I'm answering for established brands. It's possible smaller entrants are getting hosed.

Loaded question as there is a massive difference between those with vertical integration vs those who use private labels. Private label brands clearly produce at a much lower cost due to the amortization of their equipment and not to mention scale (IE most micro and small brands). Putting the later aside;

Outside of development and parts; Amortized equipment, labor, property/space, overhead all play huge factors. Most industry experts agree the average Rolex, granted not this scenario, costs between $2500- $4000 to produce. Then sold to ADs who then keep the spread. One could scale that figure down for the $3k-$5k. A 25-30% production to MSRP is completely reasonable.

All I know is that the times my 12 years of jewelry sales included watches, we sold them at 4 to 5 key. 

There were once a statistic. A watch of retail price around 10K has an production cost of around 3K.

So I would expect the productionbcosts  a 5K watch at around 1.5K.

But it really depends on the watch brand. There are also some watch brands who are just setting their prices on 5K or 10k, hoping to get in the same league. But finding their watches later with 75% discount still with enough win for the sellers. I don't want to name them to not hurt anyones feelings.

I voted $1-$2k cause it seems about right. In that range there is anything from a 500% markup ($1000 X 5) to a 250% markup ($2000 X 2.5). Those feel like reasonable margins. 
 

At $30/hour (about $50k a year, which sounds right for a good watch maker) that allows 33 hours of labor for $1000 or 66 hours at the $2k level. By the time you make the case, make the movement, encase the movement, make a strap or bracelet, the hours keep adding up. Then there are raw material costs and markup on anything done by an outside supplier.

Of course we won’t ever really know and I suppose time and effort depends on the manufacturer.

Nailed it. We saw this with Brick. A company that clearly used a private label (nothing wrong with that) selling a $200ish in parts watch for over $2000. That’s a pure misfire. Yes, he had other costs, but he was trying to sell an $800 watch at a 3x market value. In most cases, the market sorts this out.

Here's an interesting article:

https://www.jackieabraham.com/understanding-the-worth-of-your-pre-owned-jewelry#:~:text=When%20luxury%20retail%20stores%20sell,even%20higher%20for%20engagement%20rings.

Assuming they're right, splitting the difference between 250 & 300 percent (275), a watch that costs $2,000 to produce would cost $5,500 at retail. This sounds right to me.

Wow, that's approx. 336% markup! 😮

Gucci?  :-)

Oh interesting, but not surprising. Just to be in a dept store brand = high margins. 

Yep. $10 bottle of champagne they sell for $50.

Even more upsetting: the cost to produce a large (32 oz) coke is about $0.10 And most fast food joints charge you between $1.00 and $2.00 for it. Even at $1.00, which sounds cheap, you're at a 1,000% markup.

Rule of thumb.... 1/3 of price is for COGS.  And my guess would  be direct purchase from manufacturer.

This one feels personal!  As someone who does not really drink, but enjoys a can of soda on occasion, the price of soda is baffling. 

Define ‘build cost’.  Are you including a portion of the R&D?  Engineering and QC testing?  Office and management overhead?  Do the costs carried because of having parts made yet not assembled count (inventory overhead)?  Or is the ‘build cost’ limited to raw materials, manufacturing and assembly?

Sorry if I come across as rude here.  But I’ve owned three businesses, and these types of discussions just kind of get to me.  I owned a cafe once, and had a guy actually wait in the line during the lunch rush, and when he got to the front of the line this idiot actually ‘confronted’ me and stood there and gleefully informed me that he could make a tuna sandwich for $1.72 at his home.

I then asked him how much of his mortgage he included in that assessment.  I then asked how much of his homeowners insurance he included.  I had to pay that overhead, I sternly informed this idiot.  Then I pointed to my sandwich maker and explained that while he may not have thought about it, I had to pay people to make food for him.  “How much did you figure for labor?” I demanded.

”Well,” the idiot stammered, “you don’t have to be a jerk about it.”

”Neither do you,” I replied.  “Don’t bother to come back.”

There’s a lot more real ‘cost’ than raw materials and labor.

Rant over.

As a business owner myself I came across this all the time. Most people don’t know how much it costs to run a business. None of the comments here mentioned tax/vat. A £2000 watch included £333 Vat here in the uk. 

Yeah, most people can’t even conceive of working a whole year, 7 days a week, and at the end you lost money.  There’s more invisible ‘cost’ than people that haven’t owned a business will ever know,

I don't drink many sodas; I prefer sparkling water, like Pellegrino. But my kids are another story, haha. 😎

I ran a small surgical practice.

A one person office, payroll, rent, utilities (power, water, heat, phone and internet service), housekeeping, hazmat fees, insurance (business, malpractice, unemployment, health, etc), website maintenance, professional fees, adds up: all that was several hundred thousand dollars a year.

A watch manufacturer might have a marginal cost of making an in-house piece of a few thousand dollars, but there’s all the brick and mortar, many of the things I listed, as well as stocking costs, maintenance of adequate spares for decades, retirement plans, advertising, transportation etc etc. 

It’s an unending list of expenses.

A look at Rolex shows a profit margin of 20%. 80% goes to manufacturing plus other costs. We‘ll never know the marginal cost of making one of their watches.

Thank you and @Watchman1969. I think that is the difference in vote here. Most people cannot begin to imagine the math to make a business work. They see parts site online and assume a product is the sum of it's parts. I cannot imagine the maintenance required for watch machinery, and that is just one of a ton of expenses to deal with that many don't factor in.  

Yeah, most retail goods are about the same in my experience. 

Whew! I'm glad I park cars for a living. I learned a lot here and may retain some of it. Would be cool if someone had a diagram of a watch bill of materials listening the price of each item. 

R&D is so overestimated in regards to most "luxury" watch brands. 90% of them don't do any research or development, they just copy the best ones, use aftermarket parts and slap them all together to then sell those "luxury" watches for thousands and thousands of dollars. 

Does your build cost include:

600 000 development of the first one

3 000 000 marketing campaign.  

3 000 000 trade shows booths.  

5 000 000  reps going to the AD.   

How many are we producing to offset these costs?  

Is 500 per watch reasonable?  That's 23 200 watches

AD makes 1000

Warranty and returns 10%

Costs of build 1500

Overhead 500

Profit 1000? If you are lucky and sell your watches... 

Depends on what brand and/or watch we’re talking about I believe, but I‘m certain it’s under 2.000€ for any major brand. Probably even less