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How much is that watch in the window?
Economy

How much is that watch in the window?

Sunday, 23 March 2014
By Flavia Giovannelli
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Flavia Giovannelli

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4 min read

As export figures show, high-end watches are the locomotive for the branch as a whole. Could this tempt brands to take the easy option by upping their prices and their range? While some may give this impression, the situation is more complex, especially when thinking for the long term.

“Seriously? A perpetual calendar for EUR 10,000 at Montblanc, a tourbillon for EUR 50,000 at Baume & Mercier?” At the Salon International de la Haute Horlogerie in January, discussions between visitors and brands were divided along the usual lines: those where prices are wrangled after product presentations that make a point of detailing such financial considerations, and those where prices are barely whispered, mentioned almost as an afterthought at the end of demonstrations that focus on horological feats rather than the multiple zeros they will cost. Yet this type of product, manufactured in limited quantities, is generally first to go, selling out even before the SIHH has finished. The Ballon Bleu de Cartier is one example (the brand also showed floral marquetry dials depicting a splendid parrot). The Fabuleux Ornements collection by Vacheron Constantin is another, with skeletonised movements paired with different métiers d’art in a limited edition of 20. The Aviation chronograph by Richard Mille also springs to mind. Presented as the most complex ever made, it comes in at EUR 872,500. All 30 watches in this limited series have been sold even before being made!

Our entry-level range is positioned at around CHF 8,000.

A single figure says it all: 12%, which according to the annual World Watch Report is roughly the rate of growth in the Fine Watch segment. That a brand should position itself in the highest price range therefore seems to be the right strategy. “As surprising as it may seem, some customers are proud to tell people how much they paid for their watch when it carries a high price tag,” comments Jean-Marc Jacot with a smile. For the CEO of Parmigiani, there are similarities with the art world. There comes a point when the line becomes blurred; these are objects that appeal to our emotions, possibly collector’s items but certainly not essential to our existence. For Parmigiani, one of the last remaining independent names in Fine Watchmaking, there can be no doubt: “We cannot produce watches to a high standard of quality under a certain price. Which doesn’t prevent us from opening up to a new clientele. Our entry-level range is positioned at around CHF 8,000, bearing in mind that some 60% to 70% of our watches are priced between CHF 8,000 and CHF 15,000. The new Tonda Metro is one example. This segment accounts for 40% of Parmigiani’s sales.”

A bold strategy

At Montblanc, which this year unveiled its first collection under the stewardship of Jérôme Lambert, the recently appointed CEO, everyone was eager to see how the new boss’s philosophy would pan out in watchmaking terms. The brand, which sells close to 80,000 watches a year, is at the head of production resources that allow it to put a bold positioning strategy into practice, namely to take on the already crowded EUR 3,000-7,000 segment. Although Jérôme Lambert, on the contrary, thinks there is still room: “Granted, there are a lot of products in this segment but they are all much the same. Not everyone can bring together the conditions required to propose a Fine Watch at this price. You must have the weight to develop innovative techniques and be able to sell sufficient quantities in a short time.

Meisterstück Heritage Perpetual Calendar © Montblanc

Take the example of our perpetual calendar. We adopted a radical approach by putting functionality first instead of doing what others do, which is to set out with the absolute goal of producing a complication at a high price.” An approach which Mr Lambert already adopted when at the head of Jaeger-LeCoultre, resulting in a tourbillon that retailed for CHF 50,000.

Credibility at the point of sale

There is, of course, an ulterior motive behind brands’ efforts to propose watches at a price more people can afford. Some, such as Parmigiani, are openly looking to attract new customers thanks to specific models. “Our Tonda Metro, for example, carries all the expertise of a strong brand in a watch whose functionalities remain sober, without extravagance,” comments Jean-Marc Jacot.
Recruiting new customers and winning their loyalty is one element brands have to consider. Retailers are another. Says Jean-Marc Jacot, “We can’t just offer them five new watches a year. They have to be able to rotate watches in their stores. The brand’s credibility depends on this.” This is particularly true when distribution strategy is built around multibrand points of sale.

I've always taken care to propose a homogenous collection and to strike the right balance between value and quantity.
Jérôme Lambert

Jérôme Lambert suggests that the branch as a whole stands to benefit from a more “democratic” approach: “I’ve always taken care to propose a homogenous collection and to strike the right balance between value and quantity, and Montblanc is no different. I believe this is a healthier business model and more adapted to the long term, particularly once a brand has sufficient critical mass.”

All the CEOs questioned were categorical on one point: there can be no single development model; each brand must work within its individual parameters which oblige it to take measured risks in terms of price. The CHF 21.8 billion of Swiss watch exports in 2013, or the amounts achieved by certain timepieces at auction, could suggest that the sky truly is the limit, and that watchmakers can do “whatever they like”. This couldn’t be further from the truth. Push your luck too far and one day it could run out. Customers’ faith in brands to set the right price for their watches is the guarantee of future sales.

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