Should a watch company offer a lifetime warranty? (II)

Rudy Albers, president of Wempe Jewelers in New York City, equates owning a fine timepiece to owning a Ferrari. “You wouldn’t drive it for 10 years without service, and when it does need service, you wouldn’t take it to a Chevrolet dealership.” If you did, it would devalue the watch instantly. “Factory original components are designed properly and finished to the quality standards of the brand. Any aftermarket, non-original parts will stick out like a sore thumb,” says Paul Boutros, head of North American operations for the watch division of Phillips in Association with Bacs & Russo. “Non-factory parts – especially for dial, hands, bezels, crowns, and for chronographs, pushers – will affect value and desirability. Within movements, it’s also very important to use factory original parts for key components such as bridges, escapement parts, clutches, and levers.”

The advantage of pre-owned watches is selection

Does this make buying any pre-owned watch risky? Maybe, but given the surge of the pre-owned market, many believe the benefits outweigh the risks, especially if you know your dealer and the watch has a clean service record. As mentioned, luxury watches are built to last, and the price advantage more than covers any service costs. A new watch is like a new car; once you drive it off the lot, it loses value that is out of all proportion to any actual depreciation. Discounts run as high as 60%, so even if there is no warranty and you end up with a $1,500 charge when the crown falls off, you are still pretty far ahead of the game if you saved $10,000 on the purchase price. And then there is NOS (New Old Stock), a code for watches that are not “new this year” but have never been worn. And although this crosses into an, ahem, “grey” area, the discounts are the same, and the watches are often still under warranty. Furthermore, there is no reason you couldn’t send any watch directly to the brand for service and repair, as long as it has never been touched by non-certified hands or given non-factory parts. “If you bought it and it’s real, you can send it to the manufacture and they will fix it,” says Govberg.

The other advantage of pre-owned is selection. “Let’s say IWC has 50 watches in its current collection to choose from,” says Govberg. “But if you go back five years, you might have 400 models to choose from. You may like the old Da Vinci perpetual calendar better than the new one. You may find the new model a millimeter too big. This goes for any brand. There are 1,000 Jaeger-LeCoultre watches to choose from under 30 years old. And that is not old.” Does his pre-owned business hurt his new business? Govberg, who sells three pre-owned watches for every new watch, says no. “There will always be people who want a new watch and are just not comfortable with a watch someone else has worn.” Buying new from an agent also gives customers access to rare limited editions that are likely to become collectors’ pieces. Anyone who put their name on the waiting list for the first edition of the all-new Rolex Daytona a couple of years ago knew what they were doing. And it gets you into the club: concierge services, invitations to parties and brand-sponsored sporting events, even travel to Switzerland to tour the manufactures.

Buying a watch is no rational decision

Ultimately, Govberg points out that buying a watch, whether new or pre-owned, isn’t even a rational decision, so you can’t rationalize it. He offers the analogy that a man needs a watch like a woman needs a diamond. “When it comes to buying a watch, we need to ask men the same questions we ask women who buy diamonds: ‘Why do you need a carat diamond? What does it make you feel like? What is it about these shiny objects that make you willing to put a hole in your ear to wear them?’ The answers to these questions are the same answers to the question about why a guy needs a watch. It isn’t for the time; he has a phone – every minute of the day he has his phone – and he trusts that for the time, not his watch, which is a minute off. For millennials, a watch is strictly for pleasure, ego, style or because it was a gift. My son, Brian, wears a Nautilus, but he doesn’t set it. He doesn’t wear it to tell time.”

The pre-owned watch market is hot, and after a disastrous 25-month slump, the market for new watches is picking up. Would offering extended warranties boost the recovery? From a functional and value-retention standpoint, it would make very little difference, because service is the issue. From a marketing point of view, a warranty could provide peace of mind to a customer who wants to be assured of authenticity – that he is not buying a fake or stolen watch. It can also establish a relationship with an authorized retailer who in turn has a relationship with brand repair centers, and who can advocate for a customer in the event of a dispute. In fairness, though, it’s possible for a dealer, even a pre-owned dealer, to offer these assurances to some degree even when there is no warranty. Extending a warranty to a lifetime will not alter either circumstance. In fact, maybe the best marketing stance is to explain to a customer why a watch doesn’t need a lifetime warranty – and then offer a service contract instead.