A. Lange & Söhne

Langeholic
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Thought provoking topic!

It seems luxury watchmakers like ALS prefer to price based on perceived value rather than supply and demand. They perceive their brand to sit amongst the gods of horology (their perception meets with reality in this instance), hence they set their retail prices in the upper echelons. Interestingly in some instances they do achieve these prices, think Handwerkskunst and limited editions, but a great many models are discounted by AD’s, in a few cases fairly heavily!

The theory, I guess is keep retail prices on par with the quality and aspirations of the brand. Some customers are willing to pay retail for desirable models. The harder to shift models will be discounted based on demand. Eventually as the brand strengthens, discounts will be less common, especially as production is limited. Eventually production is increased and the cycle continues.

Utopia for any luxury brand is when demand outstrips supply and retail prices and premiums are comfortably met. Despite Patek’s production numbers peaking at 58,000 last year (vs 5,000 for ALS), they manage to maintain high prices relative to their market segment and have less motivation to discount, which usually means that either productions numbers or price increases will follow.

Liquidity in the secondary market is also an important factor. Consumers are more likely to buy (at whatever price) if there is confidence that their timepiece will retain its value in the secondary market. The almost cult following that Patek has in the auction market is consistent and deep rooted, hence attracting a steady mix of collectors, secondary market retailers, investors and speculators. This is something that ALS and Richemont as a group are particularly bad at, improve auction coverage and that is a strong support for the primary market.

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