Horological Meandering

First a quick update.  For those who don't know, I left MB&F in December to pursue opportunities outside of the watch industry.  As such, I am just a regular Purist once again.  My opinion clearly is not representative of any brand, and in fact I can definitely say that those I worked closest with are undoubtedly the best in the industry.  Anyway, now that I'm out I feel more comfortable talking candidly about the industry as a whole.  The following was posted on my blog this morning.  I wanted to repost here as I'd love to hear your thoughts.

Next week in Geneva, SIHH marks the real beginning of a new year for the watch industry.  This will be my first year for a while not attending the shows.  As someone who is now on the outside looking in, I have a new perspective – and can also be more candid.  During my time in the industry, I gained a ton of respect for a few people, including my former team at MB&F.  Mostly, however, I was left disillusioned by the vast majority of the industry.

I believe the watch industry is in a condition of serious danger.  Ten years of incredible sales brought on by what we now know to be a completely artificial boom here in the US and now economic growth in Asia have made it too easy to think for the short term at the detriment of the long without realizing the effects.  Brands have not paid the proper amount of attention and respect to their collectors, their products or their business models.  Here is a short list of what I would like to see change for the health of the industry as a hole.

1. Pricing is out of control.  We ALL know this to be true.  Walk into a retail store and try to buy a nice watch for less than $9000 retail.  It is incredibly difficult.  Watches that were in production 10 years ago now routinely cost double for the same piece.  10 years ago, a Patek perpetual chrono cost about $35,000.  Now $135,000.  Most of the interesting stuff starts at around $100,000.  This is insanity.  Brands need to control their costs better and maybe stop lining their pockets so thickly.  This can only continue for so long before a critical mass of collectors realize things have gotten out of control.

2. Explore new sales channels.  The internet is the most power sales tool in history.  Sorry for my retailer friends, but why are retailers getting the same margins they were before that marketing and sales channel existed?  In many cases, why are they even necessary?  Want to cut costs to bring pricing back to earth?  Here’s a great place to start.  The sales pipeline is stuck in the past.  The answer is not just to open up fancy brand boutiques and keep the margin, the answer is to streamline and cut prices.

3. Create products with soul.  Aside from a few independents and the occasional big brand release, most new watches have no soul.  A mechanical watch either has to be art or extremely practical.  If it’s over about $10,000 you can toss practical aside.  So what we have is an industry trying to make art, but 95% of the artists are untalented dilettantes who in most cases don’t even understand what art is and that it is their job to make it.  To make a watch for $200,000 where things flip around and at precisely 8am it shoots water in the wearers eye and says “I love you” is not art.  To make something just “because it’s cool” is not art except for a very very small number of true tastemakers who have such a solid grasp of the product that it works.   I’m sorry, but most of this stuff is shit.  The product people in the industry need to take a hard look at why mechanical watches exist and what they can truly offer of value – not repetition or novelty.

Will we see this at SIHH next week?  Of course not.  And so I wish my friends – the good guys – good luck at the show, and I will enjoy reading about it from Los Angeles.

First one correction.  10 years ago a Patek perpetual chrono did not cost $35K.  List price was about double that--$70K (I am assuming you are talking about the 3970, which was the model then in existence).

You know that I love watches and will continue to.  But the industry is doing their best to kill the goose laying the golden eggs.  Customers are leaving and not coming back.

I feel that Steve was talking about something more personal than Omega movements... Omega came to mind, too, for me, when Steve mentioned 9K. But as good of quality as the Omega may be... it is a soulless watch in my opinion, utterly. Sorry! But I feel that this is very much at the heart of what Steve was alluding to. Not only technical quality. I could be wrong about what Steve meant of course, but that's what I got. A bunch of soulless watches, a bunch of crazily overpriced fraudulent art.  This message has been edited by Mostel on 2012-01-13 10:15:19 This message has been edited by Mostel on 2012-01-13 10:18:13

" ...Look at Omega's new chronograph movement:  free sprung balance, co-axial escapement, silicium hairspring, column wheel control, vertical clutch, co-axial minute and hour counters and date indication."

Beyond doubt,all - or most of this - is new. But is it better? Isn't a large part of your conception of "better" rather innovation for innovation's sake? Only to present new features, new designs, in order to push sales?

Marcus

and I am trying my best to focus on other fields of activities.

This quote describes much more than the watch industry. This message has been edited by Mostel on 2012-01-13 09:58:24 This message has been edited by Mostel on 2012-01-13 10:06:32 This message has been edited by Mostel on 2012-01-13 10:08:26

Hi Steve,

I can't say I disagree with what you wrote, even if I agree largely with what Jeff wrote (if Mr Kingston allows me to call him Jeff).

Yes prices are getting insane (even if those prices pay my trip to Geneva monday, I realize that).

I'm an educated worker, I've tripled my salary since I begun working, and I still can't get to afford new (at least a minimum) interesting watches as of today. Buying a JLC Tribute to Deep Sea last year was very complicated and needed selling others.

Like you I hardly look at the most reasonable side of high horology. The most basic watch (without a serious complication) I would like to buy costs at least half of my yearly income. Even if I save it I won't buy a watch at that price.

Where art is in watches today? Well it's clear to me: in the fact that now I look at them in museum-like places, no longer even wanting to own them, just admire them.... I may not be alone!

MBF pieces may be quite interesting (and I love two of them), I don't see them less insane in terms of pricing.....

Hopefully the Chinese market will last for some while.

Best

Dje

And I have been thinking the same thing. Pricing is out of control, 99% of the products are awful and there is a massive bubble, which will take a decade or two to recover from when it bursts. That's why I buy very selectively only what I truly love so if it's worth 25% of what I paid I don't care because it brings me immense daily pleasure. I agree with everything you said except point 2. I appreciate the retail channel. I need to see, touch and play with these works of art before making such a large financial commitent. I wouldn't buy a bespoke suit online or a pair of shoes. I have to "feel" the quality and fit in person. Thanks for your great post. Best wishes,

Not calling for death of retail, just a rethinking of the approach! Some do a great job, many do not, all could benefit from some structural changes

sent from my phone

Hi Steve,

Nice post. I gave up following new watches a few years back as the prices went up in proportion to the square of the increase in their diameters, and am more than happy in the relatively sane world of clocks.

I suspect there's a second bubble waiting to happen when enough people discover the cost of servicing or repairing and the market starts flooding with unserviced, unrepaired expensive watches. And I even more strongly suspect that this will hit the uber-expensive exotics even more. You can get a skilled/willing watchmaker to make you things like chronograph register springs or other parts, but no one but the original manufacturer is going to replace parts made out of sintered unobtainium with kryptonite PVD.  And this is even more crucial for parts that were designed mathematically and manufactured to extreme tolerances. 

Try getting a "simple" minute repeater repaired and setup correctly, but check your back balance before you do so.  What's it going to cost to fix a G&F tourbillon?

nick

Was cleaning a drawer at my mother's home, found a 1950's Le Coultre Futurematic that was probably in a drawer for 20 years.  Brought to my local watchmaker.   He smiled from ear to ear.   Few hundred dollars later, fully lubed and tuned, while lacking 50 years of improvements to automatic movements, and a few signs of age on the disl, she is running fine.   And, while perhaps this find was not one of the watches on my grail list, redefines long-term value and value of serviceability for me.   

but the quality of watches are in general better then a decade ago...perhaps the fun is to separate the chaff from grain.

to me, my greatest peeve is those brands like Linde Werdelin who use generic movements warehoused on so so case, and selling at INFLATED prices,without much brand history or heriatge, costing alot more then a superb product, say the above mentioned Omega chrono.

then there is the unlimited limited editions commanding a premium of basically a colour coded change of an easily available original.  cosmestic versus intrinsic.

and reference to your example of art watches....you know i am a big fan of MBF, owning the HM1, HM2.2, HM3 and lately the LM1....but i dont like the HM4, at least not at the price point it is being sold. if i want a sculpture, I BUY A DAMN SCULPTURE!!! so even within same brand, there are hits and misses, in my eyes.

alot more to say, but its 5am here, and my eyes are sore and teary from a night of alcohol induced debauchery.

best,

Horo

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There I was....bored to tears at home and you had DE-BAUCH-ERY?

Yah Boo Hiss!

 

I'm only a phone call away........

 

MTF

Themed as horological debauchery!!

Best,

Horo

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I agree with your thoughts on the pricing trend of most brands. In fact, brands that are part of the bigger groups are probably the ones "guilty" of upping the pricing. Since when does a 3 handed ETA movement watch goes for $4k list?

good fit don't you reckon.  A chewy HM3, a H-Wing HM4, A couple of LM1s or whatever moniker they go by on each side of Princess Lea's head... An R2HM2 and a CPHM1... and all with a nice star wars fantasy story as a selling angle. 

as your "peeve" - LW -  used to advertise on this page for quite a while !

Kind regards,

anaesdoc

None of the senior people here have ever instructed me or others, as far as I know, to do otherwise.

Cheers,

Horo

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Thanks so much for your insight. I agree with every one of your points. I often wonder who's buying all these new watches from all these new and established watchmakers and it seems that anyone with graphic skills can CGI a watch, test the market, then sell watches. I know it's more complicated than that but to see the constant stream of computer generated images of watches make me wonder, "If you have developed a watch you want to sell, take a picture of the watch!" Otherwise it's vaporware.

I consider myself a collector and have spent a considerable amount (from  my viewpoint) on my collection..........with no regrets and while I agree with all your points, the fact remains that the market is currently supporting these inflated prices. If people weren't buying +$100k watches from Patek, Patek would either go out of business or lower the prices.
One would think that just as cheap digital watches killed the mechanical watch industry 30-40 years ago, one would think that the plethora of smart phones, tablets and etc., would have killed it again but I think that today mechanical watches are considered jewelry, status symbols, collectibles or investment instruments so the market is supporting the inflating prices. Something is only worth what someone else is willing to pay for it so as long as people keep buying, prices will continue to climb.
Personally, since I'm retired and on a fixed income, I can no longer support growing my collection so I'm happy with what I have.

Mel

Steve, thank you for the excellent post.  The watch industry today reminds me a bit of the portable tape players of the '70s and '80s.  There were many versions of the Walkman, but they were all, well, tape players.  A similar analogy is that the industry is a bit like the computer industry was before Steve Jobs came along and conquered it with elegance and simplicity.  I suspect the answer is somewhat more subtle than that, but I can't help that the industry is largely still selling the same dream of heritage and craftsmanship that got it out of the rut in the early '80s.  There is nothing wrong with the latter, it's just that things haven't moved on very much.  An experienced veteran in the industry once commented to me that there has been no major complication created in the last century; it's all been thought through years ago.  Perhaps an exaggeration in specifics, but perhaps true in the aggregate.

The price creep does not surprise me.  The world's growth of rich people in the last 20 years has been dramatically higher than the number of minute-repeaters made by Patek Philippe in the same period.  The high-end quality of the industry has simply reacted to pricing incentives allowed by such a group and has migrated from the well-off working class to the highly paid and entrepreneurial class.  Of course many copy-cats have followed this success and the larger hordes of successful individuals has followed by buying them.  In the physical sciences this is called an unstable equilibrium; an industry in danger.

The industry is, as you point out, ripe for disruption.  This could easily come from smart start-ups doing very surprising (but of course obvious in retrospect!) approaches to the business.  It would be great if it included new types of movements but I suspect it will be new ways of conducting business and removing the mystery from the traditional manufacture methods.  It may also put the buyer more in control of their timepiece. 

But I write too long; apologies I did not have the time to make this shorter!  Thanks again for the thought provoking.

Steve,

Some thoughts in response to your post...

1. Regarding prices, yes they have gone crazy.  It has been accelerated by devaluing currency and market demand.  To quote Warren Buffett:  "Only when the tide goes out do you discover who's been swimming naked." I suspect at some point in the future the emerging market economies will cycle and our friends in the Confederation Helveti will need to reassess their strategies and reliance on the growth in these markets.  In fact, I suspect a very different attitude to American retailers at this years show as the Far East market begins to soften and EU dealers concerned about the Euro cull back on buying.
2. I am not sure that I agree with this.  The elimination of bricks and mortor ADs will do nothing to reduce prices, just provide manufacturers to both sides of the transaction.  Additionally, we need ADs for more than watches but also for Jewelry. They are local merchants who have larger relationships than just watches.   Many have been business partners and carried water for these manufactures for decades, only to be rewarded during an economic downturn to the kind comments of Nick Hayek last year in WT and alocaton shortages while watches are sent to other regions of interest.
3. I am always careful to define what is art and what is not.  I am however very quickk to declare something as "good" or "bad" art. Yes, there is lots of repetition among designs and many bad ones, but that just makes the good ones more special when they come along.

Welcome back to the hobby!

 

Bob

I enjoyed reading through them.

One of the immediate thoughts that it spurred was that the very thing that a lot of collectors -- including myself -- are doing may be getting us into more trouble.

I refer to the "flight to quality," in which we sell a number of modestly priced and mid-priced pieces (earlier this year, I sold a bunch, at prices ranging from $4k to $40k) in order to buy a smaller number of "better" pieces.  I'm suddenly feeling a draft -- although I am trying to focus on pieces that I believe have extremely high quality and a dose of what for a better term I have been calling "authenticity," buying pre-owned watches from other collectors (generally once the watches have been in the market long enough that something of a price equilibrium has been achieved, usually well below original retail), and concentrating my purchases of new watches via a small number of ADs who are offering significant courtesies on pricing.

The exception is on a few new watches from independents, whose prices have gotten nutty lately ($85k for a three hand watch?) but whose costs are also bizzare.  I know the cost structure of one independent (not that one...) pretty well, and understand that with the cost of developing one's own movement, making watches in very small volumes per item at low total production numbers per year, fighting rapacious and slow suppliers, and allowing substantial margins for the retail trade, there frankly ain't much left even at todays high asking prices. 

I'll continue to follow this thread and if time permits try to contribute more, but at the moment I need to leave for my flight to Geneva .

All the best to you, Steve!

Best,

Gary G

Thanks for your perspective.  State of the industry aside, tell me, do you still LOVE watches themselves as passionately as you did before becoming an industry professional?

Cheers,
Daos