Patek Philippe

Recently on Instagram I wrote a series of posts concerning Patek and the grey market. I put them together to share here. Hope you all enjoy. 

Some find it easy to place blame on Patek regarding the Grey Market issue. Through my journey with Patek, I don’t see those comments as reflective of the truth. Now it’s one thing to blindly take someone’s word at more than face value and another to see those words in action. When I go on holiday, I always try to find the time to pop into a watch store and have a chat. Once I was in a Rolex retailer that had some Patek stock in the window. I queried why only to find out they had lost their Patek dealership. Following on from that conversation they proceeded to show me a selection of limited editions and sought after models (Nautilus and the likes), some even dated few years ago. I came to learn this retailer had held back a lot of stock to sell on the grey market at market prices. Boldly and unashamedly they even mentioned how they used to sell to dealers. So it was absolutely no wonder why Patek withdrew their retailer status. It was one of the clearest demonstrations of Patek actively trying to deal with this unprecedented situation.

I have known Patek (first hand) to take part in mystery shopping to identify where flipped watches came from and blacklist the client. Further, they dedicate significant efforts to trawling the internet looking for “evidence”. However, Patek Philippe is a watchmaker first and foremost. They only have limited resources they can dedicate to the pursuit of flipped watches. They also expect a reasonable level of cooperation from their retailers. I think some questions rightfully should be raised when the first pieces of a “hot watch” allocated to VVIPs get resold. I also think a harsher line should be taken with ADs (even if they do close a few of them down). Yet it’s an impossible cat and mouse game that will probably never have a winner. Some clients and ADs masquerade under elaborate and sophisticated lies to help oil the wheels of the grey market machine. Knowing what’s what isn’t always clear cut. And this is all without even getting down to other issues such as justifiable reasons for resale. It’s an extremely difficult issue with no clear path. I felt it necessary to share my experiences for things are not always as they seem

Part I 

Earlier in summer I posted a 5712 with a caption defending Patek in their battle against the grey market. I pointed to real world examples of them taking action in different ways to highlight how they have a somewhat appropriate strategy for these challenging times. I also made note of how Patek is a watchmaker and not a horological police force which is worth remembering. Still they dedicate significant resources to combatting flippers. Of course Patek could improve their handling of how pieces are “flipped” (especially concerning AD punishment and KYC) yet in general I had positive experiences to share with their approach. From first hand accounts of ADs being closed to their mystery shopping tactics, certainly there is a coordinated response from the Maison. The response to these posts was incredible. However mixed in were some quite curious arguments. I have highlighted three points I’d like to address that I feel cover the general sentiments of those who disagreed with what I wrote. 1) Patek should increase production to match demand. 2) Patek should raise the RRP to market price. 3) Patek should abandon their ADs and adopt a boutique focused strategy. I will spend the next few posts arguing against these three points.

Part II 

I felt the response of “production should be increased to match demand” ignores the time it takes to train watchmakers, especially on the scale we are discussing. Moreover, to make such an extraordinary jump in production would mean Patek sacrificing several core principles. In the elusive book “Patek Philippe: The Values of a Family Watch Company”, Philippe Stern mentions how because of limited production, it “adds to the sense that, in owning a Patek Philippe, you possess something of rare value”. He goes further stating “in many ways the owners of our watches form an exclusive club”. Exclusivity and rarity were always a part of the Patek philosophy and in decimating this, not only would Patek undermine what they stand for, they would help evaporate demand. Rarity is part of the allure. Patek has always been stubborn in the best of ways. When the rest rushed to steel to make more affordable watches, Patek refused. They knew it would harm their value and identity. Patek has been concerned about safeguarding value for decades. Their magazine has a section dedicated to auction prices after all. Harming themselves and their customers in an attempt to restore some fanciful equilibrium would ultimately serve to the detriment of the company. It would cripple value and rarity and make demand remember forgotten miseries.

Raising supply to meet demand would open Pandora’s box to allow the Nautilus to dominate production. When the ramifications of this move are properly understood by the market, demand may drop until such watches are collecting dust on shelves and in the process would assist in destroying creativity and variety. The core of Patek would suffer while trends of a moment control production. Any creativity would be chained to market demand with no long term vision. So references like the 5070, unpopular for its time, would never have existed. Often the market knows not all. Time makes champions, not opinions of a moment. In short, raising production to meet demand would assassinate their varied catalogue, make the Nautilus the identity of the company and ultimately cripple value across the board.

“Rarity is the essence of art” - Philippe Stern.

Part III

The very early 1920s saw the Weimar Republic plagued with hyperinflation. Citizens would literally stuff seemingly endless notes into wheelbarrows just to afford a loaf of bread. Occasionally, by the time they arrived at the grocers, they would have to turn back to collect even more cash because the price had once again doubled. This is the image that springs to mind when I first heard the suggestion that Patek should set their RRPs to market price. If a client were very unlucky, by the time he got the call and was on his way to the store, he might leave empty handed because the price has moved yet again. It’s preposterous to support this idea. What metric would be used to determine market price? Especially for new releases, would it be a matter of guessing the market as opposed to RRPs that make sense for the company’s catalogue? How quickly would companies react to the changing market price - especially when it falls?

If we allowed the market to dictate RRPs then suddenly we would have some Nautilus variants selling for more than minute repeaters. This is disrespectful to the craft. Patek has a responsibility to protect tradition so to lower prices of calendars and some repeaters while raising prices of sports watches significantly is antithetical to their own philosophy. A minute repeater cannot and should not ever retail for less than a Nautilus. Patek has previously created pieces the market didn’t want but was later enormously appreciated. They didn’t follow trends of the time but rather boldly led the way by enacting their own vision with little regard to market behaviours. Markets fluctuate - Patek remains firm. If they were to exclusively follow the market then perhaps many great references, that struggled to find good homes before would never have been created.

It would be foolish to think Patek’s prices are based on intrinsic value of craftsmanship alone, their name certainly plays a part. Yet still we are left with RRPs that broadly demonstrate a sensical approach by the company. If fashion trends spawned by hype beasts and speculators dictated the RRPs for Patek, it would be a miserable state of affairs.

Part IV 

In 1854 Tiffany & Co placed an order for 150 watches from Patek to start their relationship. 1854. 150 watches. Momentous. In 1872 Patek and Gondolo & Labouriau established a relationship that at its height was responsible for selling roughly one third of all of Patek’s production. In fact, so successful was this relationship at establishing Patek’s presence in Brazil that the word “Patek” became a substitute for the noun “watch”. Incredible. These are just two examples from the early years of Patek’s history where ADs have played a pivotal role in the expansion of the Maison. Yet between then and now, an army of loyal (often family owned) ADs have retailed Patek’s catalogue through the good years and the bad. Through the crises and the gold rushes. It is an understanding of history, one filled with deep and meaningful partnerships, that has led in part to Patek’s refusal to opt for a boutique-only route.

Throughout the centuries, Patek has sought to expand their markets by partnering with local ADs who know their markets with great expertise. They have been pivotal in bringing the now renowned name of Patek Philippe far and wide. Patek celebrates this in the most grand of ways, with special editions to mark anniversaries of their respective partnerships. There is a clear understanding of history but most importantly loyalty. So when I am asked after my defence of Patek’s actions in the grey market, why they don’t abandon ADs in favour of a Patek owned distribution network, I can only ask, where is the loyalty in such an action? Patek expects loyalty from their customers not to sell and they expect loyalty from their ADs in purchasing stock. It would be antithetical to their own philosophy to abandon treasured partnerships simply because the times are good. I have dedicated numerous posts to the vast corruption that occurs within an AD network. Patek, where they can and with enough evidence, will close these ADs. And yes, more must be done but to turn their backs on the many superb ADs out there would be a great tragedy of ironies. More so for the family owned ADs that have spent time and resources to retail Patek and build a market.

Part V