One of the more frequently-recurring questions on the watch enthusiast message boards is, "How does Brand X rank compare to Brand Y?" or "How much money should I spend on a watch?" The answers to this type of question will always be subjective in nature, especially when the question is posed in terms of brand prestige. “Is Brand X considered more prestigious than Brand Y?” That’s an ambiguous question, as there is no universally agreed-upon way to quantify and measure prestige. Do both of the brands have a rich and uninterrupted history? Do both brands produce their own movements? Is Arnold Schwarzenegger an unofficial ambassador of either brand? Many of the topical threads on the watch forums concerning brand prestige eventually devolve into back-and-forth arguments that lack quantitative substance. Rather than attempt to rank the brands by prestige, we thought it would be more interesting to look at very simple measurement of worth – price.
Given that all largest luxury watch brands offer multiple models, a price list of models for any given brand can be thought of as a data set of numbers. The price-related statistical quantities derived from these sample sets can be used to compare brands amongst each other. The most frequently-used statistical measurement is the arithmetic average or mean, an easily-grasped statistic. However, the average price of a brand’s model line is easily distorted by the presence of halo models, highly complicated timepieces that represent a significant departure from the high volume watches in in the brand’s portfolio that are statistical outliers. The median price is a better representation of a brand’s positioning in the marketplace because it is not distorted by the presence of a few halo models.
In 2011, Robert (Bob) Berger analyzed the price data for twenty eight luxury watch brands using the 2011 Wristwatch Annual Guide(for watch models and pricing by brand) and Minitab Statistical Software. While the Wristwatch Annual Guide does not include every brand’s complete model line, the models included for every brand in the guide are a fair representation of the brands’ full model lines. Using the median price distribution, the twenty eight brands were divided into four groups or quartiles (tiers). The centerpiece of the analysis was an informative box and whisker diagram. As a first attempt to update the material to 2013, TheTickingTruth looked at these same twenty eight brands using the 2013 Wristwatch Annual Guideand Excel. An updated box and whisker plot was quickly produced using Excel, which is shown below. For more information on interpreting box and whisker plots, consult this Wikipedia entry.
First, the important disclaimer: The watches that are chosen for inclusion in the Wristwatch Annual guides may not be representative of the brands' full model lines. Brands will, in general, choose to showcase their latest and greatest models in the guide, which may skew the data and resulting statistics.
Comparing the 2013 data to the data from 2011, there are a few minor changes to note. First of all, the median price of the median price distribution has increased from $14,875 to $20,400. Using the average US CPIs (Consumer Price Index) from 2012 and 2010 (the Wristwatch Annual guides are published in the previous year), we can express the 2010 price data in 2012 USD, thereby accounting for the effect of inflation. Working in 2012 USD, the median of the median retail prices for these twenty eight increased from $15,660 to $20,400 between 2010 and 2012, which is a 30% increase. Given the volatility of the price increases from brand-to-brand, this number is ultimately meaningless. It is more interesting to look at the changes in the median prices on a brand-by-brand basis, as is done in the two tables below.
Summary of the median price data for the “TZ Brands” using the 2011 and 2013 editions of the Wristwatch Annual buyer’s guide.
Summary of the minimum and maximum price data for the “TZ Brands” using the 2011 and 2013 editions of the Wristwatch Annual buyer’s guide.
The average (inflation-adjusted) increases in the minimum, median and maximum prices (by brand), were 19%, 21% and 21%, respectively. Looking at the distribution of price changes across brands, the variance was lowest in the minimum prices, followed by the median prices and the maximum prices. Looking at the minimum price, i.e. the price of entry into the brands, we see the largest increases for Sinn, Vacheron Constantin, Blancpain and Montblanc. Looking at the median prices, i.e. the price of a typical watch from the brand, we see the largest increases from Montblanc, Rolex and Seiko. The data for some of these brands is a bit difficult to interpret. For example, Seiko is always overhauling its high-end sales strategies outside of Japan, so the basket of goods is changing drastically every year. Rolex has released updated versions of the iconic Explorer and Submariner, but the new complications like the Sky-Dweller are being released in precious metal versions only. However, the numbers do strongly suggest that Montblanc is currently in the process of moving upmarket. The recent introduction of manufacture movement models across the brand’s entire product range support these figures and Montblanc’s novelties at the 2013 SIHH trade show indicate that this trajectory will continue for at least another year. Montblanc has added new manufacture chronograph models to the Timewalker line and they continue to showcase new complications in the upscale Nicholas Rieussec and prestigious Villeret model divisions.
The US watch market does not operate in a vacuum and, as such, outside factors deserve further consideration. The majority of the luxury watches showcased in Wristwatch Annual are produced in Switzerland using Swiss labour and Swiss parts, so it stands to reason that US retail prices are influenced by the strength of the USD against the Swiss franc (CHF). Looking at historical USD-CHF exchange rates, it turns out that the CHF appreciated against the USD between 2010 and 2012. The fluctuations in daily rate are quite volatile, so we'll restrict our focus to the yearly-average USD-CHF exchange rates. In 2010, 1.00 USD could purchase 1.04 CHF, while in 2012 1.00 USD was only worth 0.938 CHF - roughly speaking, a 10% decrease. As for precious metals, the story is mixed. Between 2010 and 2012, the average price of gold shot up from $1225 to $1669 per oz - a healthy 36% increase. During the same period, the average price of platinum actually dropped a hair, from $1609 to $1550 per oz. While the price of gold and its short term volatility provide an ideal narritive for the the price adjustments we observe, reality is decidedly more complex. Most of the large brands and suppliers deal in futures contracts to eliminate the volatility, although long term movements in the real price cannot be buffeted. Furthermore, as the price of a watch increases, the cost of the precious metal material represents an ever-shrinking portion of the pie, yet some of the largest observed price increases were for prestige brands' top-end models (maximum price). That supply and demand are outsized factors in the luxury watch market should come to no one's surprise. Still, the trends in watch pricing are worth further scrutiny, so we'll return to the issue in future posts.
While the observed pricing trends are very interesting, we felt that twenty brands was a bit limited in scope for a series on brand positioning. In Part 2, we'll focus exclusively on current brand pricing and double the number of brands in our analysis.