Retail Pricing of Gens.... An interesting read

[Guest]

Ive seen Gens priced so "cheaply" sometimes that I became curious on what exactly goes on with the prices of watches.

taken from www.ablogtoread.com

The watch buying landscape is relatively interesting as retail industries go. Most interesting or rare watches fall within the "luxury item" group given their pricing. A distinct feature of this group involves a good deal of efforts to keep prices high. High prices don't necessarily just mean high profits for the retailer. A psychological effect to the consumer of keeping prices high is to elevate the status of a product, given the existence of a suitable market willing to pay for high status goods that is. In this arena, watches that are priced higher have the illusion of more prestige, rarity, and class. While often times you get what you pay for, the price of a watch is not always going to be commensurate with ownership experience or overall satisfaction. The truth is that watch pricing is a game, and a game that watch companies fight to win.

The concept of an authorized dealer is simple. You cannot sell a watch unless the manufacturer authorizes you to do so. They will only authorize you to sell a watch if your store is nice enough, you maintain a good image, keep prices above a regulated minimum, and promise not to place watches on the gray market. In exchange you get the supreme honor of selling for them and being able to tout you are an authorized dealer. The benefit to the consumer is that they know watches purchased from an authorized dealer are real, and that warranty and service claims will be honored by the manufacturer.

To implement the authorized dealer restrictions, manufacturers of high-end watches individually number each watch. These serial numbers or "codes," can be traced back to the store authorized to sell the particular watch. Because watch pricing is inflated to a high degree, it is necessary for watch manufacturers to police this system judiciously. A watch dealer will acquire a watch in two ways from a manufacturer; either purchasing the watch flatout at a dealer price, or on a consignment basis (where the retailer does not actually buy the item, but merely "displays" it for the manufacturer who either rents the space or pays a commission to retailer when the item is sold). Both methods have plus and minuses, but the majority of watch retailers purchase watches at dealer prices from the manufacturer and then resell them. At the basis level, the manufacturer has a retail price which they "suggest" and there is a different price that the dealer pays for the watch. The difference in those prices that the dealer makes in a sale is their profit.

The system is riddled with middlemen. For instance, the distributor who sends/imports the watches takes a cut, and another big cut is given to the actual salesperson who makes the sale to the consumer. Often times the difference in price from what the retailer/dealer pays for the watch, and the suggested manufacturer's retail price is 40-60%. In order to make prices more competitive, watch sellers often want to reduce profit margins to lure consumers with better prices. While this practice benefits the retailer and the consumer, it does not the manufacturer who has already made their money on the watch. Their interest after selling a watch to a retailer is branding, and getting customers to buy more watches. Thus they want to ensure the highest possible prices.

Most watch sellers online are not authorized dealers, and that is potentially not a problem. A non-authorized seller can offer prices below an authorized seller because they are not bound by an agreement with a manufacturer. In order to maintain themselves, unauthorized retailers will "decode" watches. This is the process of physically removing the serial number or code on a watch. There are different ways to do this of course. You have the back-alley scratch it off with a sharp object - to the professional neat and clan removal. Not having the serial number on the watch protects the watch seller as each watch can be traced due to the codes. It is not so much for the gray market seller, but more for the original authorized seller that often places the watch in the gray market to begin with.

The risks of purchasing a gray market decoded watch are that the original manufacturer will refuse to service the watch, or refuse to honor a warranty. For most people this is not a big deal. There are tons of places to get a watch serviced or repaired, which are almost universally cheaper and faster than the manufacturer. Further, these places can request specific parts from the manufacturer, so there are actually only a few instances when only the manufacturer can repair a watch.

Further, some buyers may feel uncomfortable purchasing a gray market watch or one that has the serial number "wiped." This is a highly individual sentiment difficult to comment on and often comes down to the savings involved. The ability to save many thousands of dollars in exchange for some number is too appealing for most. On the other hand, you have collectors who are less concerned about the initial price of the watch because they either want to invest in the watch or simply add it to their collection unblemished.

All watch consumers should be aware of the retail landscape and where their money is going. Valuation can often be a highly ambiguous concept. You don't just pay for the materials that go into a watch. You also pay for the design, construction labor, exclusivity, marketing, distribution, and then profit to a mixture of entities. Knowing what you are buying, and who you are buying from is important. A good deal of watch stores online do not themselves have inventory, but rather work with a number of inventory partners or from distributors. The concept makes sense. Why carry a stock of $5,000 watches when you have to buy them yourself and wait for someone to buy them from you at a higher cost? Instead, you can place a picture of the watch online and once someone orders it, you can then buy it from the distributor at your wholesale/dealer rate.

The consumer can benefit from buying the right watch, at the right place. One of the reasons eBay is an excellent place to buy watches, is that there is always a large availability of new watches. Often times you are presented with a new watch at a highly discounted rate, gray market or not, these are not fake watches. Further, the availability of well cared for used watches on eBay makes it difficult to pass up.

So now the concept of a decoded watch is clear, and you are aware of the benefits and risks. In the case of any doubt, the best course of action is to talk with the seller, at least now you know what types of questions to ask.

[mactower]

Thank you for posting this, a very interesting read.

M.

[Lobster]

this is nice, thanks bud

[Ronin]

Anyone know if Jomashop actually wipes serials?

[Guest]

I dont know about the wiping serials part....Here in my homeland we have a well known and established jewelry shop...(think supper high end Torneau ish) and he (owner of the store) told me he can get almost any non-in shortage watch for 30-40% under what I see in the stores in the states....

[Bike Mike]

Ive seen Gens priced so "cheaply" sometimes that I became curious on what exactly goes on with the prices of watches.

taken from www.ablogtoread.com

... There are tons of places to get a watch serviced or repaired, which are almost universally cheaper and faster than the manufacturer. Further, these places can request specific parts from the manufacturer, so there are actually only a few instances when only the manufacturer can repair a watch.

I disagree with this. Faster then the manufacture…sure...cheaper as well…however the ability of any repair shop to service gen timepieces is becoming more and more difficult each day. Many manufactures now require any service facility to be approved before they will even sell parts to them. Rolex for example, requires the watchmaker performing the service to have certifications such as CW21 (here in the States), and certain equipment that must be inspected and evaluated by Rolex prior to their official approval. Once you are approved then you can order parts, but to order parts Rolex wants the watch serial number and old/bad parts returned to them.

Rolex, Omega, Tag, Breitling and several other brands are doing this. My buddy just had Omega come in at certify his facility. They looked at what tools he was using…he was required to buy a Horotec screw driver sharpener to hollow grind his blades…absurd! I was at his shop working when Rolex came in…they as well looked at everything even going as far as to measure the RPM speed of his polisher and brush wheels! Nuts! Rolex goes one step further…any typical on hand service parts such as gaskets, crowns, stems etc that are not used to service their watches within a year, need to be sent back to Rolex, just so the shop owner can buy them back as the increased price!

Manufactures are now taking control of the service industry so that their products retain their level of "Excellence" as well as preventing Gen parts from finding their way into the rep World. If repair shops want to stay in business repairing high end timepieces they need to make the investment to do so.

[Ronin]

@Bike Mike, reading that makes me wish for a solid aftermarket, and 'acceptance' of the aftermarket by the masses. Wouldn't be cool if we had an AutoZone equivalent for ALL watches.

The funny thing is, didn't they crack down on the auto industry for attempting what these guys are doing? Then again, cars have become more of a need than a luxury item want I guess.

[Guest]

Ronin's idea of the year!!

right next to a Carmax lot a

WATCHMAX FTW!!!!!!!!!!!!!!!!!

[Bike Mike]

@Ronin, You are correct it was tried...the issue is, unlike cars, watch manufactures have so many models that do not share a lot of the same parts...so aftermarket parts do not make sense unless the watch is high volume such as a Rolex Sub.

[L8terz]

Great read & very informative.

[BROM]

Anyone know if Jomashop actually wipes serials?

They did not on an Oris Diver I bought from them about 6 mo ago.