the hidden premium

[poretl]

It makes one wonder. The following watch sells for $8.89 INCLUDING shipping from HK to everywhere in the world and of course PayPal and eBay fees.

http://www.ebay.com/itm/Stylish-Mens-Gents-Leather-Sport-Quartz-Wrist-Watch-Black-Band-Dial-Japan-Movt-/160655643664?_trksid=p4340.m1374&_trkparms=algo%3DPI.WATCH%26its%3DC%252BS%26itu%3DUCC%26otn%3D15%26ps%3D63%26clkid%3D5936631971815675751

This is a real watch, everything working, and if I may say so it looks very very good. These guys only sell watches and look at their feedback. No complaints and everyone is happy with their watch.

Of course this is not Panerai but if one can manufacture a decent watch with $3 it's REALLY hard to comprehend how a watch like Panerai (which are extremely simple watches) can cost $10000. One usually believes that a rep Panerai, which can sell up to $350, is cheap but is it really? We are overpaying for genuines and we are overpaying for replicas. The reason why a rep Panerai is expensive is the same as why agen Panerai is expensive.

But I take all the above back. Everything I said. Noone is overpaying for anything. If someone puts out a product at a certain price, no matter how ridiculous, and the market does not reject it then it's not overvalued. The market speaks and the market is the one that determines the fair value of everything. So these watches are overpriced and overvalued for the ones that observe, the non-participants. Like the ones who choose to buy the $8.89 watch above. But definitely not for the ones who choose to pay up $10 000 for a watch whether it has a 3-day, 5-day or 300-day power reserve.

[Jkay]

A three handed A21j watch sells on the street for $40 in Asia. Hell, the A21j NoobMariner was on sale on another forum for $54 for a year.

Making a watch costs less than people suspect.

ReplicaMake had the NoobFactory DSSD A21j on special sale for a few months for $89 at one point.

[highoeyazmuhudee]

youd be surprised to learn that a submariner costs about $500 to produce. COSC testing and marketing are probably the larger part of the budget

[Logan]

The whole point of branding is to get your customers to pay more than they otherwise would.

A real Panerai probably costs surprisingly little to produce.. not more than a few hundred dollars at the most, maybe less given the level of automation in Swiss factories now.

I would never buy a genuine Panerai.. but bizarrely enough I'd consider a Richard Mille RM11 for $80,000 if I had the money.. illustrating your point perfectly..

[GloStiX]

As someone who has lived in China for 5 years, yes we are indeed overpaying for our reps.

We need to quit being a bunch of suckers, but when someone who wanted to buy a $6,000 Rollie sees he can get 99% similar for $300, he's happy to jump on that. Me, I got into reps as a kid in high school so I never even started from that "genuine buyer POV". A cheap Chinese watch that cost $30 to make, you want me to pay $300 for it?

It's a rep forum culture thing. I've been lurking a buncha forums since 2007/2008 and I'm appalled at how we as a community have no balls to stand up to dealers. I mean aside from blatant cases in which ppl use forum admins to help resolve situations, we practically justify them lying to us, "Swiss ETA" movements being a prime example. Or stuff like no QC and crooked cyclopses, etc.--Casio, Invicta, Seiko, blah blah can do better and printing 5 different letters on the dial doesn't double the cost of the watch.

Or you can just say I'm a cheap bastard, another $100 don't mean nothing to you, it's just a "buck" right? Well especially in this economy, and as a college student now, I care about how I'm spending my money, and you should too.

[slask111]

As someone who has lived in China for 5 years, yes we are indeed overpaying for our reps.

We need to quit being a bunch of suckers, but when someone who wanted to buy a $6,000 Rollie sees he can get 99% similar for $300, he's happy to jump on that. Me, I got into reps as a kid in high school so I never even started from that "genuine buyer POV". A cheap Chinese watch that cost $30 to make, you want me to pay $300 for it?

It's a rep forum culture thing. I've been lurking a buncha forums since 2007/2008 and I'm appalled at how we as a community have no balls to stand up to dealers. I mean aside from blatant cases in which ppl use forum admins to help resolve situations, we practically justify them lying to us, "Swiss ETA" movements being a prime example. Or stuff like no QC and crooked cyclopses, etc.--Casio, Invicta, Seiko, blah blah can do better and printing 5 different letters on the dial doesn't double the cost of the watch.

Or you can just say I'm a cheap bastard, another $100 don't mean nothing to you, it's just a "buck" right? Well especially in this economy, and as a college student now, I care about how I'm spending my money, and you should too.

I agree with you. We accept the prices and the "[censored]" that they bring as long as they are a "trusted dealer". We are paying premium for our watches. It seems the logo on the watch.. gen or rep.. bring up the price.

But then again.. we buy them.. so what to do?

[FxrAndy]

Something is worth exacty what some one can sell it for, or what some one will pay for it, telling the rep dealers that we wont pay the prices they are charging is a bit like telling rolex the same, there are enough people that will pay the price rep or gen. if you frequent gen forums you will notice alot of sentiment about people saying they would not buy a new rolex after all the recent price increases, Do Rolex care? no because there are enough people in the world that will pay the price.

[Ronin]

Two quick additions. The watch in that auction is 1.) Quartz, and 2.) the Chrono is faux/non-working. In short, it has a $1.00 movement (wholesale), and probably another $4.00 in parts (battery, hands, dial, strap). The seller is probably making $2.00 USD after fees and shipping, etc.

As far as mark-up on reps here. I think some of that is to cover the risk. Risk of confiscation and thus a re-shipment by our trusted dealers. Risk of the law, etc. If I were shipping goods internationally with the threat that some % won't make it to the destination, I would probably mark my stuff up double to cover my a$$.

Supply & Demand +Risk Bonus = Rep Price.

[mikellem]

youd be surprised to learn that a submariner costs about $500 to produce. COSC testing and marketing are probably the larger part of the budget

Marketing is the big number in my eyes...

MM

[poretl]

I never compared the watch in the listing with a rep Panerai. It was only given as an example to show that if a watch like that costs $3 then a rep Pan cannot cost more than $40. And the main point of this all is that if you removed the word Panerai from the rep Panerai and you changed it to "NiceWatch", i.e. no brand, while you kept everything else the same, it would be found on eBay for $42 including shipping.

But this is where the problem is. It's a Panerai. Fake yes but still. It's a Panerai.

OK, what is the bottom line of all this? Simple. The rep industry is WAY WAY more profitable (translates to rip-off) than the gen watch industry. Let's not get into a lot of details. Let's keep it simple.

Panerai sells a watch at $5000. The true cost is I'm sure way more than $1000 incuding R&D, design, marketing, manufacturing etc. Less than 5X the cost. And how many do they sell? Of course a limited number (by the way this is another reason the watches are this expensive, very few sales while they have to cover some minimum expenses for the company to continue to exist). And plus they have to worry about keeping their doors open next year by innovating, hiring good people, monitoring the competition etc. Nothing is granted,

A rep costs $30 and it sells for $300. 10X the cost. And they sell way way more as long as they keep themselves busy. Plenty of watches to copy and if one brand ceases to exist thank God there are another 1000 of them.

In both cases we are overpaying. But from where I'm standing it looks obvious we are overpaying more for the reps than we are for the gens. But as said before, it's the market that ultimate decides what's a fair price and what's not. But don't start feeling good just yet. Be careful because noone said that the market is smart enough to be able to discover the true prices of anything. The markets are usually stupid. Take for example the stock markets. Everyone sells when prices are low out of panic and fear and they all buy like stupid morons when prices have already skyrocketed through the roof out of greed, complacency and mainly stupidity. They say the price of a stock is the 'fair' price because the markets 'know' but looking at it closer the market doesn't know [censored]. The markets are dead asleep and they can't tell their ass from their face.

All that being said, we'll continue to buy both gens and reps unitl we drop dead and buy [the stock market] high and sell low. That's a plan. Let's commit to that.

Edited January 30, 2012 by poretl

[mgarrine]

the poretl arguments are really interesting. And the whole topic is. I think the point is always the same when we consider and reasonate about counterfeit things (bags, watches, apparel, etc..) its imho brand sentiment, and shared values (among our friend, families, etc.).

I would never buy a fake jeans/shoes/cap/belts and I do spend insane money for these things, but I'm not taken by that sense of "fakish" when I do spend for rep watches. Maybe not for the money (If do sum my latest spending for shoes, jackets, etc I could have bought a gen pam like 000 or 111...) but for our ( I mean people who love reps) attitude towards watches and rep world itself.

REp business is a kind of game, with a continue sense of novelty ("have been this point solved?...")..

That is maybe why we spend money for overpriced reps. We are "in love" with the brands (noob factory, h factory, and the dealers..) and we look always for new emotions..

Imagine to came across a dealer who sells REP of the REPS. Maybe lot of us won't feel ok to buy a REP of REP , since It could be considered at a lower lever (not for the quality itself)...

I'm just a noob in the rep world, but I'm already taken by the fever. And I'm already linked only to some dealers and not others....

[FxrAndy]

Reps of reps exist the vintage subs with the stumpy CGs are a rep of MBWs even down the the polex engraving

[StormTooper4]

I get the OP's point but those cheap watches are cheap for a reason

They'd be well Sh!te and you couldn't pay me to wear them ,

to me they are a waste of the world resources and bandwidth and shouldn't be made

[highoeyazmuhudee]

we must not forget that rolex and any other fore mentioned company is a business, they exist to make money, people will buy at whatever ludicrous price point they put out this year, that is their market. they justify these high prices by stroking the ego of those who can afford their new MSRPs with words like "exclusive" and "deserving"

[Jkay]

by stroking the ego of those who can afford their new MSRPs with words like "exclusive" and "deserving"

Yes.

[chefcook]

Even though you pretend to not compare the shown watch to a Panerai you do it.

What you get für $9 is no way near the material quality, the design complexity or the the built complexity of a mechanical watch.

For example the dial of a real Panerai does cost more than 80 Euros ($105.70 ) to buy. Not for the customer, for Panerai!

That is what they paid their suppliers already in the year 2000 and for a good reason named quality. I know that because I know a company which produced Panerai dials in the past.

The other point you do not consider in your calculation are the dealers. Usually in this industry an authorized dealer pays roughly 50 to 60% of the final MSRP. That does not mean that the dealer makes 100% profit because they have to pay rent, personell, insurance, interests, debts, give discounts, pay taxes and so on. A dealer in the luxury industry needs that margin to have a 12% to 15% profit after discounts and running costs.

After having worked with such companies I can assure you that the cost breakdown typically looks like this for a watch wearing a $5k sticker:

• Dealer Margin 45%: $2,250
  
  Not we watch nerds are the manufacturer's customer. The dealers are their customers. It is not in the manufacturer's interest to take care of us and whoever visited watch shows like SIHH or Baselworld knows that. Unless you are one of their customers, meaning dealers, they won't care about you.
  After serving their real customer the manufacturers have a budget of $2,750 fpr the $5k watch that splits up into:
  • Manufacturer Margin 20%: $550
    
  • Logistics 12%: $330
    
  • Warranty 4%: $110
    
  • R&D 5%: $137.50
    
  • Marketing 14.5%: $400
    
  • COSC Testing: $86
    
  • Budget to built and pack the actual product: $1,136.50
    

  No one is taking a dubious profit out if a $5k watch. Usually you will get it from your dealer in the range of $4,500 unless he was lucky enough to have something really rare and then he still has to pay a lot of stuff from this.

  The watch manufacturer has to pay interests, debts, make new investments, serve shareholders etc.

  I also think that your numbers for reps are a little optimistic. With my end link project I am learning more and more about the cost structure of reps and it gets more and more clear that we don't get ripped that much. It is more that a bracelet for a $300 watch costs $30, not the whole watch. But then you still have to build the rest of the watch and get it into the market to the actual customers.

  People usually underestimate the cost of actually selling something.

[Eton]

Even though you pretend to not compare the shown watch to a Panerai you do it.

What you get für $9 is no way near the material quality, the design complexity or the the built complexity of a mechanical watch.

For example the dial of a real Panerai does cost more than 80 Euros ($105.70 ) to buy. Not for the customer, for Panerai!

That is what they paid their suppliers already in the year 2000 and for a good reason named quality. I know that because I know a company which produced Panerai dials in the past.

The other point you do not consider in your calculation are the dealers. Usually in this industry an authorized dealer pays roughly 50 to 60% of the final MSRP. That does not mean that the dealer makes 100% profit because they have to pay rent, personell, insurance, interests, debts, give discounts, pay taxes and so on. A dealer in the luxury industry needs that margin to have a 12% to 15% profit after discounts and running costs.

After having worked with such companies I can assure you that the cost breakdown typically looks like this for a watch wearing a $5k sticker:

• Dealer Margin 45%: $2,250
  
  Not we watch nerds are the manufacturer's customer. The dealers are their customers. It is not in the manufacturer's interest to take care of us and whoever visited watch shows like SIHH or Baselworld knows that. Unless you are one of their customers, meaning dealers, they won't care about you.
  After serving their real customer the manufacturers have a budget of $2,750 fpr the $5k watch that splits up into:
  • Manufacturer Margin 20%: $550
    
  • Logistics 12%: $330
    
  • Warranty 4%: $110
    
  • R&D 5%: $137.50
    
  • Marketing 14.5%: $400
    
  • COSC Testing: $86
    
  • Budget to built and pack the actual product: $1,136.50
    

  No one is taking a dubious profit out if a $5k watch. Usually you will get it from your dealer in the range of $4,500 unless he was lucky enough to have something really rare and then he still has to pay a lot of stuff from this.

  The watch manufacturer has to pay interests, debts, make new investments, serve shareholders etc.

  I also think that your numbers for reps are a little optimistic. With my end link project I am learning more and more about the cost structure of reps and it gets more and more clear that we don't get ripped that much. It is more that a bracelet for a $300 watch costs $30, not the whole watch. But then you still have to build the rest of the watch and get it into the market to the actual customers.

  People usually underestimate the cost of actually selling something.

  Thanks for the info, appreciate the perspective!!!