This is an old (2000) Forbes article that I ran across through a reference in a thread at WUS. Still an interesting read IMHO.
http://members.forbes.com/global/2000/0918/0318046a.htmlTime Is Money
Joshua Levine, 09.18.00
In late July Financire Richemont, a holding company for costly Swiss watch brands, paid $1.86 billion to acquire Les Manufactures Horlogres, another Swiss watchmaker. The price works out to nearly nine times sales. Was it fancy technology that Richemont got? Far from it. With Horlogres it picked up the 167-year-old movement-maker Jaeger-LeCoultre, along with the watch brands IWC and A. Lange & Sohne, which means that it got its hands
on a collection of workshops where men in white aprons construct tiny little spring-wound timekeeping mechanisms accurate to within eight seconds a day. That isn't even as accurate as a $10 quartz Timex. Horlogres is not high tech. It is what the Swiss call "high mech."
To understand why brands of mechanical watches are so sought after you have to understand why the watches are sought after. To do that you've got to look at people like Brian Ehrmantraut. Now 37, Ehrmantraut knew nothing about watches when his employer, Network Appliance of Sunnyvale, California, went public in 1995, and he suddenly found himself with lots of money. All he knew was that James Bond wore a Rolex Submariner, so Ehrmantraut bought one, too. That was just the beginning. Today he's a watch junkie, with 80 fancy mechanical
watches and counting. "I discovered that for the price of a Ferrari or two, I could put together a pretty good collection," says Ehrmantraut. His latest purchase is a handmade $69,000 Tourbillon by F.P. Journe, who makes only a few dozen watches a year.
"It's an antidote to the technology I work with every day," says the semiretired techie. "These things are made by people sitting at benches, not computers. When you look at one of these things through a magnifying glass, you can see that a human being worked on it. It can never match a $50 Swatch, but I really like the futility of that--there's something noble and tragic about it."
Not so tragic if you live along the banks of Lac Leman, where Geneva's high-mech moguls keep their low-key estates. Two decades after it was left on the same dust heap as the manual typewriter and the rotary phone, the $5.5 billion, 400-year-old Swiss watch business suddenly looks as frisky as a wireless startup. Today
there is even the rare newcomer Swiss luxury brand, which says a lot in a business where a centuries-old pedigree counts for everything. Christian Bedat, 35, launched Bedat & Co. three years ago. "If you
tried to do this ten years ago, they would lock you up," says Bedat.
A quartz watch that serves its purpose well enough can come from anywhere. But the high-priced mechanical watches almost all come from Switzerland. Sales of mechanical Swiss watches are up 80% in the U.S. since 1996, to $377 million (wholesale). This is the province of luxury-goods makers. The average wholesale price in this segment is $1,000.
Why is this archaic consumer product doing so well? The roaring economy has a lot to do with it, of course, but there are other things going on. Swiss watches took on their mystique only when they were obsolete technologically. That sounds paradoxical, but you have seen this before. It was obsolescence that made horses and fountain pens into status symbols.
Another psychological factor in the frenzy may be a perception of scarcity--a perception artfully exploited by the
vendors. When Rolex put its Daytona back on the market in 1991, after three years of having none for sale, the waiting list grew to six years. And then there is the peacock-feather explanation. The tail feathers aren't for flight but for displaying to other birds that the possessor has biological resources to spare. Among higher animals, jewelry serves this purpose. Men generally don't wear jewelry around their necks, but they like displaying a $13,000 Bedat on their wrists.
In Europe and Asia wrist hardware goes a long way toward ranking one guy in an expensive suit over another. In Italy the average adult owns five watches. It's unlikely that the U.S. will ever end up as watch-mad as Italy, but it's beginning to move that way. A cool watch is becoming a kind of hot rod for the wrist. With one big
difference. "If you're 18 years old, are you going to buy a BMW or a $1,500 Tag Heuer?" says Susan Nicholas, the CEO of Tag Heuer, U.S.
It's a guy thing. "When the people who buy these things were kids, they hid under the covers with a flashlight
looking at car magazines, not
Playboy," says Richard Paige, who closed his California jewelry stores four years ago and started the watch website Timezone.com in 1996. Last year Timezone offered an online course in watch repair. Some 800 guys signed up just so they could tinker under the hood. "I mean, in the U.S., knowing how to fix a watch used to be about as glamorous as being a plumber," he says.
Swiss watch sales might have climbed higher still, but there just aren't enough master watchmakers left, even
though young Swiss are now rushing in to replenish their badly depleted ranks. "We could have sold 20% to 25% more watches in each of the last few years if we could have produced them," says Henry Edelman, the president of Patek Philippe in the U.S. "You walk through our workshops and you see people over 50 and people under 35 and no one in between. The Swiss felt there was no future in it. All of a sudden it became a career again."
Subject: "True" cost of making a watch 
Sun Jun 06, 2010 6:55 pm
I think one
