There is almost no difference between a watch that costs £300 and another that costs £7,000.

So why should we pay the extra £6,700?

There are approximately 5000 watch brands in the world. Out of these, 500 brands belong to groups like Richemont, LVMH, Swatch, Sowind, Gevril, Fossil, Seiko and so on. Although these Groups only correspond to ten percent of the world’s manufacturers, their turnover represents almost seventy percent of the industry’s sales.

These groups – which include independent brands like Ulysse Nardin, Oris, Rolex, Corum and Breitling – sell directly from their own offices, to shops in the UK. The other 4500 brands rely on distributors, agents and dealers, who are, in fact, (would be their) investors.

We could point to the boom of watches Made in China around 1990, although a number of manufacturers were already using Chinese tooling prior to this date. After 1990 the economic opportunity became obvious: there were huge advantages to be had by moving brand production to China.

These were the years during which a grey market was created for some of the more famous fashion brands; the time when a large number of cheap but ‘authentic fake/original’ watches were sold on the internet. How did it work? Fashion brands would ask Chinese companies to manufacture 5,000 pieces of a specific model. These manufacturers would actually produce 5,400, delivering 5,000 to their client and would transfer the remaining 400 to the grey market. The watch would probably cost no more than £25 to make, the fashion brand would retail it for £250 or over and, in the grey market, it would sell for around £60. Those days have gone.

While the grey market has almost disappeared completely, we are now able to find exceptionally good copies of those 500 top brands. Indeed at a fraction of the price of the original item – and no one is questioning such difference in prices, in some cases, several thousand of Pounds.

A litre of Scottish whisky can cost £2.45 and a litre of crude oil costs around £0.38 per litre (facts). But the cheapest bottle of whisky is available at around £11.00 per litre and petrol is £1.30 per litre at the pump. For the most part this is a result of the taxes levied by various governments and, of course, the massive profits made by the distilleries, wholesalers, distributors, retailers and, the oil companies. Taxes on oil and whisky are much higher than those on watches and other accessories, on which we only pay VAT. A watch from Japan or Switzerland at £200 will cost us £240 to import.

Watches belong to the fashion industry and, unlike other products such as cars, home appliances, electronic equipment and so on, expensive watches have no real, tangible value. We buy them because they make us feel good about ourselves.

The standard trade discount on almost all brands is 50% off retail, with a few going to 60%. Some policies are changing (as we speak) as “strong manufacturers” are looking to increase profits as volume of sales is and will decrease.

A very good marketing gimmick was brought to the UK by three British brands about a decade ago. Retail price for these watches stood at £499. They were advertised in hotels and papers at £99 and, best of all, they could be purchased on eBay or outside petrol stations (usually sold by some seedy characters) for about £35. I believe that this is still going on.

Bear in mind that any two watches will cost almost the same to produce, regardless of their shelf prices. One could be £100 and the other £7,000. It makes very little difference to most manufacturing costs. Without taking into consideration those watches that sell between £2 and £15, MOST models cost between £35 and £250 (maximum) to make. Probably a shocking revelation or one that most of you have known already but have refused to acknowledge (I have included a parenthesis on the subject at the bottom**).

The classic brands include the likes of Rolex, Tag, Breitling and Omega. They’re right at the top of the ladder. No one seems to question why some of these brand’s most basic models still cost between £2,500 and £6,000. As I said before, watches are fashion items. You have to wonder: why are you willing to pay so much for these brands?

When you pay that much for a watch, you also foot the bill for the brands’ astronomically expensive marketing campaigns. If Tag offers $20 million to Tiger Woods to sponsor their brand, then someone is fronting the money. That would be you, the hapless customer! If Breitling invests in aeroplanes and stuntmen to promote their brand, someone is paying for the jet fuel and the actors’ bills. You again!

[no complaints about Breitling air stewardesses].

Rolex is divided into different corporations but it is said that the group is worth CHF19 billion in assets. Those profits have to come from somewhere. Guess where – or who – that money comes from. Yes: you again!

Short and sweet, here you have it. There are the 4500 brands backed by little advertisement but which are still able to maintain a market presence for their low price timepieces (in some cases low quality timepieces too), while the big brands pay someone to come up with unbelievable statements about their products and charge you for their extortionate prices.

**[Cost breakdown – an anatomy of a watch].
I mentioned production costs between £35 and £250. A watch that costs £35 to produce is often sold for £1,500 and another that costs £250 to produce is sold for £750. There really are no set rules in this industry.
For around £9,500 one can buy a new Fiat, Seat, MG, Chevrolet, Dacia, Nissan, Hyundai and so on. Specifications for these cars will also be similar to each other. Based on the £35 – £250 ratio we ought to see one of these cars on sale for just over £67,000. We all know that this is not the case.

The public is led to believe that some brands are more special than others. Based on what?
The components are all the same. Case – one sort or other of steel or titanium or aluminium or some extravagant name that, in reality, does not mean anything. [For your information these are the prices, for ONE TONNE of: steel £128; aluminium £740; titanium £3,400; tungsten carbide (my favourite) £275. Most watches will average a weight, just for the case, of 70 grams (1 tonne = 100000 grams). Most high quality s/s cases are sold for £15 and another £8 [£23] for the strap. Sapphire glass could be expensive, especially the one made in Germany (Otto Frei, for example), but, on average, the cost doesn’t exceed £12 [£35]. Dials, hands, crowns are all in the small change prices. Might as well mention it now, assembling a watch costs £7 per piece [£42] – (Swiss made)].

The only argument left rests with the movement. At this point the connoisseurs will come up with a long list of testimonials and high end engineering that will make the movement so special and, in fact, so expensive. So expensive it seems, for many brands, that such movement will cost hundreds of pounds if not a couple of thousand. That is rather far from the truth.

Evidence of the wheel’s presence in the development of technology begins in the mid-4th millennium BC, and nothing much has changed since then. A couple of decades ago, a watch enthusiast named Walt Odets dared to criticise the Rolex movement as “a total piece of junk” (not quiet his words but a good summary based on what other watchmakers have shown me). Of course he got a good frying from the watch community, all too quick to defend the brand. Reality is, similar to the wheel, not much has changed on the watch movement front in the last 300 years.
I am still talking about basic ETA movement and not complications (known as Tourbillon or others). At this point, I need to raise my hat to the Japanese and their kinetic movement. Very accurate watches have been sold for less than £250, all singing and dancing.
The original Breitling brand closed its business in the early 80s but was later bought and revived by Mr. Ernest Schneider. With the view to bring money to the new company, he started selling, at around £900, some of his watches with a quartz Miyota Japanese movement. The cost of this movement was… £4.50 (add this to the £42 above and you have a “cheap” watch sold for £900). Most high end watches have an automatic movement and I can assure you that this does not cost more than £50 to make. Should it cost more, the manufacturing company would have serious financial problems.

To close this wrangle, I would like you to compare 2 pairs of watches.
The first pair is a Tissot Men’s SEASTAR 1000 Automatic, on sale at £575.00 – v – the Rolex Submariner at £5,700. Where does the £4,700 difference come from between the two watches?
There’s the Charmex CX Swiss Military Hurricane Automatic Chronograph (ETA cal. 7750 Valjoux COSC) at £1,200 – v – the Bretiling Navitimer World at £4,800 (same movement but the CX is superior in water resistance)
Finally – not to mention the almost £2,000 difference between two identical (1999) watches and with the same movement – The Zenith Rainbow El Primero – v- Rolex Daytona.