Wristwatches for the Rich
It's amazing that as little as 40 years ago, a watch was just about telling the time.
From the mid-19th century to the mid-20th, railroad companies would reward long-serving employees with a gold watch—an appropriate gesture for the institutions that invented the modern concept of standardized timekeeping to prevent their schedules from degenerating into chaos.
These days, though, as Marshal Cohen of Port Washington (N.Y.)-based retail consultant NPD Group points out, "Watchmakers are having to recognize the importance of designing a classic timepiece where being accurate isn't even part of the message."
True. When I was a kid, watches boasted about how accurate they were, but what's that worth today when a $20 quartz watch can keep as good time as the most expensive Swiss chronograph?
For a while the advent of this quartz revolution seemed as though it would doom the watch industry. With so many electronics products—from the MP3 player to the cell phone—that tell the time, young people were shunning the watch business entirely.
What happened instead was the watch business transformed itself into an accessory business, and accessories are very hot indeed right now.
Swiss Watch Sales Rise
This has led to the current situation where, according to Cohen, "the watch as a timepiece is probably the least important reason someone buys the watch. The branding, the image, the glitz, and the investment value of the watch have become more important than accuracy."
Andrew Block, executive vice-president of Tourneau, the largest watch retailer in the world, has watched this transformation and also believes that it's not just because of the technical aspects but because of branding. "It's about making a statement by what you are wearing on your wrist."
And a highly successful transformation this has been, too. Numbers are difficult to come by since there is no main watch manufacturers' trade association, but figures from the Federation of the Swiss Watch Industry provide a pretty good surrogate. In Swiss francs, exports to the U.S. have risen from CHF243 million in 2005 to CHF261 million through the first 10 months of 2007, or, in dollar terms, from $185 million to $236 million.
That represents a growth in sales of 7.3%—healthy, but nothing compared with Hong Kong's spectacular 45.5% sales growth over the same period, or Russia's 59.6%. Yes, the "new" watch business does seem to offer a new-money product.
This transformation of the business has also given rise to some horrendous new terminology, with "watch wardrobing" and "accessorizing your wrist" as two of the more egregious examples of the marketer's dark craft. But in many ways they are suitable terminology for some of the more ostentatious, bling-and-knob-embellished behemoths being sold today.
Otherwise known as complications, they control everything from a stopwatch accurate to a zillionth of a second, to displaying the phases of the moon, your altitude, and the efficacy of your golf swing. It is these complications, in addition to the expert labor and precious metals and gems used in the making of high-end watches, that add so much to the price. Well-heeled consumers think nothing of dropping $5,000 to $10,000 or more for a Swiss watch, while serious collectors can easily spend hundreds of thousands, if not millions, on a single timepiece.
In 1999, an anonymous collector purchased at Sotheby's (BID) a one-of-a-kind gold pocket watch with 24 complications made by Patek Philippe in 1933 for a record $11 million.
For Identity and Status
Of course, most owners rarely use any of the complications on their watches—or even know how to use them.
"Take this watch," says Block, picking up a hummer of a piece that, for the sake of discretion, will remain nameless. "It has so many functions on it, I have no idea how to use it—and I own one. It has slide rules, money converters, and so much stuff the instruction book is an inch thick."
Cohen adds that while complications appeal to both men and women, "especially for men, you can't have enough functionality. Not that they use it all. In most cases, people just go 'It looks great on my wrist.' It's a statement."
Yes, that's what watches have evolved into these days. A watch is about so much more than telling the time—it's about identity and status. That's why, in the accompanying slide show, we have included a diverse array of watches of different styles and price points so as to appeal to every possible taste, from a preference for clean lines and elegant simplicity to a desire for bulked-up, rugged functionality.
See BusinessWeek's slide show to see a roundup of high-end watches for the holidays.