Watches come in an endless array of sizes and styles. They are also available at virtually every price point. With prices ranging from under $20 for basic quartz watches to $100,000+ for luxury watches, you’ve probably questioned what the difference is and what makes some watches so pricy. After all, cheap watches, in most cases, keep time just as well as Rolex watches and other luxury timepieces.
So, why are watches so expensive? This is a great question, but it does not necessarily have a straightforward answer. Taking out a $50,000 loan to pay for a vehicle is a perfectly reasonable decision for many folks. But spending several thousand dollars on something small like a watch might seem ridiculous to those unfamiliar with high-end jewelry. Let’s take a closer look at why luxury watches come with hefty price tags.
Consumers are drawn to brand names for a multitude of reasons. Whether they’re shopping for groceries, apparel, or even a watch, they gravitate toward known brands with solid reputations. Often, people buy watches from luxury brands like Rolex solely for the name. They want the prestige and recognition that comes from having one of the most well-known luxury brands in the world strapped to their wrist. And they’re willing to pay the price.
There are also watch enthusiasts who care little about status and recognition but still want to build a collection of timepieces from renowned brands. These folks are willing to pay top dollar for coveted pieces.
Production and Overhead
Producing a luxury watch isn’t cheap. Most are made from precious metals, and those raw materials come with a hefty price tag. And while the cheap watches sold at your local big-box store likely feature cheap battery-powered movements, high-end watches have quality mechanical movements. And often, those mechanical movements are made in-house. Whether produced in-house or purchased from a vendor, quality movements are costly.
However, raw materials and mechanical movements aren’t the only factors driving up the cost of luxury watches. For a watch company, overhead includes custom machinery, design, prototyping, payroll, and research and development. Rolex even operates its own foundry, where the company casts its own gold.
Despite their small size, watches are advanced devices, and the latest designs aren’t created in a day. It takes large teams of people several months — sometimes even years — to develop new designs and movements. And the folks who make up those teams are highly skilled engineers and watchmakers who command top dollar.
It takes a substantial amount of time to develop a luxury timepiece. And as the saying goes, time is money. Production and overhead costs add up quickly and make those hefty pricetags seem a bit more reasonable.
Most luxury products are made in limited quantities. In the case of luxury watches, production is not limited merely to increase demand. Producing mechanical movements is quite difficult. Even once engineers and watchmakers have figured out all the details, making them is no easy task. It takes skilled artisans a considerable amount of time to produce each piece, so it simply is not feasible to flood the market with vast quantities of luxury watches. This low supply fuels high demand, which, of course, drives up the price.
Maintaining relatively low production levels also helps luxury brands maintain strong reputations, too. And since these brands are built upon and live by their reputations, this is extremely important. The limited availability of luxury watches allows brands to maintain their reputations, deliver quality products, and charge top dollar for their merchandise.
Many brands also make limited edition watches. These pieces tend to cost even more than usual because the cost of production and development is divided between fewer pieces. In addition to increasing the selling price, producing a limited edition watch creates an air of exclusivity that drives demand. When consumers know that, for example, only 500 of a particular style exist, they will rush to purchase it to avoid missing out — despite the larger price tag.
Marketing plays a massive role in the world of luxury watches. With a smartphone in nearly everyone’s pocket, there’s no real need for a watch that keeps accurate time. So, to sell timepieces, brands need to tell stories and market a lifestyle — not merely a watch.
Luxury brands have astronomical marketing and advertising budgets, and they spend millions to make consumers want their products. With plenty of more-affordable alternatives on the market, luxury brands rely on storytelling to entice people to fork out thousands of dollars to become part of the lifestyle they are selling.
Like rose gold chains and other high-end jewelry pieces, luxury watches have substantial markups. This, of course, contributes to their high price. All that money doesn’t just go into corporate bigwigs’ pockets, though. A substantial portion is reinvested back into the company and used for further research and development.
Also, keep in mind that there are usually several intermediaries between the manufacturer and the consumer. And the more hands a product passes through before reaching its destination, the higher the markup.
What’s “expensive” to one person may seem completely reasonable to another. This is true of many things, including luxury watches. When shopping for high-end timepieces, the price on the tag is based on several factors. When buying a brand like Rolex, you are paying for more than just a watch. You’re paying for history, quality, innovation, and craftsmanship.
Keep in mind that prices can vary greatly for luxury watches and other high-end jewelry, like gold chains. For this reason, it’s always smart to do some research to determine the value of the item you are interested in buying. A Rolex or another high-end brand will never be inexpensive, but that doesn’t mean you should overpay. Simply doing your homework could help you make a better investment and spend a bit less on that expensive watch you’ve been wanting.