HOT WATCHES, HOT PRICES

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The market for luxury products such as wristwatches is highly reliant on human emotions and perception. Dealers of artistic or lifestyle luxuries have long known that perception and availability are for many consumers much more important than actual inherent value. That means even a temporary “high-demand trend” can quickly translate into more demand than supply. Luxury seekers end up focusing more on the fact that a product is hard to get versus what that actual product is inherently worth much of the time. In some instances a very “good” product will also be hard to get, which further decreases ease of acquisition because the items are both inherently valuable and actually scarce. A product (or experience) being desirable because it is hard to get is what we refer to when something is “exclusive.” The idea being that it is desirable specifically because it is uncommon – and watch brands know how much this emotion can galvanize watch collector purchase behavior.

Exclusivity can come naturally when something is limited in production because of complexity or the scarcity of raw materials or parts. Exclusivity can also be artificially created by producing less of a product than is known can be sold. This limits short-term profits because a company is selling less than they know they can sell, but can actually increase long-term profits because limiting supply keeps fans both engaged and in emotional demand for a limited set of goods, which now carry known exclusivity value. Also, the brands we are talking about choose particular halo products which have limited supply, while supplying other watches much more easily (but often at more expensive retail prices). This means brands typically don’t restrict all the products they make, just some of them in order to galvanize collector interest and zeal.

Clearly not everyone is as interested in the psychology as I am, but to make a long story short it is our distinct belief (based on plenty of evidence) that some of the more clever (and independently owned) watch companies are going to be increasingly limiting supply of high-demand sport watches in order to increase demand. This will happen even if it means lowering short-term profits in the form of sales for those specific watches. It is a tactic that only works for stable brands with a long-term vision… and it requires incredible discipline. Discipline typically entirely non-existent in publicly traded or more short-term focused watch brands.

The strategy is simple; based on market demand, limit the availability of entry-level or close to entry-level sport lifestyle watches from brands also known for much higher-end goods. For example at brands like Rolex and Patek Philippe, that means making it easy for a consumer to get a more expensive complicated or precious metal-based watch, but much more challenging to get a simple steel timepiece. If you have been doing business long enough, you tend to know the types of watches your consumers like, and can thus predict which watches you need to carefully dole out to retailers.