The Shape of Things to Come

J
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One Swiss brand that might be a barometer of this up market movement is JLC. With their crazy 40% price increases lately, we can soon see what will happen to that brand. Will this pull prices up on preowned JLC models on the secondary market? Will AD's be able to sell any of these watches? Or will they end up dumping them on the gray market and further devaluing prices on the secondary market? The secondary market often sets the true value of pieces.
 
paysdoufs
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You're absolutely right - it’s circular. Like the bi-annual price increases of watch brands 😜

But I think it’s really going to be interesting to follow how this plays out… Currently, I feel they’re apparently all trying to maximize the profit that they can get out of their existing customer base* - but who will be the player that is going to be able to attract the next generation (the now 20 year old) of first-luxury-watch buyers? IMHO, historically, that has been TH, Breitling, Longines (and to a lesser extent Omega), who all don’t seem to be very keen on that segment any longer (maybe with the exception of Longines, whom I cannot see breeze past Tudor price-wise).

So I guess they all hope that the upcoming generations will buy their 2nd, 3rd etc. (even more expensive) watches from them. We’ll probably know if that was the right strategy (or if the next generation would rather skip to Rolex right away) in about 15 years. Maybe the SG has done something very smart with the MoonSwatch (and to a lesser extent the PRX) in that respect after all…

*) About the existing customer base: There has been - over the last month or so - a very surprising and extremely long thread on the German Uhrforum, in which dozens of long-term members (with most of them having been in watches for years and some circling through two-digit numbers of new pieces in their buying history) all say that they’re pulling the plug/pulling out of the arms race. The reasons for that being most often cited are: (1) only more of the same being proposed for ever higher prices, (2) shifting preferences re. spending on hobbies, and/or (3) less disposable income (i.e., choices need to be made - e.g., between watches, cars and travel). It’s a single-country snapshot, obviously, but still interesting.
Edited:
 
Pitfitter446
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It will reach a limit where people just say ‘enough’, once prices reach a point at which a bit more will purchase a bigger brand, or folk just say ‘screw that’ and spend the money on different things.
 
dtf
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Reminds me of when the UK supermarket chain Tesco raised their prices in response to falling profits after the 2008 financial crisis. It went as well as you’d expect.
 
bpsmith
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Agreed. Would have been even worse for them if eating was a choice, rather than a necessity, unlike watches. 😀
 
Aquagraph
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paysdoufs paysdoufs
You're absolutely right - it’s circular. Like the bi-annual price increases of watch brands 😜

But I think it’s really going to be interesting to follow how this plays out… Currently, I they’re apparently all trying to maximize the profit that they can get out of their existing customer base* - but who will be the player that is going to be able to attract the next generation (the now 20 year old) of first-luxury-watch buyers? IMHO, historically, that has been TH, Breitling, Longines (and to a lesser extent Omega), who all don’t seem to be very keen on that segment any longer (maybe with the exception of Longines, whom I cannot see breeze past Tudor price-wise).

So I guess they all hope that the upcoming generations will buy their 2nd, 3rd etc. (even more expensive watches) from them. We’ll probably know if that was the right strategy (or if the next generation would rather skip to Rolex right away) in about 15 years. Maybe the SG has done something very smart with the MoonSwatch (and to a lesser extent the PRX) in that respect after all…

*) About the existing customer base: There has been - over the last month or so - a very surprising and extremely long thread on the German Uhrforum, in which dozens of long-term members (with most of them having been in watches for years and some circling through two-digit numbers of new pieces in their buying history) all say that they’re pulling the plug/pulling out of the arms race. The reasons for that which are most often cited are: (1) only more of the same being proposed for ever higher prices, (2) shifting preferences re. spending on hobbies, and/or (3) less disposable income (i.e., choices need to be made - e.g., between watches, cars and travel). It’s a single-country snapshot, obviously, but still interesting.

Honestly I don't see me purchasing any more 'new' watches. All I can really 'afford' are F1s and Aquaracers and I have more than enough already. At this point it kinda feels like they are taking the piss. £8-1000 for Monacos is a joke.
 
bpsmith
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I think this is going to be the case for a lot more people, whether it be a case of pieces becoming outside of budget or just beyond what people are prepared to spend.

As for attracting the next generation, I have my doubts on that too at this stage. It will need some considerable “influencing” for people to feel nostalgic for something that wasn’t really a thing for them in the first place.
 
Pitfitter446
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In Chisholm Hunter on Thursday, looked at IWC Annual Calendar and perpetual version, £22.5k and £29k I’d rather save hard and buy one watch than several overpriced Tags. Salesman did hint if cash was the payment method I could get some discount but no more forthcoming.
 
bpsmith
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I have been flitting between buying just one more, but making it something pukka, vs two or three “cheaper” choices over time. With more everyday pieces becoming a lot more expensive, this is becoming more attractive, although the third option of buying nothing more and just enjoying my two has entered the frame of late.

EDIT: When I say something pukka, I was more in the £10k-12k area than £20k-30k though. 😀
Although that is now everyday for TH it appears…
 
bpsmith
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Aquagraph Aquagraph
Get your pukka Monaco skeleton
It wouldn’t be my choice at almost £10k sadly, much as I do like the Monaco.

I would really like a Monza though, if there was something midway that came out at some point.
 
J
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I think it is clear from the interviews that Tag Heuer intends to move up market. Frederic also specifically states they want to ensure the value of the watches are maintained over the long term. LVMH certainly knows how to do this. Given the focus on closing down points of sale and expanding brand owned boutiques, I think LVMH is starting the process of taking control over distribution and discounting. These luxury conglomerates have a history of destroying product (i.e. handbags) that doesn't sell rather than discounting them in order to protect brand value. I would not be surprised to see Tag Heuer start dismantling watches (for parts) that don't sell rather than selling them at a discount. LVMH has the money and patience to ride out sales downturns to achieve a long-term goal of growing brand values. I don't think LVMH cares about quarterly results at Tag Heuer. Their long-term goal is to grow the brand value. I recently had a discussion with my AD that carries Tag Heuer and Omega. He currently will still offer discounts on Tag Heuer, but will not offer discounts on Omega now that they cut his margin. I would not be surprised to see Tag Heuer pull this move as well. Or maybe they offer a buyback program from AD's to keep them from discounting. Why discount or dump product if the manufacturer will buy it back from you? Or perhaps the authorized deal model goes away completely. AP and Patek are moving this direction. I would not be surprised if in 10 years the only way to buy a Tag Heuer is directly through LVMH. No discounts, full stop.

Ultimately, I think this strategy will raise secondary market values, which Frederic states as a goal. When volumes are limited and people are forced to pay full price, they will be less willing to sell preowned pieces at a lower price. The perceived value of the brand grows and LVMH achieves their goal. Perhaps at that point Tag Heuer watches become Veblen goods.
 
paysdoufs
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If they start doing this now, there will still be hundreds of thousands of used TH watches out there on the secondary market from the 2000s and 2010s alone (and maybe the 2020s until they’re done killing the ADs); which are technically 90% as good as any new piece currently in the catalogue. Good look trying to take all of them with you in the planned upward price spiraL. I strongly doubt that will work.

In the end, they could just alienate the buyer of new pieces and push those still on the fence to the used market, too. And if this happens, I’m pretty sure we’ll keep seeing unsold new watches in the TH-owned outlets (and/or the grey market - if it still exists). TH may be owned by LVMH all they want, I cannot see how dismantling a steel watch with a stock Sellita inside would make more economical sense than simply selling it 40% below RPR (but I’m happy to be proven wrong).

Which brings me to the brand value: As much as I love TH's designs more than that of almost any other brand - I don’t see them having the necessary caché to go boutique-only. They’re just not AP, Lange or even Omega; and IMHO never will be. Plus: the number of units they could effectively sell would take a beating, simply due to the sharp reduction in points of sale compared to now. Heck - even Breitling, despite investing heavily in their brand boutiques, struck a deal with Bucherer in order to be present in their decidedly multibrand stores again.
 
Albert-AMG
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The question is, if they want to focus the range more on luxury and launch new models on the market that -due to their quality, exclusivity, and movement- justify higher prices (a change in focus that could be understood)... or simply raise prices to the products that they already have in the range, without any upgrade or justification… (a change of approach that can be seen as a tease to their future buyers)
 
Aquagraph
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I don't see TH going boutique only, they only own about 3-4 boutiques in the UK the rest are owned by Goldmsiths / Ernest Jones / Watches of Switzerland. It might look like they are going boutique only, but that route is also problematic. If you have unsold stock, it's your problem. If it's ADs stock you can choose to buy it back, but they won't get what they paid for it. Besides. The 'boutique' with the biggest sales in the UK is the outlet at Bicester Village. I doubt they'd want to kill that.
 
bpsmith
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I don’t think the Bicester outlet hurts them at all though tbh. Much as the Breitling equivalent there too. They are older models at the end of the day, rather than current models which they discount. Subtle difference but more acceptable.

Pricing isn’t as good as before though, as they keep pushing prices up to match the increase in pricing for new models. Some of the stuff I have been tempted with is still priced ok, but it used to feel a lot more like a bargain before prices increased in line with current “inflation” increases.
 
J
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I am OK with Tag Heuer trying to move up market through improved quality. I understand a $3,000 Aqua Racer with a Selita movement is not going to compete well with micro brands selling similar pieces for $1,000. However, a $3,000 (or even $4,000) Aqua Racer with an in house or Kenissi movement could easily compete with a Tudor Pelagos, Tudor Black Bay, or Breitling Super Ocean which are selling at those prices. I could see a $10,000 rattrapante chronograph still offering good relative value while moving the brand up market. I think Carerras priced around $6,000 aren't a bad relative value.

I recently watched a Youtube video where a mainly Rolex dealer was really impressed with the new Skipper. However, he just couldn't bring himself to pay $6,000 for a Tag Heuer. Mind you, this being a Rolex gray market dealer, probably has no hesitations about paying over $10,000 for a simple 3 handed Rolex OP. Really? I think this is the issue Tag Heuer and LVMH are trying to tackle (perceived value.)

I think LVMH is perfectly OK with Tag Heuer losing sales in the short term if it means they can improve brand value and more easily sell at full price in the future. I don't think they care at all about how much they could make selling watches at their outlet stores vs dismantling them. It will all start to become about protecting the brand. Once people realize they can't get discounts anymore, they stop worrying about if they are paying too much and just buy it. Where can you go to get a discount on a LV handbag? Nowhere. Where can you go to get a discount on a new Rolex. Nowhere. It's all about perceived value.
 
bpsmith
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I have to agree about the impulse buying being halted by the potential discount when shopping around, although I do wonder whether everyone is aware of the discounts available or even know to ask?

Those that are aware are likely to be the same that know the movements used are very cheap but pricing is being hiked up regardless of them not actually improving or moving to a better movement.

I love the Aquaracer and would have bought mine sooner if I wasn’t worried about the dreaded Cailbre 5. Having experienced a fault on it after 7 months, I would not buy another now. That would change somewhat if they switched to a solid movement which could be relied upon for more than 7 months!

The problem is that they have hiked the pricing of the current model so far now that they would expect to add quite a bit more again on top, as and when they put a decent movement inside.

They are a good way off having s movement like that in the Seamaster for example, let alone the quality of the rest of the piece too.
 
Shane paradis
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bpsmith bpsmith
I have to agree about the impulse buying being halted by the potential discount when shopping around, although I do wonder whether everyone is aware of the discounts available or even know to ask?

Those that are aware are likely to be the same that know the movements used are very cheap but pricing is being hiked up regardless of them not actually improving or moving to a better movement.

I love the Aquaracer and would have bought mine sooner if I wasn’t worried about the dreaded Cailbre 5. Having experienced a fault on it after 7 months, I would not buy another now. That would change somewhat if they switched to a solid movement which could be relied upon for more than 7 months!

The problem is that they have hiked the pricing of the current model so far now that they would expect to add quite a bit more again on top, as and when they put a decent movement inside.

They are a good way off having s movement like that in the Seamaster for example, let alone the quality of the rest of the piece too.
I’m very confused about the Cal. 5 being unreliable… from what I understand, it’s a standard ETA 2824, or Sellita SW200. Both of which are known to be incredibly reliable and easy to service. I get that Sellita kind of sucks… they have a higher failure rate than ETA, and I’ve experienced that… but in my 20 years of collecting watches on and off, I’ve only had one issue with this movement type, and that was an SW200.

What exactly is TAG doing differently than Breitling, Tudor, and pretty much every other Swiss brand? Don’t get me wrong, I hear this being brought up a lot, so I believe that owners are having issues. I’m just curious as to how that could be?
 
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