WatchFreaks Blog interviewed by STYLE:MEN Magazine

“Dial Q for Quartz” by Terence Lim

Last month, the Singaporian Senior Writer and WatchFreak, Terence Lim interviewed me for STYLE:MEN (November 2010 edition) – Singapore’s leading men’s style magazine for the stylish Singaporean male. You can download the interview by clicking on the link of the title of the article: Dial Q for Quartz.

Quartz is a muchmaligned material in watchmaking. Because of  the affordability of quartz watches, people — watch buffs or otherwise — don’t talk about them in the same breath as their mechanical counterparts. In fact, many watch snobs perceive quartz watches to be inferior but any connoisseur worth his Patek Philippe will remember the pivotal role quartz played in  the history of watchmaking.

In 1969, Seiko released the Astron, the world’s first commercially viable quartz watch. The ensuing years saw Switzerland grapple in vain to best employ the mineral, while  the Japanese conquered the market, producing cheap, reliable quartz watches. Sales of these electronic — industrial term for  quartz — pieces were phenomenal, which inadvertently caused  the Swiss watch industry to crumble in the 1980s. Then, Nicholas Hayek, the late Swatch chairman, was hired by a  consortium of banks to liquidate the flagging industry. Instead  in 1983, he launched fashion watch brand Swatch, which would  later sell millions of quartz pieces to the world. That allowed him to reinvest the profits into haute horlogerie — the shot in the  arm that the high-end segment needed badly. And as Bernard  Kaplan, publisher of watch blog watch-happening.blogspot.com puts it: “Ironically, it took a Swiss quartz watch to save the mechanical watch industry.”.

Forty years on, quartz watches still account for the bulk of Swiss  watch exports. The majority of watches sold— if not of the  value — are quartz. According to the Federation of the Swiss  Watch Industry statistics, sales figures for electronic  watches have steadied between four and five billion Swiss francs throughout the last decade. Which is a feat despite the two crippling economiccrises — the tech bubble bursting in 2000,  and the fall of the American banking system last year. Also, it  indicates the constant demand for quartz timepieces worldwide.  And the demand is not just limited to the massmarket brands. Quartz watches bring home the bacon even for big names like Rolex, Patek Philippe and Cartier. “No question about it!” Kaplan points out. “Patek Philippe, one of the  most prestigious mechanical watch manufactures, probably makes its highest gross margins on the quartzdriven Twenty-4.”

This year, watch cognoscenti see the re-issue of two quartz legends. To celebrate the 40th anniversary of the original Astron, Seiko released 200 pieces of the new Quartz Astron.  Likewise, Girard-Perregaux launches a limited edition Laureato, equipped with a new in-house movement, the GP13500. It has been developed with utmost attention to detail — something more commonly associated with mechanical movements. With the launch of these high-end quartz pieces, one can’t help but  wonder if a return to those halcyon days is on the horizon.

“It is  great that these brands, which were at the cradle of the quartz revolution, honour the first watches with a re-edition,” says Alon Ben Joseph, contributor to watch blog watchfreaks.wordpress.com. “But [I] do not think we can speak  of the heyday of the 1970s.” That said, Ben Joseph, who also heads Ace Jewelers in The Netherlands, rules out the possibility of quartz being phased out soon. “Of course, a mechanical watch has more detailing, passion, and complexity,” he says. “But a  quartz movement has advantages that a mechanical one does  not have. I believe they can live next to each other like yin and  yang; a true symbiosis. Who says one should own only one watch anyway?”

Copyright: MediaCorp Publishing

Who’s the King?

We all love ranks, lists, competition and knowing who is the best. In the watch industry many players crown themselves as the king of the industry. Consumers always want to own the best watch. But who is actually the king?

Is Rolex the king of the watch industry, like many people (want to) believe? Or, did Rolex crown itself as the king of the watch industry, and therefore have a crown as their logo?

Rolex Logo

Like many people, I always wondered what watch brand was the absolute number 1. But who and what defines the number one? As a small child, I always believed the one that produced the largest quantity of watches, is the number one. Since I was infected with the Swatch virus, that started in 1983 (I was four and had a Swatch on my wrist – I couldn’t even read time), I believed Swatch was the number one. As I grew older, Swatch grew to be a huge international hype. When I grew even older and started to understand the value of money and recognize the diversity of the many brands, I believed Rolex was the number one. Not only because it seemed everybody who spoke about watches, spoke about Rolex; but also because it seemed the ultimate watch brand for many.

When I started high school and started to work in the family business during holidays, I learned there were so many more brands out there. Many of them weren’t even sold in The Netherlands and I started to fall in love with Jaeger-LeCoultre, Patek Philippe and Audermars Piguet. Now that I am working in this industry for more than 10 years, I have the greatest respect and appreciation for the geniuses that are still alive and create amazing, innovative movements (like: FP Journe, Richard Mille, Grubel & Forsey, Renaud & Papi, etc). But also people, like Kurt Klaus, who work for the major brands (I had the honour to have met him on many different occasions and even drove him from one side of The Netherlands to the other – the poor guy, I drilled him for the complete two hours).

At the end of this post I will share my opinion of whom I believe is the king, but first let’s define some means to measure the greatness of a brand. First and foremost, people will always define quantity. But this is tricky, since some Japanese or Chinese manufacturers most probably produce more pieces annually than the complete Swiss watch industry. So, we need to narrow this down. The second definition that pops into my mind is exclusiveness and that is immediately linked to luxury. And, to measure exclusivity one can use recommended retail prices and therefore crown the most profitable watch brand as the king of the watch industry?! But, what about values at auctions? Let’s propose historic and/or market prices as a third definition.
As a fourth definition we could consider is independence as a parameter… We all know “money makes money” and with enough marketing budgets, one can ‘buy’ exclusiveness, market shares, brand awareness and raise auction priceses (Antiquorum Scandal and remember the Omegamania auction?!). So, independent brands should be considered more successful, if they excel in a market that is dominated by huge globalized public listed companies (Swatch Group, Richemont, LVMH and others). And, last but certainly not least, perception is a parameter I want to consider. For my bachelor thesis I did research about brand identity versus brand image of watch brands. This is a very interesting and timeless subject: The self-perception of almost anyone (persons and companies) is different if compared to how we are perceived (but then again, the truth is in the eye of the beholder 😉 ).

If we look at these five parameter to define who is the king of the watch industry, we have to analyze each paramter:

1. Quantity
As discussed already, some single Asian brands produce annually more watches than the complete Swiss industry, so we need to narrow it down. In the trade we generalize and split the market in to three segments: Low-end (up to EUR 1.000), mid-range (between EUR 1.000 and EUR 3.000 – some say EUR 5.000) and high-end (a.k.a. Haute Horlogerie – from EUR 3.000 or EUR 5.000) and up. And in the high-end there are many sub-segmentations possible, but we will neglect those for now. In the low-end, Seiko is the king of quantities. In the mid-range, I find it very difficult to quantify, but I personally believe it is Tissot (please share if you have any statistics – I couldn’t find any now). And, in the high end it is indisputably Rolex! Although Rolex does not publicize any figures, there are rough estimates that Rolex manufactures about 1 million watches a year. We can conclude this by the figures the COSC publicizes.

COSC Certificate

2. Exclusivity/Profitability
Many watch brand nowadays compete for the title to have created the most exclusive watches. Some say the most expensive watch is the most exclusive (I believe that today this is still the Patek Philippe Sky Moon Tourbillon). Others say that this is not only one of the most expensive watches, but also a watch that has been produced in a limited series… Of course, a piece unique should win this title… lately people say it is the replica of the Breguet Marie-Antoinette. But let’s not forget the IWC Grand Complication Il destriero scafusia, Vacheron Constantin Tour de I’lle and Blancpain Le Brassus 1735 Grande Complication. Of course there are a few more that belong in this list. But measured overall, Patek Philippe is the brand that creates and manufactures the most exclusive watches in the market (you’ll rarely find discounts on these watches – many models will be sold with a premium). Their aim was from the start to create the best watches in the market and even today they live by this promise. Linked to this, I dare to say it is the most profitable company, if measured by market price divided by quantity sold annually (no numbers know, so this is pure my personal hunch).

Breguet Marie-Antoinette

3. Timelessness/Market Values
Although recommended retail prices could indicate how exclusive a timepiece is, but wouldn’t market prices be an even more important tool to classify the exclusiveness of watches? As discussed in the previous paragraph, there are only a few watches that actually sell above the asking price. The first watch that comes to mind is the Rolex Daytona in stainless steel for a watch that is still in production and on auctions almost all vintage Patek Philippe watches break records (In the top 10 of The Most Important Vintage Wristwatches (made before 1990), all 10 watches are by Patek Philippe!). Therefore I believe Patek Philippe is the undisputed king of timelessness and holding its value. Or even more important, proving to be a good investment: It will only go up in price. On top of that, nowadays, almost every new launched Patek Philippe watch sells for a higher price than the recommended list price! But ofcourse the also produces models that make many of us wonder what the designers where thinking while creating these pieces.

Patek Ref. 1415 HU - Most expensive wrist watch (USD 4 million)

4. Market size: Independents vs. Groups
After the quartz-crisis in the 1970s, not many watch companies survived and most of them that survived joint forces. Nowadays, we can conclude that the luxury goods sector is dominated by corporations. And this also counts for the watch industry. Many international watch brands (mostly haute horlogerie brands) are now part of a large consolidated corporation selling watches, jewelry, leather goods, hunting weapons and writing instruments. Although Swatch Group is the only luxury corporation that focuses on the watch industry, it is by far not the largest group, measured in turn over. The top 10 of luxury good companies that manufacture watches is (in 2006 in billion USD):

1. LVMH (Zenith, TAG Heuer, Hublot, Dior, etc.) = 20,2
2. Richemont (Cartier, Mont Blanc, IWC, Panerai, etc.) = 6,3
3. PPR (Gucci, Bedat, Sowind, etc.) = 4,7
4. Chanel = 4,6
5. Swatch Group (Omega, Breguet, Blancpain, Longines, etc.) = 4,2
6. Valentino (Valentino, Hugo Boss, etc.) = 2,6
7. Hermes = 2
8. Giorgo Armani = 2
9. Dolce & Gabbana = 1,4
10. Bulgari = 1,3

Unfortunately all these groups do not publicize the individual figures of the subsidiaries and therefore we can’t analyze and compare individual watch brands. On top of that the individual watch brands also do not publicize their turnovers and profit margins, so therefore we have no clue who is the ‘largest’ watch company by turnover. But if we have to guess what group is the largest, based on their turnover generated by pure watch sales, Richemont is definitely the largest! Although LVMH is more than three times larger, their watch sales most probably do not surpass those of Richemont! We have no clue how profitable Patek Philippe and Audermars Piguet exactly are, but everybody in the watch industry indisputably assumes that Rolex is the largest and most profitable individual watch brand/company. There is no manufacture that produces around 1 million quality watches annually with an average price of approx. USD 8.000! And then we do not even take Tudor in to account, but that is probably pocket change for Rolex S.A.?!

5. Perception
This is a difficult one! As written before, I have written my bachelor dissertation about Brand Identity versus Brand Image. They only way to quantify this is to do a large-scale poll. In this poll one should assess the identity of a brand and compare it with the perception of its consumers. So litteraly compare the image of the consumers with the identity a brand. Again I emphasize that this post is my personal opinion and I am heavily generalizing here. My purpose is to provoke responses, so please do share your opinion. If I have to guess, I believe that Rolex believes they are the king of the watch industry (therefore have a crown in their logo). On the other hand if you ask the majority of the population and ask them what the best watch brand is, probably 80% will say Rolex! Rolex ranks number 72 of the Top 100 Best Global Brands (Newsweek), so that is not very strange. The funny things is two years ago the Swatch Group publicly attacked Rolex (the subject of my next post), by claiming that in three years time Omega will be bigger than Rolex, measured in turn over. So, in 2006 Nick Hayek Jr. claimed that by 2009-2010 Omega will be bigger than Rolex (therefore admitting Rolex is the king) and aiming to be the king of the watch industry.

What about the 20% that doesn’t believe that Rolex is the king… Many people who have decided to by a good watch, go out there without analyzing the large selection of watches available and buy a Rolex. They buy a Rolex, because they believe they bought ‘THE’ best watch out there. But, often they are disgusted by the fact that ‘everyone’ has a Rolex (or Lolex – or any other look-a-like). If their passion for mechanical movements grow, they are obliged to look into other brands. If you want a chronograph (and have a Daytona or can’t get one) you are obliged to look at other brands. If you want a watch that is even more complicated, you definitely have to look elsewhere. So, for lovers of mechanical movements and complications, I believe Patek Philippe is the undisputed king, and I simply base this notion on the fact of the auction results! But even the true WatchFreaks often love Rolex watches too! Rolex has made and still makes iconic/minimalistic/qualitative movements and watches! Personally I have loved Rolex, then the love passed, it come back again and now turned into a love-hate relationship…. Yes, I know: Love is complicated 😉 Maybe a nice topic for another post! 

Personally I believe that the King of the watch industry is a watch brand that finds a balance between heritage, innovation, quality and timelessness (read: is of will be a legend). Personally, I believe Patek Philippe is the king of the industry, because:

– Like many other watch brands, has an amazing heritage. It is still a family company (but not the Patek or Philippe family – but still independent).

– It is one of the most innovative watch manufacturers out there. I believe Patek was the first one to create silicium spare parts in their movement. But to be honest, Audemars Piguet and Ulysee Nardin are as innovative. But it underlines again that the independents invest more in the long term, versus the short term profit strategy of many groups.

– I believe innovation and quality go hand in hand, but when Patek Philippe was founded their aim was to produce the best movements and watches out there. This is proven by the results on auctions. Today they also produce one of the best watch movements and watches, this is underlined by the huge waiting lists for models and the premiums people are willing to pay for the new watches!

– In the battle of who produces the largest watches, Patek still sticks to the ‘old-fashioned’ small and thin movements. I believe that is very daring, but then again, that shows vision and faith in their own identity and strategy!

– Last, but not least: Exclusivity/Distribution. Even though Rolex doesn’t really have many retailers compared to other brands, Patek is truly exclusive. It only has a handful retailers and they only work with the best retailers in every city/country! No concessions to quality and service! 

The funny thing is, I believe that Patek is the King of the watch industry, I still do not have the urge to run out and get one particular Patek at this very moment. I do love the 5960p, but still I love my Portuguese Chrono more (sorry!). And I always loved the Nautilus (am a huge fan of Gerald Genta – AP Royal Oak is my favourite), but even though the new 5711/1 grew to a good size of a 43mm, I find the watch thin (case and bracelet)! But what an amazing movement and what a finish on every single detail! 

Yes, when I am a bit older and have a lot more grey hair, I definitely want a Perpetual Calendar in white gold (5140G). But still, 37mm is very small. My wrist is not to big and therefore I don’t wear watches over 44mm, where 42mm is ideal for me. 39mm is really the minimum for me, but just for the love for the brand and this model it is a dream to wear the 5140! But first I want the IWC Portuguese Perpetual Calendar (IW502218).

I am very curious who you believe is the king of the watch industry!

A mechanical greeting,

Alon

P.S. Rolex was founded in 1905 and the Crown-logo was registered in 1925.

To Manufacture or Not To Manufacture, That Is The Question!

Last decade almost all watchmakers were (and still are) rushing to become a manufacture watchmaker. To answer to the title of this article, “To Manufacture or Not To Manufacture, That Is The Question!”, one needs to define the title ‘Manufacture’, and that is what ALL watchmakers leave in the middle!

Everybody who studied a bit of Latin, can split the word ‘Manufacture’ in two: ‘Manu’ and ‘Factura’ and knows one can translate this in: Manu is hand and Factura is to manufacture (Isn’t it funny what the English word derives from). Wikipedia gives the following definition for this word:

“Manufacturing (from Latin manu factura, “making by hand”) is the use of tools and labor to make things for use or sale. The term may refer to a vast range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale.”

By this definition almost all Swiss watchmakers can call themselves Manufacture Watchmakers. But then Wikipedia also states:
“Manufacturing is used ironically within some of these companies as a term referring solely to the marketing of the product, perhaps due to it having the alternate meaning of creating false statements. More generally, many companies use it to describe the entire process of production, all the way through from idea conception to its first use by the consumer.”

This is something that I can agree with. If we follow this definition of Manufacture, then suddenly there are NOT many watchmakers that are ‘true’ watchmakers. Companies that do not create new calibres are not watchmakers, but watch assemblers or to make a bridge to car making: Watch Tuners (Does the program ‘Pimp my Watch’ already exist?!). These watchmakers take a calibre and tune the ‘engine’ of the watch (Tissot, Raymond Weil, Rado, Baume & Mercier and many more). As you notice this discussion is soley about the ‘heart’ of the watch, the movement. That is why I only take mechanical watchmaking in to consideration in this article.

Until couple of years ago there was only ONE company in Switzerland could make Hair Spring Balances from mechanical movements (Nivarox), so there was not one compay that could make a 100% manufacture mechanical watch movement, so that was the start of when can one call it’s movement a manufacture movement?! In the watch industry there is still no clear definition. Some say a watch movement should made up by 80% of spare parts that are MANUFACTUREd by the watchmaker itself. Some say it is 90% and other says, no that is impossible and it should be 70%. If you search for a definition of manufacture on the official website of the non-profit organization Haute Horlogerie, you can find the following interesting article:

“For a long time, Manufactures were a rare breed in the watchmaking world and for one reason: after the quartz tidal wave, few companies held on to production resources that were tuned to the manufacturing of mechanical movements. Given the investments and skills this type of venture entails, few were tempted to make the move towards greater autonomy and industrial integration, in particular as there were no bottlenecks in production. How things have changed. With the return of mechanical watches, one of the main priorities has been to guarantee a continuous flow of supplies, particularly of movements. Hinging on this is brands’ credibility among an increasingly well-informed public, not to mention their all-important legitimacy at a time when more and more companies lay claim to the title of Manufacture.

Once used indiscriminately, the title of Manufacture has grown in importance and this time brands have the credentials to go with it. With an eye on the competition, numerous brands have grasped the nettle and embarked on production of their own in-house movement. Hublot has announced its calibre for next year, as has Bovet. Daniel Roth and Gérald Genta will follow suit in 2009. Omega, Panerai, Maurice Lacroix and Frédéric Constant can already pride themselves on having taken this crucial step. When Bovet took over three manufacturing firms (tourbillons, calibres and balance springs) that were grouped together under STT Holding, including the former Progress Watch, to create Dimier 1738, the brand was propelled to the rank of Manufacture. In 2002, no-one would have bet on such a transformation, except perhaps a certain Nicolas Hayek…”

Where this article stops, I want to continue, because the family Hayek had a bigger impact on the (Swiss) watch industry in last 25 year, than many grand watchmaking houses in the last hundred years. For those that are not up to date about the Hayek Family (Creaters of the Swatch brand and largest share holders of the public company Swatch Group – the biggest watchmaking group in the world), I’ll give a short summary:

In 1982, N. Hayek Sr. was attracted as a consultant to advise the SMH Group to overcome the ‘Quartz Crisis’, that crushed the mechanical watch sector: cheap and precise electronic watch movement (mostly Japanese) took the Swiss mechanical watch industy by surprise and many companies went bankrupt. In 1983 SMH group created a revolutionary watch concept: a plastic watch with a down-sized quartz movement (lesser spare parts) that took the world by storm. I don’t think I need to elaborate about the brand Swatch…. The name of group that owns over 156 Swiss watch (spare parts) factories and the following brands nowadays: Breguet, Blancpain Glashütte-Original, Léon Hatot, Jaquet-Droz, Omega, Longines, Rado, Union, Tissot, ck Calvin Klein, Certina, Mido, Hamilton, Pierre Balmain, Flik Flak and, last but certainly not least, Swatch.

The advantage of such a group is that they lifted the complete Swiss watchmaking industry and saved many ancient watch brands. The down side is that they also bought all the important spare part manufacturers (like: Nivarox, ETA, Valjoux, etc) and control the companies that are the supplier of approximately 90% of the watch industry. As you can guess, this creates monopoly inefficiencies and arrogance. For this reason many watch brands started creating their own calibers, because ETA announced to stop supply spare parts and only complete movement (read: reason to raise prices). Legendary brands like Patek Philippe and Rolex always have been independent (read: not belonging to any public listed company) and always make sure they will stay like that, they increased their research & development efforts to the maximum and took steps to create a watch movement that is almost 100% manufacture. But also many brands, like named in the article of Haute Horlogerie, are stepping up their R&D efforts. Last years many brands started to create new calibres, and if they didn’t have the knowledge in-house, they would either team-up with manufacturares or simply buy the complete company:

– Mont Blanc bought Minerva
– Audermars Piguet took shares in Renault & Papi
– Breitling bought Kelek (but not a manufacture)
– Harry Winston teams up with a different magnificant individual watchmaker every to years to create a unique Opus watch.
– Group effort: Cartier uses JLC movements (Richemont)
– Chanel will launch watches with Audermars Piguet movements during Basel 2008.
– Omega bought the co-axial eschapment from the Englishman George Daniels (BTW: Patek turned it down in the 1970s).

What I also believe many brands forget in their race to become a ‘pure’ manufacture, does the consumer really want/need it? Personally, as a purist, I love the thrive for excellence, but a bit more quality is an exponential spur in cost/price. What’s wrong with the strategy Breitling and the pre-Richemont IWC have: Their philosophy is to create a product with an excellent price-quality ratio. That means, create watches they believe are ‘Instruments for Professionals’ and using the best resources at the best price. So, they always use the Valjoux 7750 (nowadays ETA 7770 – Yes, both a Swatch Group company and ETA swallowed the legendary Valjoux), and enhance it to their personal quality specifications. And what I think even is more distinguished, is the fact that they are open about the fact that they are NOT a manufacture. Nowadays, almost every watchmaker calls oneself a manufacture, but if you confront them with the question, how many of your spare parts are actually made in-house, you never get a straight anwser!

I will not start the discussion about what is actually ‘Swiss Made’. If you are curious, have a look at the website of: The Swiss Watch Industry FH, you will be amazed what a hollow title that is!

To end this article: Should watchmakers become a true Manufacture?

To my opinion, please do, but only if you are true to your own values and more importantly to your fans, the WatchFreaks. Don’t do it to have a reason to increase prices. Don’t do it to spite the big bad wolf, The Swatch Group. Don’t worry about them, the Anti-Trust Laws in the EU are fierce and they can’t use all the movements they produce for their own watch brands (unlike they claim). Don’t be vague about it, be ethical and don’t mislead the consumer. The society is changing so rapidly, that the watchmakers should be happy that, in such a hi-tech society, people still buy old-school timekeepers. Everybody has a clock on his cell phone, in his car, on his microwave, Philips Wake-Up Light, etc.

WatchFreaks Blog Team is growing

In a short time, we received many responses and feedback. We are proud to welcome the third author on this blog, Robert-Jan Broer, the owner and writer of the following leading watch blogs:

FratelloWatches.com

and

Omega-Addict.com

We met a while ago digitally and last week face-to-face, and we had the same WatchFreak vibe, so we decided to join forces. Please stay tuned for the posts of RJ at WatchFreaksBlog.com