The
Real Worth Of Your Time
(Part
1)
It
is $350,000, counteracts gravity, shows the phases of the moon and
it even tells time. With prices soaring and an influx of new collectors,
how do you assess the value of this once basic accessory?
Mario
Torisi realized the winds of the watch industry were no longer blowing
his way during a sushi dinner last October.
The
evening was hosted by Swiss watch maker Patek
Philippe to celebrate the unveiling of its latest Nautilus
model. Mr. Torisi, a top watch dealer, had hoped to order a dozen
of the watches, which retail for up to $36,000. However, as scores
of dealers and collectors from around the world filed in, Mr. Torisi
saw what he was up against. "You can't even ask. They tell you
how many watches you'll get," Mr. Torisi recalls. Patek
Philippe held him to a six Nautilus limit.
With
high-end watch prices reaching remarkable levels, knowing what to
buy and what to pay is increasingly complicated. Hedge-fund managers,
Wall Street bankers and newly minted moguls are stoking demand - a
process furthered as watches become a collecting obsession alongside
cars and contemporary art. Devotees spend anywhere from $3,000 to
upwards of $500,000 on timepieces that in some cases only a watch
buff would recognize as more than nice looking jewelry.
In
response, makers say they're working to boost production. They're
rolling out new models that try to justify they're lavish price tags
with jeweled faces and cases made from precious metals. Traditionalists
eschew such external embellishments, preferring esoteric mechanical
details. Harry Winston's Opus V, for example, has rotating
cubes in place of hour hands; other watches have ultra-miniature chimes
that can sound off hours and minutes. (For serious collectors, only
men's watches qualify - the dainty casings typical of women's models
are too small to hold all of the intricate innards.)
What
makes shopping for watches at this level somewhat mystifying is partly
that so much of the price tag is at best on the inside and, in some
cases, intangible. Prices can vary dramatically for two watches that
look dramatically similar. The A.
Lange & Sohne Lange 1 and the Nomos Tangente
Date Power Reserve don't look drastically different. But at $24,000,
the Lange 1 costs nearly 10 times as much as the Tangente. One reason:
It's considered one of the most mechanically impressive watches. In
addition, some watches hold their value much better than others.
In
a recent survey of collectors, dealers and appraisers, poring over
auction prices of several hundred watches, the results underscored
the challenges for shoppers trying to judge the value of elite timepieces.
For example, while connoisseurs say the $36,000 Martin Braun Eos,
which debuted in 2000, has the potential to gain in value, some watches
that have already come up at auction haven't done so well. A Corum
"Bubble" watch - so called for its dome-shaped face
- recouped only a third of its original retail price of $3,500, while
the $860,000 Blancpain
1735 Grande Complication, one of only 27 made so far, recovered
two-thirds of its value at auction not long ago.
Shifts
in a brand's history can affect prices. Elite maker Blancpain
saw the value of its watches fall in the secondary market after being
acquired in 1992 by SMH Swiss Corp. for Microelectronics Watchmaking
Industries Ltd., the then-parent group of Swatch.
Patek
Philippe, on the other hand, has an unbroken history of family
ownership dating back to 1932. At auction, therefore, Patek
Philippe watches consistently fetch record sums, including
the more than $4 million paid in 2002 for a 1939 World Time model.
As
with the wait-lists that have become a fixture elsewhere in luxury
goods, watchmakers are walking a delicate line - catering to demand
while at the same time maintaining the scarcity that gives an aura
of exclusivity. Audemars
Piguet rewards longtime clients with first dibs on limited-edition
watches sold at their own boutiques. Patek
Philippe sets aside a handful of the brand's most highly coveted
watches for top clients.
This
pecking order is also sometimes used to drive sales of less popular
models. A few top dealers commonly bundle their sales of blue-chip
watches with less popular models. That practice can force buyers who
lack clout to spend tens of thousands of dollars on watches with less-complex
designs before they can get their hands on a highly coveted watch.
Manufacturers
keep a tight grip on distribution. Watches are only sold through
authorized dealers or through directly operated boutiques that vet
customers to make sure they are not re-selling the watches on the
secondary or "gray" market. To stay ahead of the curve,
seasoned collectors maintain networks of dealers around the world
who can give them access to the hottest models and actively lobby
manufacturers for preferential treatment or inside scoops on upcoming
watches.
The
influx of new money and new blood is also driving a subculture of
hard-core collectors. Tom Adair, 53-year-old executive living in Hong
Kong, plunged into collecting in 1999 after receiving his first big
company bonus of $100,000. He says he set out to spend a large chunk
of it on a gold watch, which he had always viewed as a status symbol.
But while browsing at Selfridges in London, a salesman steered him
to a model that was less flashy and more intricate on the inside:
a white gold limited-edition Omega
DeVille featuring a co-axial escapement - a mechanism that
regulates the speed of a watches movement - the first in Omega's
history. Mr. Adair paid about $10,000 for the Omega
while his wife snapped up a men's $8,500 Ulysse
Nardin London 1862 Medal Commemorative in rose gold.
A
year later, he returned to Selfridges and bought not just the same
model, but one with a serial number consecutive to his wife's watch.
He says obsessing over such minute details was worth it because the
watches are "a good conversation piece with fellow collectors."
With time, his interest in mechanical
watches grew. With dealers actively courting him, the collector
made what he calls "frenzied acquisitions," updating his
watch collection at least once a month. Soon, he had a different high-end
watch to wear every week of the year.
More
recently, Mr. Adair began to notice he wasn't the only budding collector
with plenty of cash to spend. Dealers were no longer pursuing him;
he had to go criss-cross Asia to keep tabs on them. He also started
planning his vacations to Europe around trips to watch factories in
Germany and Switzerland to see new models. He says the biggest cost
of collecting isn't measured in dollars but in the energy he spends
on it: "It's about how much you have to sacrifice in terms of
family life."
Entry-level
limited edition watches, priced between $15,000 and $30,000,
became especially difficult to procure, so Mr. Adair decided to move
up-market. At a watch fair in 2004 he decided to rarify his collection,
unloading 35 lower-end watches, ranging from Rolex
to Seiko,
that he judged lacking in "horological merit." The group
sold for a total $15,000 - roughly 35% of what Mr. Adair originally
paid for them.
(continue in Part 2)
