Owning a million-dollar home used to signal that one had arrived. In today’s new Gilded Age, how about purchasing a million-dollar watch?
As wealth creation reaches unprecedented levels, uber luxury is thriving at Switzerland’s top watchmakers. Whereas $5,000 timepieces used to impress, watches in excess of $100,000 are the new bellwether for the extraordinary. Watches with a tourbillon – a complicated mechanism to compensate for the effect of gravity on time – or dripping with diamonds easily climb into the seven figures.
“It used to be stunning to sell a watch over $100,000,” said Franois-Henry Bennahmias, chief executive of Audemars Piguet USA. “Today, it’s no longer surprising.”
Bennahmias said Audemars Piguet sold more than 80 watches priced at more than $100,000 last year. “This year, we’ll sell more than 100 [watches of that caliber],” he added.
Executives said they see no reason for the trend to abate. These are, after all, boom years for high-end Swiss manufacturers, with most of the major players, from Cartier to Omega, reporting high-double-digit annual gains. Industrywide, the Federation of the Swiss Watch Industry said sales ofwatches through the first half of the year gained 15.5 percent, with luxury watches growing at as much as twice that rate. The growth is coming worldwide, from New York to Hong Kong, as the increasingly wealthy splurge on rare, ultraexpensive watches as collectors’ items.
“The growth is spectacular in high-end mechanical watches, above $40,000,” said Caroline Faivet, president of Swatch Group US, which runs brands like Breguet and Blancpain. “We sell the watches as soon as we get them.”
Occasionally, that is a problem. Because of the labor-intensive nature of the trade – the most intricate pieces take years to assemble – watchmakers can’t always keep pace with demand. Likewise, years are required to train new watchmakers, making it difficult to rapidly boost production.
A prestigious name like Jaeger-LeCoultre, the Richemont-owned brand, for example, has an estimated annual output of 50,000. Patek Philippe made 38,000 watches last year, while Rolex produces more than 500,000 watches a year.
As in the art world, where limited supply has driven prices at auction to spectacular levels, so, too, has the rarity of the finest Swiss watches added to their mystique. Often, editions are sold out even before they are in production, as collectors scramble to get the latest releases.
“The demand is extraordinary,” said Jerome Lambert, chief executive of Jaeger-LeCoultre. “Customers are ready to wait two years to get the watch they want.”
Or more. Lambert said an order today for Jaeger’s new Gyrotourbillon watch, a 300,000 euro, or $414,000 at current exchange, supercomplicated piece with a tourbillon mechanism that rotates on a double axis, will be delivered in five years.
“Finding buyers isn’t really the challenge,” said Paul Ziff, president of Zenith North America. “It’s producing the watches to fill the demand that keeps us up at night.”
Severin Wunderman, the owner of Corum, the luxury Swiss watchmaker, said his firm had sold 22 watches retailing for $1 million-plus through the first six months of this year. Two were sold in the U.S., three each in the Middle East and India, five in Southeast Asia and nine in Russia. “This trend seems to find no end,” said Wunderman. “Big sales are the norm for the moment, and not the exception.”
Meanwhile, the trend is having a trickle-down effect to less-expensive mechanical watches by pushing average prices up across the board. Brands traditionally geared to the midmarket – from Tag Heuer to Omega – have reported double-digit hikes in average prices. Executives said it largely reflects market demand for more sophisticated watches, such as chronographs or watches sparkling with diamonds.
“We see sales daily on price points that hover around $50,000 retail,” said Andrew Block, vice president of Tourneau. “A $10,000 to $15,000 sale is no longer the highest sales of the day. We are witnessing more and more sales made that eclipse the $100,000 mark.”
Executives conceded that, while the most expensive watches were typically moving fastest in markets such as Russia and the Middle East, more Americans were willing to spend big bucks on Swiss mechanical pieces.
“Obviously, we see a tremendous amount of Wall Street money being spent,” said Block.
Faivet asserted that Americans have grown more educated in the intricacies of fine horology over the last decade.
“It’s an appreciation process,” she said. “Only now is the U.S. grasping the idea of high-end luxurywatches. They now understand that a watch that costs $40,000 doesn’t exactly mean it’s clunky. It can also be understated, and that the price is linked to the art of the precision movement. There are $300,000 Breguets without a single diamond.”
Nonetheless, diamonds are the requisite status symbol for certain customers. But even that is changing as conspicuous consumption supplants restraint among influential tastemakers.
“The very expensive watches [in diamonds] used to be for the Middle East and Russia,” said Philippe Leopold-Metzger, president of Piaget, which introduced a $2.5 million watch this year. “Today, Europeans and Americans are also buying diamond watches.
“It’s recognition that diamond-set watches aren’t ugly – but are beautiful objects in themselves,” added Leopold-Metzger.