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Buying a Watch: a Primer

Buying a watch is a fairly straightforward process for most people. The goal is usually to find something with an appealing design which tells the time accurately. But the watch industry has a surprising depth and breadth which is worth appreciating and understanding.
It is very easy to inadvertently spend a great deal of money on a product which really isn't worth it compared to similarly priced alternatives. In this article I will describe the fundamental layout of the watch industry and the range of options available to buyers.

Product Versions

Almost all watches can be placed in one of three categories based upon their source of energy. The largest market segment, by far, is populated by quartz timepieces. Estimates are that production of these watches numbers in the billions. These watches are powered by a small battery (like other consumer electronics) which is periodically replaced when it runs out of power. Some quartz watches feature a rechargeable battery. They can run from very inexpensive, approximately $5 or so, to $3,000 or more (the Casio G-shock MR-G). The technology for this watch type is approximately sixty years old.

The second type of watch is powered by energy stored in a spring. We usually refer to these as mechanical watches. Their history is far richer and deeper than that of quartz watches, hearkening back to approximately 1810 when the Queen of Naples commissioned a wrist-wearable watch from a watchmaker named Abraham-Louis Breguet. There is still a watch manufacturer carrying this name. Their used watches typically sell for $2,700, on average but new Breguets can be very dear. A simple Classique reference 5177 has a suggested retail price of $23,700.

The third type of watch is powered by a battery which must be recharged very frequently, typically nightly. These are usually referred to as "smart watches" I have argued elsewhere that smart watches aren't actually watches so I am largely going to ignore that category in this discussion.

Instead, I will focus on the second category of watches: mechanical timepieces. It is in that category where the widest variety of watch designs and value can be found. And it is this category which is less understood by the general public.

Mechanical Watches

Unlike quartz watches (with one unique exception) mechanical watches are by far the most collectible of any timepiece category.  There are many reasons for this but collectibility of mechanical watches primarily stems from the stable preference and taste for this type of watch among the public, a stability which has to do with tradition and history.  For example, since the presidency of Harry Truman a Vulcain mechanical watch has been given to a President at the start of his administration.  A mechanical watch, the Omega Speedmaster, was worn on the wrist of the first astronauts on the moon.  Purchasing one of these timepieces gives the wearer a connection to history and legacy which a quartz watch can not equal.  

The technology of a mechanical watch also has a certain flexibility to match the needs of the wearer. "Complications," such as an alarm, can be added to the mechanism, referred to as a movement, and extend the basic functionality of a timepiece. And watch movements have been refined over time in order to ensure a certain level of reliability. There are even certification processes to validate a watch's accuracy. An example of this is Contrôle Officiel Suisse des Chronomètres (COSC) Certification. Mechanical watches are also durable. Properly serviced a mechanical watch can be handed down from one generation to the next as a perfectly functional heirloom.

However, the market value of a watch is subject to erosion due to changes in fashion trends. For example, presently circular vintage watches tend to have greater value compared to rectangular or oblong watches of similar vintage (there are exceptions such as the Tag Heur Monaco or the Cartier Tank). But there is no guarantee that this pattern won't reverse in another 60 years.
This implies that watch value is subject to a certain level of uncertainty. For most timepieces, when a buyer purchases the watch new and opens the box the watch immediately depreciates in value much as a new car being driven off the lot. But provided the watch comes from an established brand and serviced regularly, most mechanical timepieces will either maintain their value or slowly depreciate over time. This is particularly true for watches with a mechanism built in Switzerland, Germany or one built by Seiko. There are other mechanical movements available (principally Japanese or Chinese) but these present a less stable source of value.

Further, there is a special class of watches built by so-called "independent" brands. These timepieces are very limited in availability and they are often at the forefront of design and technology. The movement mechanism may be manufactured "in house," meaning that almost all of it was built by the brand rather than purchased from a third party manufacturer. An "in house" movement also tends to carry a premium when it is made by larger, non-independent, manufacturers although it is unclear whether this should or will continue. Because independent manufacturers produce in small batches they lack the economies of scale associated with large manufacturers such as Tissot or similar. Consequently, these timepieces can be extremely expensive. For example, a Romain Gauthier Logical One in titanium is approximately $100,000.

For many it is these six or seven figure prices which seem extremely irrational, especially considering that a mechanical watch is typically less accurate than a $5 Casio. In other articles, though, I explain that these luxury timepieces play a very different role extending beyond timekeeping. They are a positional product which is tied to social status, a so-called "Veblen" good. And they can also serve as a highly portable source of liquidity. In many ways these high values are what pull along and sustain the value of more routine mechanical timepieces, like a rising tide lifting all boats. This year the most expensive watch in the world emerged: a one-off Patek Phillipe Grandmaster Chime sold for $31 million. A few years earlier a Rolex Daytona previously owned by Paul Newman sold for $17 million. These auction results help support the value of less unique Patek and Rolex timepieces as well as other luxury Swiss brands.

In conclusion, the watch industry offers consumers an incredible array of variety, prices, functionality, design and legacy. Decision-making can be daunting as a result. Fortunately the community associated with watch buying and collecting is, by and large, collegial and welcoming. It is in that spirit that this article is offered.

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