Watches. All watches are equal but some watches are more equal than others. The term “Luxury” in luxury watches gives way to an entirely different set of buyers who are not worried about splurging a lot of money. But what makes these watches so expensive?
Let’s start with the materials first. The materials used in making luxury watches are of the highest standards which in some cases is not available very easily. Some brands use various types of materials for each part of a watch. Precious stones and metals are also used here, which significantly drive up the prices of these watches.
The people who create these watches are incredible in their craft. They are highly skilled and trained in their profession. They use magnifiers to work and put the minute parts in place to get the artistic result that is desired. Some watchmakers have a legacy of their own and come from families that have been in this business for generations.
Speaking of art, some of these watches have the most beautiful and smallest pieces of arts or paintings on them. Since this has to be done on a very small dial, the amount of work is also a lot and hence an increase in prices.
The time and effort that is put into these watches add a premium value to them. Some watches even take decades to build.
Luxury watchmakers test these watches in a lot of different ways to make sure they work in many different conditions. After all there are chances that their watch might go to space or the moon.
Since the buyers are ready to drop a lot of money on this, they also expect a high precision device. The complexity and the features available in these watches increase the desire for them too. Some watches have a tourbillon to increase the accuracy of the watch. Some even show the positions of stars and planets. Some watches have multiple layers each functioning in a different way to accomplish a different task. Watchmakers micro engineers many different functions into these watches.
Exclusivity is also one of the drivers here. Some watchmakers launch limited edition watches, which makes them highly sought after.
There are collectors who buy watches of people they admire or because it is a vintage, limited edition and an extremely valuable watch.
The hype, marketing and the brand value of these watches also a key reason for their high prices. Watch collectors have their own craze behind these.
These watches are also viewed as a status symbol as they are worn by leaders of the world and by celebrities. James Bond has been using Omega watches for quite some time now, fans of the secret agent would also like to get their hands on one. Paul Newman’s Rolex Daytona sold for $17.8 million in an auction. Fandom can be a different market altogether for these watches.
Some people buy these watches as form of investment. Prices of watches have increased over time. Limited editions have a low supply, let’s say 100 watches are made, but the people who want to buy these are maybe 10000. This creates a higher demand for these and hence will help in price appreciation.
The heritage and vintage aspects of the watchmakers and the watches the make are also one of the reasons for the high price
Now lets look at the economics aspect of this market. Luxury watches are a type of Veblen good. A Veblen good is a luxury good for which demand increases as price increases, which contradicts the law of demand.
Human nature also has a role to play here. If you are minting money then there is a high chance that you might want stand out from the rest of the crowd and might go on to buy some expensive items. Watches in this case.
Considering all these reasons, luxury watchmakers price their watches highly and people are ready to shell out money for them.
Do you think that these watches are rightly priced? What other factors do you think affect these prices, let me know in the comments below.
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