Why Are Watches So Expensive?

People often look at the luxury watch market with a lot of suspicion and believe that it’s cloaked in mystery and deception, like the diamond industry. 

However, the reality is a lot simpler than that. 

Whether you’re looking to buy your first luxury watch or you want to explore investment opportunities related to flipping luxury timepieces, there are critical factors you have to understand. 

It’s not just all about precious metals and gemstones. And if you don’t fully appreciate what’s behind a luxury brand, then you’ll find it impossible to appreciate the real value.

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What Price Range Do Watches Have?

When it comes to luxury watchmakers, you’ll find prices ranging from a few thousand dollars to millions. Even within the product range of a single company, you can expect to see a huge difference. 

Let’s take Richard Mille as an example. 

At the cheap end, you’ll be paying at least $80,000 for an RM. Yes, you can buy a very nice car for that or even multiple cars. For the “slightly” more expensive models from the brand, you’ll need a 7-figure budget. 

Compare that to Tag Heuer watches, which range from about $2,000 at the entry-level all the way up to $50,000. 

Now, I get why these high prices confuse people. 

Not only are the entry-level prices between luxury brands vastly different, but the prices for their entire product catalog cover a huge range. 

As a watch geek and experienced investor, I can tell you that all of this can be explained by nine factors that influence an expensive watch. 

Let’s take a look.

Understanding The Underlying Costs Of Luxury Watches: 9 Factors That Influence Pricing

The price of expensive watches from a luxury brand depends on these nine factors. Some of them have a larger influence on price than others, but it’s important to understand all of them in order to appreciate why there are such fast differences

1. Luxury Materials

Most people automatically think of gold, platinum, and diamonds as influencing the price of luxury watches. But they would also be surprised to find out that even a luxury watch brand like Rolex doesn’t use any of these materials in the majority of products–they actually use stainless steel for many signature models like the Submariner. 

See, even the stainless steel used to make luxury watches isn’t the same quality as you’d find in kitchen and dining utensils. 

Here’s what I mean. 

Stainless steel is graded based on quality that relates to its strength and how corrosion-proof it is. The higher the grade, the more expensive the steel is and the more difficult and time-consuming it potentially is to work with. 

316L stainless steel is quite common in watches, but luxury watch companies like Rolex have switched to the higher grade 904L, which has a nicer visual appearance when polished and is far less prone to corrosion. 

Another factor you have to account for in all luxury watch brands is the quality of the sapphire crystal. While it may look like glass, this material is made by crystallizing aluminum oxide. 

It’s an expensive material but critical for ensuring a scratch-resistant watch face. 

What you’ll also find commonly, especially on ladies’ watches, is diamonds and other precious stones embedded in the watch face, strap, and bezel. 

Even considering that these are very small in carat size, they add considerable material expense, as well as added costs of making the watch. 

2. Quality Movement Mechanism

The vast majority of luxury watches come with an automatic self-winding mechanical movement. This technology essentially uses an internal weight (called the rotor) that reacts to body movements by spinning around a central axis. 

This spinning movement is transferred to a spring that acts as the power reserve to keep the watch ticking. 

You’ll even find these automatic movements in cheap watches, but there are vast differences in quality. 

It’s kind of like the difference between a cheap 4-cylinder Toyota engine and a Ferrari V8.

There are four main characteristics of mechanical watches that significantly impact the quality of the movement and thus the price of a watch: 

  1. Accuracy
  2. Durability
  3. Reliability
  4. Power reserve

Let’s dig a little deeper into each of these characteristics.

Accuracy

Accuracy refers to the precision and time keeping of a watch, so that owners of expensive watches don’t have  to correct the time on a regular basis. This characteristic is typically measured in how many seconds luxury timepieces will gain or lose per day. 

The lower this value, the more accurate and expensive a watch will be. For a company like Rolex and Audemars Piguet, the target accuracy is +/-2 seconds per day. 

You might end up off by a minute after a month, which is still an exceptional achievement for an automatic watch.

Durability

Even if you pick up an antique expensive watch from a luxury brand, you’ll have the expectation that the mechanics are still working. Some people own a Rolex or Patek Philippe passed down through generations, and they still work flawlessly. 

In fact, Patek Philippe has made that idea a key part of their marketing approach: “You never truly own a Patek Philippe; you merely look after it for the next generation.”

But achieving that is no easy task. 

Only with the best quality materials and mechanical design can luxury watch companies achieve durability that spans generations.

Reliability

Reliability is how well a watch preserves its original function over time with prolonged use so that owners of luxury timepieces don’t need to submit their expensive watches to regular maintenance or repair. Even if worn often, everyday use shouldn’t result in premature wear and tear.

Power Storage

Finally, the one thing that sets automatic luxury watches apart is that they have exceptional power storage. 

Here’s what that means. 

Inside the self-winding mechanics, there is a metal weight called the rotor, which spins around the central axis when you move your arms or hands. The rotor’s purpose is to tighten the mainspring. 

It’s the spring that functions as the power storage, which is measured in hours. 

What this means is that if you were to take off a mechanical watch, it would keep ticking for the amount of time stored in the mainspring. 

In high-end watches, you would expect that to be over 40 hours, and the higher the power storage, the more complicated the design and the more expensive the watch will be. 

3. Design And Style

The next thing you need to take into consideration is the visual design and style of a watch. 

While there are vastly different styles among luxury watches, when you start looking at the details, there’s one thing that stands out. 

Every single angle, line, shape, color, and indentation was designed with the creative purpose of blending everything into an extraordinary appearance. 

No matter what angle you look at watches like Audemars Piguet and Richard Mille from, you simply can’t appreciate the design enough. 

I even challenge you to look at luxury watches under a magnifying glass to see the details not even visible to the naked eye. That’s how you build your expertise in watches and come to truly appreciate their value.

4. Finishing Quality

While the overall design and style of luxury brands go into a lot of detail, the finishing quality is what often sets these high-end watches apart from the rest. 

Let me give you some examples. 

Even a stainless steel Rolex, Omega, or Breitling will have a case, strap, and bezel that is polished to perfection. There will be no rough edges, bumps, or imperfections, and that requires time-consuming polishing techniques.

Another example of incredible attention to detail in the finishing touches is visible in watches that have diamonds. If you use a jeweler’s loupe to look at the size, shape, and spacing, you’ll notice that they are aligned to perfection.

Every stone will be the same size and cut, and there will be an incredible consistency in color and clarity. 

Is it noticeable to the bare eyes? 

Probably not, but all these little things add up to the perfect look and feel. 

You also need to look at the presentation of luxury brands in their box. These watches usually come in heavy presentation boxes with perfectly molded foam to keep them safe. 

It’s actually an incredible experience to open the box of your first luxury timepiece.

5. Production Time

It might come as a surprise to some people but watches from luxury brands like Rolex, Patek Phillipe, and Chopard take 9–12 months to produce. 

This is due to the fact that crafting a single model requires a huge amount of manual work hours, and with many of the mechanical watches that include stopwatch features (e.g., Rolex Speedmaster range), it can take even longer. 

It’s this dedication to hand-crafted human watch-making skills rather than assembly line mass production that is clearly visible in the quality of luxury watches.

6. Research And Development

Owners of luxury watches have extremely high standards when it comes to the technology inside their purchases. It’s the same with luxury cars, where manufacturers have to constantly come up with new technology for engines, brakes, and handling. 

Watch companies spend a lot of time, effort, and money on research and development to make their watches better than ever before. 

They also try to find new ways to make their models stand out from competitors through innovative designs. 

From improved accuracy and durability to trying to get more into a smaller space, this all requires master watchmakers who spend years perfecting the products.

7. Retailer Markup

The majority of luxury watches are sold through retailers like jewelry stores. 

While some companies have started selling directly online, it’s still the case that most potential owners prefer to try on a few different watches before they make a decision. 

These retailers have to make money as well, and they often have very large overheads. They don’t employ an average salesperson, often require more security, and their inventory literally costs a fortune. 

In most cases, the retailer markup on luxury brands is 40–60%. That means if Patek Phillipe charges a retailer $30,000 for a watch, the price tag in-store will be upwards of $42,000. 

This is where shopping around and building relationships with store owners becomes hugely valuable for anyone interested in flipping or investing in watches.

8. Marketing

Another important factor tied up in the price of watches is the marketing, advertising, and sponsorship deals a brand has. The more heavily a company is involved in sporting events and celebrities, the bigger its marketing overhead will be. 

Now, you might think that many luxury watches don’t ever appear in adverts you see. 

For example, when was the last time you saw a Patek Philippe advertisement or sponsorship? 

The company doesn’t sponsor any sporting events or celebrities. But it still heavily advertises in places most of the public isn’t familiar with.  

Product placements for upper tier watches happen at events like luxury yacht sales or in magazines targeting millionaires and billionaires. 

On the other hand, you have brands like Rolex, which is the official timekeeper of Formula 1, while Omega signed a deal with the Olympics as one of the main sponsors. 

Similarly, Richard Mille is one of the main sponsors of the McLaren Formula 1 team and its drivers. 

All these marketing efforts amount to hundreds of millions of dollars that get baked into the price of every watch.

9. Scarcity

This is where things get difficult to track and measure in the luxury timepiece market. See, many companies encounter unprecedented demand for certain products, and they simply can’t keep up with production. 

Remember, I mentioned above that it can take a year to make a luxury watch, and it’s not easy to ramp up production at a moment’s notice. 

Here’s an example:

The Rolex Hulk is one of the top Rolex watches for resale and was named that way because of its green bezel and watch face. It was in production from 2010 to 2020. During that time, the retail price was about $20,000 to $25,000. 

However, there was a huge demand for it, and aftermarket prices soon exceeded $40,000 for an unworn one. There are even reports of prices peaking above $90,000. 

Another company where scarcity is practically built into the business model is Richard Mille. If you visit one of the official stores today, there will be at least a 2-year waiting period before you can acquire a model for your own personal wear.

This lengthy waiting list has driven up the aftermarket price for new and unworn Richard Mille watches.

Do These Characteristics Make Luxury Watches Worth It?

The only person who can honestly answer that question is the individual buyer. Some people are perfectly happy with a $50 watch because they only see the basic practical benefits. 

But as with anything rare (and meticulously designed), there is no shortage of people who appreciate all aspects of luxury watches. 

Considering the materials, quality, retailer markup, overall hype and the fact that pricey watches are an asset class of their own, it is more understandable as to why a watch can cost more than the average car.

If you’d like to learn more about flipping luxury timepieces and how to find the most sought-after models in all price ranges for potential profit, then grab a copy of our Time Piece Profits guide here

Inside, we cover models ranging from a hundred dollars or less to tens of thousands and everything in between to give every budget an opportunity. For more watch news and education, feel free to check out our blog here, and as always, best of luck.

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