In this article, we'll explain in detail the reasons that have led market prices to their current level of around 20,000€ (and even more in some cases) for high-end pieces similar to the X41 watch.
In order to do so, we've:- analyzed the role of intermediaries in watchmaking
- meticulously observed the influence of the luxury goods industry on Fine Watchmaking and its prices
Finally, we'll reveal how CODE41 is taking on the challenge of offering a high-end manufacture movement under 5,500€.
Intermediary mark-ups
These days, the majority of a watchmaking brand's distribution is controlled through the classic model, which has been in place for decades:
- the brand creates the product and has it manufactured
- the distributor (or a subsidiary of the brand) develops their network within a certain area in which they hold exclusive rights
- the retailer displays the product in their point of sale and gives advice to potential customers
At each stage of the process, multiple intermediaries add their own mark-up to the purchase price. The mark-ups of the various participants leads to a price 6 to 8 times the cost of production. In the end, the customer in the store ends up paying a price far removed from the production cost of the watchmaking brand.
And yet there is a second factor which holds the same influence over the pricing of a watch: marketing.
Luxury and Fine Watchmaking: a history of marketing
Fine Watchmaking is often associated with the world of luxury. The latter is a synonym for inaccessibility, social standing, and even ostentation.
These subjective criteria have the unfortunate tendency to propel prices to artificially high levels.
But above all, luxury is about market positioning. It gives an item a subjective value, and its price very rarely reflects the cost of production. Luxury market positioning is, therefore, a subtle speculative game consisting of measuring the point to which the consumer (for whom money is no object) will continue to accept the prices of a brand.
This practice is commonly known as "pricing power".
So it all comes down to creating (and then preserving) a magical chemistry between the desire of consumers, the brand's appeal, and the most profitable prices possible. This chemistry is based on advertising.
It convinces you that you're not only buying a watch, but even more so a lifestyle, a style of emotion, and social status.
What dictates the prices in classical watchmaking and Luxury Fine Watchmaking?
- In classical watchmaking: prices are 6 to 8 times the watchmaking brand's cost of production, due in particular to the mark-ups added throughout the distribution network.
- In luxury Fine Watchmaking, market positioning is the main culprit behind skyrocketing retail prices, which can reach levels 10 to 20 times the brand's cost of production!
X41: direct distribution and transparent market positioning
On March 14, 2018, we introduced our X41 project: creating the first community-designed manufacture movement, with the aim of democratizing Fine Watchmaking. Our objective is to offer a watch with a high-end manufacture movement under 5,500€. In order to keep our sales price as close as possible to our production costs, we're relying on our main strength here at CODE41: a direct distribution system and transparent market positioning.
Direct distribution
We cleverly cut out the middlemen required by a physical distribution network by selling our watches exclusively online. As well as drastically lowering the final retail price for our community, online sales offer numerous other advantages:
- Fast and safe delivery
- Ultra-secure payment
- A flexible, reassuring returns policy
- An international 24-month guarantee (36 months for the X41)
Thanks to support available by chat, telephone and email, our members can get in touch with our team extremely quickly, and enjoy more in-depth expertise than that offered by physical distributors.
Total transparency
We produce our watches under the banner of total transparency. We reveal and explain the production cost of each of our watches, including the X41 (see here). Of particular note is our TTO Label, standing for Total Transparency on Origin. This label precisely shows the origin of each component and each process. We also reveal and explain the production cost of each of our watches, including the X41 (see here).
Within this policy of total transparency, we also apply a fixed profit multiplier of 3.5. Therefore, the price of the X41 is not a result of market positioning, but rather a direct reflection of the cost of production. This approach requires us to focus exclusively on objective values, such as unbeatable quality and superior expertise.
A dream come true
The X41 project is the realization of a dream that we share with many of you. The creation of a high-end manufacture movement is quintessential for fans of fine mechanical watchmaking.
Thanks to its online distribution system and total transparency, the X41 project will allow all watch enthusiasts to enjoy the best of Fine Watchmaking for an unbeatable price.
