OPINION: Value for the people
In the face of what many refer to as ‘greedflation’ — where luxury watch brands hiked prices significantly in the aftermath of Covid lockdowns — the K-shape of the watch market has been exacerbated. The ‘haves’ are keeping the house of the cards stable for now, but do the ‘have-nots’ feel priced out and left behind? Leading watch writer and podcast host Robin Swithinbank sees early signs of sanity returning to luxury pricing.
In Luca de Meo, chief executive of the French conglomerate Kering, luxury may have found a saviour. After announcing Kering’s better-than-expected second quarter results, the former Renault boss said something really quite extraordinary. “Gucci is competitively priced on the new products, and we have also, in a few cases, repositioned some of the products, because I have the feeling that in some categories we went too far,” he said.
Too far. Two words that will send a shiver down the spine of chief executives across the luxury spectrum, whether they’re hawking handbags, holidays, hairspray — or indeed horology.
‘Greedflation’ is what analysts called it as brands sent prices spiralling in the Covid aftermath. You probably won’t need reminding that this was a season during which brands saw buyer frustration — “revenge purchasing” in analystese — as an opportunity to jack up profits, partly to satiate avaricious shareholders, and partly to offset behind-the-scenes challenges such as increasing labour and material costs, incoming (and expensive) sustainability reporting obligations and, in watchmaking at least, the inexorable rise of the ruddy Swiss franc.
This has resulted in what I’ve referred to before in this column as the “luxury aspiration gap” — a vacuum created by brands as they amped up prices way north of historic norms, leaving buyers behind. Many have suffered since, certainly in volume terms; some in profitability terms, too. Swatch Group, which spiked prices of its Omega cash cow, has seen its profits crumble to almost zero in just a few short years. Too far? Let’s hope not.
Swatch Group, which spiked prices of its Omega cash cow, has seen its profits crumble to almost zero in just a few short years.”
As an outsider brought into the luxury fold, de Meo appears to have figured out what many on the sidelines have been chirruping about for some time. That there are a lot of luxury buyers out there, if only brands would offer them something of value.
Value, in case there’s any doubt, doesn’t mean cheap. Of course it doesn’t. The definitions of luxury stand. But even the richest — sometimes particularly the richest — luxury buyers want to know that their investments in luxury make some sense. That they’re not being ripped-off. And as Gucci has found to its detriment, as soon as they can’t see the value, buyers stop buying and spend their money on something else.
A few weekends ago, I received three messages in quick succession from friends and friends of friends looking to buy a proper watch under £1,000. One was for a son’s 18th; another a bride wanting a gift for her husband-to-be; and the third a wrist-aware guy in his 20s just looking for a nice timepiece as he made his way up the ladder.
It’s only one example, but it pointed to what most believe — that the desire is still there. It’s just, what do these people buy? They’ve googled Rolex, Omega, and TAG Heuer and discovered their aspirations are wholly misaligned to current pricing. One suggested they were thinking of buying a 1950s Omega Seamaster — a lovely thing no doubt, and within budget. But a terrible idea if it’s going to be your one fancy watch. The routine maintenance bills would come as a horrible shock.
There are still options in the space. I sent links to the upstarts Baltic and Studio Underd0g, and reminded them that Tissot, Hamilton, and Seiko still play in that pen, too. To my relief, the vintage Seamaster guy went for a Seiko Presage instead. And no, I’m not on commission. More’s the pity.
Even the richest — sometimes particularly the richest — luxury buyers want to know that their investments in luxury make some sense.”
Now, if you know anything about watches, which I think we can safely assume you do, you’ll by now be thinking about what I’m thinking about. Which is Gallet. In Geneva this week, House of Brand’s junior member, its baseline, gets a heartbeat. And it is, as Gallet’s fresh-faced managing director Erwan Rossignol told me quite clearly when I met him over the summer, a gap-filler, intended to fill the space vacated by Breitling, Gallet’s big brother, and the rest.
Prices start from £2,200 for a steely automatic called Flight Officer; there’s a chrono for £3,400; and then top of the pile are the Gallet Classics at £5,300, which run on Breitling’s hand-wound B09 chronograph calibre. Those, incidentally, are really quite lovely.
Ambitions are sky-high. House of Brands expects to be shifting tens of thousands of Gallet watches within a few short years. Will it? Impossible to be sure, not least when awareness today is at zero, although given it’s leveraging Breitling’s production facilities, distribution channels, and retail network — and indeed advertising itself as “Manufactured by Breitling” — perhaps odds are even. In a stale, highly polarised market segment that is thought to have shrunk by as much as half since Covid, it could yet prove rocket fuel.
But there’s an uncomfortable truth in all this, too, which points to the value perception challenge brands in push-up bras are facing. A quick look at the Breitling website, and buyers will find that same B09 movement in steel watches that cost £7,700 and up. That’s a lot more.
Some will find the cachet in a Breitling is worth the markup. No quibbling with that. The whole industry is built on brand power and consumer lust for a cocktail of status and nostalgia. But there’s little hiding from such disparity any more. To his credit, Rossignol admitted there will be some cannibalisation, even as Gallet grows the overall market, per House of Brands’ forecasts.
Anyway, the point was not to highlight House of Brands’ challenges, real though they may be. Rather, it’s to highlight there’s value out there and a customer ready for it. Luxury value propositions have huge potential to cut through in a market that is still suffering from the corrosive effects of greedflation.
If my take isn’t enough, listen to one of the biggest brains in luxury industry analysis, Bernstein’s Luca Solca. He told WWD that “Gucci’s new and more realistic take on pricing, product, and positioning seems the most important reason for its quick revenue stabilisation.” A lesson in there, surely.
To my mind, de Meo is on to something. Something that’s seemed crashingly obvious for years now. Let’s hope watchmaking’s decision-makers can bring us value, too, and give the people what they want. Then perhaps we can finally put this painful period in watchmaking history to bed.
This article was first published in the August edition of Watch Insider.
