PANERAI PRODUCTION COST

[angelrondon]

So I go to ebay, and type panerai movement (not sure if it was a genuine one who know) however, it was priced at $99.99. Let say that it was the correct price... Now, why is it that the original watches;sell for 3K and up. I know a profit has to be made and all by the company, however it makes you think economically the true cost for high end genuine watches.

Im sticking to my repsssssssssssss!

 

[supermanx]

So I go to ebay, and type panerai movement (not sure if it was a genuine one who know) however, it was priced at $99.99. Let say that it was the correct price... Now, why is it that the original watches;sell for 3K and up. I know a profit has to be made and all by the company, however it makes you think economically the true cost for high end genuine watches.

Im sticking to my repsssssssssssss!

100% not gen panerai movement, although its true that the same "base" movement is relatively cheap. Yes gens are overpriced, but what most people dont include is marketing. Many luxury goods manufacturers spend multiple times their production costs on marketing. Plus other non-material costs. Workers Benefits, promotions, sponsorships...

 

[angelrondon]

sure thats all understandable, and its the core of a business. I just interesting to compare the cost of something versus the price paid by consumers. in our arena watches

 

[hooligan]

A genuine Panerai movement would probably sell for thousands, depending on which movement it was, because they are IMPOSSIBLE to find. However, a more accurate comparison of "cost" would probably be one of tourby's 6497s that are claimed to be finished and decorated by SOPROD, the same company that does the finishing and decoration for Panerai. Those typically sell for $400-500 on eBay, IIRC.

However, Panerai is making a HUGE margin on each and every unit they sell, rest assured.

 

[lysis]

So I go to ebay, and type panerai movement (not sure if it was a genuine one who know) however, it was priced at $99.99. Let say that it was the correct price... Now, why is it that the original watches;sell for 3K and up. I know a profit has to be made and all by the company, however it makes you think economically the true cost for high end genuine watches.

Im sticking to my repsssssssssssss!

Here's what one watchguy from another forum had to say about it. Rather than paraphrasing it, I'm just going to (shamefully) quote it verbatim:

"The costs of manufacturing in relation to the retail price will vary from brand to brand. But I was once lightly involved in a watch manufacturing project a while ago and the industry's rule of thumb, at least back then, was that the manufacturing cost was roughly multiplied by 5 to reach the retail price. To me it seems that the large brands have greatly increased their marketing efforts in the past years so the factor could be higher nowadays.

"Also, the costs greatly depend on the size of the series a watch is produced in as the initial design process, programming of the machines and tooling costs are the same if you make 1 or 20,000 of the same parts.

"Generally, the profit margin in percent on watches with a case made out of a precious metal is higher than on steel or titanium watches. The margin increases even more when precious stones are involved. "

 

[frankt8242]

So I go to ebay, and type panerai movement (not sure if it was a genuine one who know) however, it was priced at $99.99. Let say that it was the correct price... Now, why is it that the original watches;sell for 3K and up. I know a profit has to be made and all by the company, however it makes you think economically the true cost for high end genuine watches.

Im sticking to my repsssssssssssss!

I once worked in the "semi fine" jewelery industry, where the production techniques were similar to those of a watch manufacture, and we generally used a benchmark of 10-1 for retail cost to production cost...
In other words, we could spend $100. to produce a piece that would retail for $1000....Bear in mind that the actual price we charged to our initial buyer was @ double our raw production cost....the rest of the markup was absorbed by the various distribution levels, with the final retailer typically taking a 50% margin at full retail...I'm sure that the Chinese factories use a different set of parameters...

 

[Mr.RadioActive]

There are some super high fake pams on ebay being passed off as gen. Beware on all the pams on ebay!!! They even include "box" sets.

 

[Aji]

angelrondon................ Its like most things...once big business gets involved the costs start to spiral out of control.

This can be seen in every facet of modern day living.....

 

[horologie_unitas]

just consider Tag Heuer....

they pay ( ed ) Tiger Woods, Boris Becker, Michael Schumacher, etc.

tens of Millions for contracts to show off their watches.
thats why the - dumbass - customer that likes a Tag, pays $ 1500 for a QUARTZ watch....
that has a value of ......lets say not more then any SEIKO Monster.

 

[angelrondon]

quartz

horologie_unitas, I so agree with you. THATS SO RETARDED TO PAY THAT KIND OF MONEY FOR QUARTZ... NOT THIS GUY FORGET ABOUT IT!

 

[Panama]

That`s the point. Production costs/retail don`t reflect the margin, you`ve got to consider those mind blowing amounts companies spent in marketing campaigns.
Don`t know how much it costs exactly, maybe someone else knows more, but every single magazine ad has to be paid, millions and millions are spent there... (I guess one side in a life-style mgazine costs around 50k?)

Cheers
Panama

 

[searching]

Cost Plus vs. Value Based

There are two basic ways to price items. You can start with the cost of manufacturing and add in a margin (cost plus) or you can determine the value that your consumer will assign to the item and price based on intrinsic desire (value based). The luxury good demand curve is based on value pricing, on capturing the greatest value from the consumer. Keeping the price high also acts as a defense for the brand - keeps it exclusive.

As manufacturing quality increases in china we are getting to a point where the 'fake' good is equal in quality to the real good, especially when a dealer QC's. Then the only real difference in value will be so called moral value of buying a real good. But with huge impersonal conglomerates owning most of the brands, this moral culpability is diffuse.

Bottom line: I'm sticking with reps. Especially with the superreps it's the same great feeling as buying the gen, minus the fiscal hangover of paying thousands.

 

[spookycord]

Just looking at the swatch group's annual statemenets found on their invester website, some numbers for 2006 (in Millions converted to at current rate not historical USD)

Net Sales - 3,618

Production Cost 949
Personnel Cost 1,193
Other Op Cost 1,180 (marketing spend mostly)

Operating Profit 822


So as you can see from these crude numbers, a watchmaker selling their watch for $4,000 (this does not refelct the 'retail price' but the price they get to the wholesaler/dealer), they make about $900. If you take a 50% margin as a basis, then a $8000 gold omega aqua terra would yeild the swatch group $900, or close to 10% profit. Of course these numbers include everything from Breguet to Tissot. Prestige brands are likely higher margin.

hr Watch magazine does a breakdown in marketing spend of all the major brands. I don't have one handy but if someone does, just flip to the back.