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      03-10-2014, 05:48 PM   #110
NemesisX
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Quote:
Originally Posted by tony20009 View Post

Notes:
  • This post is super long, but if you take the time to read it, I think it'll give you a good basis for how to think not only about fake watches, but to some extent, watches in general. The concepts I discuss can also be extrapolated to just about any luxury or premium product.
  • Nemesis, I'm just replying off your post, not disagreeing with you.

Introduction:
I need to start by saying despite what it may feel like to you and me as individuals, just about any mechanical watch costing $2K+ has to be seen as a luxury item, even though there are lots of other watches that cost many times $2K. The reason is simply that below $2K one can get substantively all the functionality, durability and accuracy one is that there exists to be had from a standard mechanical watch, i.e., time-only, time + date; time, date + chrono; and/or time, date + power reserve indicator. Yes, the time keeping accuracy can run from +/- three or four seconds per day to +/- 18 seconds per day, but I think it's safe, from a practical standpoint, to consider any of those accuracy measures as "accurate enough" for most anyone's needs. The major impact is just how often one will have to adjust the time on the watch. If that's really that bothersome, perhaps one should choose a quartz watch, all of which have accuracies measured in terms of seconds per month or seconds per year.

My Thoughts on Your Thoughts:
Your line of thought is right on target. There is absolutely no rational, empirical -- from a consumer perspective -- about why any watch costs $10K+. The same can in fact be said of just about any watch that is a luxury watch. Another way to say that is "any watch that is more than purely functional." There are rational reasons for why that is the way it works, but the prices themselves cannot be rationally justified by a consumer. They can, however, be emotionally justified and that's exactly the approach makers of luxury goods take to promote their products. (Why they do so and why it works requires an understanding of several disciplines --- industrial psychology, marketing (advertising, promotion and pricing strategy), sociology, and economics are the major ones. I'm not going into all that...this post is already long enough.)

What Goes Into Watch Prices
Once one gets above about $2000 for an uncomplicated or for a watch having just a basic complication watch (chrono or power reserve only) , one has to realize that the retail price of the watch includes labor, material, overhead and intangibles. Labor can be human and/or machine effort to build the watch even though, from an accounting standpoint, they are differently classified. Consumers can consider them as one just to keep things simple. Similarly, the intangibles don't have a place in a company's books of record, but they do play into pricing strategy and implementation.

Now, I think most folks won't gripe too much over the cost of labor, materials and overhead. It's the intangible aspect that galls or befuddles them. While nobody lacking access to a company's internal records can specifically identify how much of a watch's cost is apportioned to each of the components, either "good sense" or comparative analysis will tell one that it cannot, for $2K+ watches possibly be more than half the MSRP of the watch. Another thing to realize is that as the MSRP of a watch increases, the cost components don't increase at a corresponding rate. Taken together, that means then that the intangible component is what's increasing.

The intangible part if the MSRP is nothing more than the premium the maker/retailer assigns to the value of their brand name. One can think of it as shown below, although again, that's not how prices are accounted for or determined.
Luxury goods MSRP equals:
+ Cost of Labor + profit assigned to labor
+ Cost of Materials + profit assigned to materials
+ Cost of Overhead + profit assigned to overhead
+ Any additional profit the maker thinks they can obtain. This is where the intangible portion of the cost comes in.

Pretty much all brands assign profit to the three tangible components of cost, but no-name or non-status-name brands assign far less to the intangible component. (An odd and interesting fact is that if they simply did increase the price by boosting the intangible component, consumers would actually perceive the watch to be higher quality and would pay the extra amount.)

Fakes vs. Authentic Rolex Watches
Now when it comes to matter of fakes versus authentic products, Rolex happens to be a pretty good pricey brand to use to illustrate. The reason is that Rolex make and sell a very basic watch at comparatively huge prices. Rolex Oyster collection watches don't have any of the fancy, artistic embellishments one can find on other watches at prices similar to Rolexes. Also, Rolex movements are "generic" in the sense that the movement inside any Oyster isn't appreciably different from the movement inside any other one. Even the Daytona, which is a chronograph, is the same base movement; it just has a chronograph module "bolted on."

It's true that Rolex, as your video illustrated, have outstanding attention to detail when it comes to executing the build of the watches. However, like many things German (remember that the Rolex Oyster design is not Swiss, but rather German), it's greatly over-engineered. ETA and others may not all have the same level of attention to detail, but as ETA's track record has shown, their movements have that attention to detail in the places that make a difference in the long term usability, dependability, etc. of the watch movement. There are other movement makers that are quite the same in that regard, but yes there are those too that don't. Some of the movements found in some fakes are certainly not as well crafted and the "shortcuts" can, in those movements, make a difference.

The "So What?" Factor
Nemesis, the video you provided is quite good at identifying traits that distinguish an authentic Rolex from a fake. That's great and useful information for anyone seeking to buy a new Rolex Sub (and to a lesser extent any Rolex) from a non-authorized dealer or a used one from any seller. What the video didn't discuss, and what I think goes through folks' minds when they choose to buy fakes, is which if any of those differences matter. It comes down to the value proposition. What benefit doe one actually get in return for having spent so much more, and are the benefits worth the extra money?

Recognizing that authenticity, in and of itself, is neither a benefit nor a detractor (aside from any legal/seizure risk associated with the fakes), let's look at some of the things from the video in your post.
  • Holographic sticker -- Well, I don't think I need to say much here. The sticker is for verification purposes and has no impact on the watch's performance or longevity. Mine are in a trash dump somewhere.
  • Color -- Again, slightly off in color doesn't affect the watch.
  • BPM (ticking vs. sweeping hand) -- Certainly it's something that distinguishes Rolex from the poor fakes, but unless the hand is actually stopping at each second interval, it's hard to see what difference it makes. There's no question that some 30 or so years ago Rolex touted the "sweep" of their second hand as being a big thing and competitors responded by upping the beat rate of their movements to make their hands sweep. The sweep is elegant looking, but it doesn't keep time better than a non sweeper. There are chronometer watches that sweep and there are ones that don't.
  • Movements -- Miyota, ETA, and others make very accurate and durable movements just as Rolex do. My oldest mechanical watch movement is the one inside my 1970s Swiss Army watch which has never been serviced, has ETA inside and still works fine. After that, comes my '80s era Air King. My next oldest is an ETA movement also from the '80s. Now I'm not good at all about regularly servicing those watches and they both run fine, at least fine my expectations. So, for me at least, I don't have any experiential evidence indicating that it matters. I don't have similarly old watch with a Chinese, Sellita, Miyota or Seiko mechanical movement to use as a person point of comparison.
  • Crown guards -- Again, I get that they distinguish the watches, but for the life of me, I can't see what difference it makes.

    Rolex make watches that lack a crown guard altogether. Many a an excellent dive watch -- some far better suited to actually diving in the ocean -- lack crown guards. As far as I can tell, the crown guard on the Sub is just a design difference between it, ts stablemates and other watches. If someone here knows what difference it makes, let me know. I'm not a professional or technical diver, so I don't know how significant a crown guard really is.
  • Solid end link (SEL) bracelet attachments -- Here, I have to agree that the SEL design is sturdier. If I'm going to pay a ton of money for watch on a bracelet, or even just a bracelet, I look for SELs. Having said that, I have a Tag Series 2000 (an Aquaracer essentially) and it has folded, open link attachments. The bracelet has managed to stay affixed to the watch since the 1990s.

    The SEL design is one of those things that strikes me as being something that's over-engineered as far as most folks' needs are concerned. Plus, what's going to fail is more likely the pins holding the bracelet in place, not the ends of the bracelet. About the only benefit I can identify to the SEL design is that it reduces the likelihood that the pins won't fly off when the bracelet is removed. The main reason that happens is that there's just less room for the pins to "get away" when they are being removed. So, yes, there is a difference, but to the point I stated above, I don't know that it matters. I'm open to finding out that it does, but until that happens, I don't think it does. (I know a good bit about watches, but I know too that I don't know everything about them. )
When I consider the things that are different between Rolexes and the fake Rolexes, I find it impossible to say with a straight face to someone who just wants a nice watch that there's a good reason to buy a ~$9K Sub instead of something else, be it an authentic Sub competitor or a fake Sub of reasonable quality. The sole reason I can come up with is to do so if one just wants to and has the money to do so. Now for folks with different purchase expectations -- curatorially oriented collectors, folks planning to resell it, people who are comparing it against other similarly priced watches and that I feel won't meet their expectations as well as the Rolex, etc. -- sure, I'll advocate for the Rolex.

Authentic Non-Rolex Watches: How they differ from a Rolex
Rolex is somewhat unique among pricey watchmakers because they really make no effort to decorate their movements. Rolex is all about durability, functionality and practicality. Practicality in all respects except price. In that sense, it's safe to say that once really can't find a watch that's better put together than a Rolex. (One can find watches that are as well put together.) That's the difference between being "the best" and being "number one." Many makers can be "the best" simply because on this or that basis of measurement, they are equal and none others are better. Being "number one" requires a basis of comparison against which one competitor empirically outperforms all others. If the basis of measurement has anything to do with watch movement decoration, Rolex is at the bottom of the barrel right along with ETA, Sellita, and many other movement makers. (I don't know what brand I'd cite as #1, but that's not the point and it doesn't matter anyway. It's just clear that Rolex isn't anywhere near #1 on that measure.)

I went through the preceding discussion to provide a framework for considering the fake PPs, IWC, JLCs, Breguet, AP, VC, etc. that one can find in the marketplace. The watches made by those companies differ from a Rolex Oysters in two key dimensions: they all have greater and lesser degrees of decoration on their movements and they can have complications other than just a chronograph and/or power reserve indicator function. The decorations include things like
  • Cote de Geneve (Geneva stripes) - linear or circular stripes abraded into movement plates, there are several variations of this technique. All of them can be done by hand, some by machine.
  • Blueing -- a heat treatment applied to screws; it makes them permanently blue or grey depending on the temperature and time of the heat. This treatment is a major profit maker. It looks cool, but costs almost nothing to effect.
  • Poli noir (black polish or mirror polish) -- This is rare to come by, so I'll explain it a bit. It is the highest level of polish possible and the most arduous to obtain. It's possible only on steel. It requires rubbing a zinc plate against the steel using varying coarsenesses of diamond paste so that the steel turns black and has no texture at all, even under high magnification. When light is shone on the resulting surface one of two things happens, depending on the angle of the light source:
    1. All light appears to be absorbed and the surface appears intensely black, i.e., as black as black can get.
    2. The light reflects back in a 100% undiffused manner.
  • Anglage (beveling or chamfering) on screws, screw holes, plates and/or cog wheels. Some makers bevel every edge they can find, some only bevel the edges that a user can see. Whatever the extent of beveling, it has to be done by hand.
  • Perlage - swirls applied usually to movement plates,
  • polished holes,
  • Brouillage - essentially a sand blasted looking-like pattern applied to a metal surface, and
  • Dressage - essentially a linear, brushed patterning; it looks like most any other brushed metal surface treatment.
  • Plating -- often enough, movements are plated with gold or rhodium. The plating serves three purposes:
    • It makes the movement look nice (assuming one likes the look)
    • It reduces the risk of corrosion because both materials are highly non-reactive
    • It increases the maker's ability to charge more for the watch.
Now for the most part, these decorations are just that, aesthetic enhancements that make a movement pretty to look at, and, of course they do increase the cost of making the movement. They also, as noted above, create additional opportunity for the maker to charge more and make more profit. There are, however, some decorative effects that technically have some functional value.

For example, beveling has some functional value because it removes burrs that could otherwise eventually fall off a piece of metal and "clog up the works." Beveling also can reduce corrosion by dint of its smoothing of a surface. It makes the beveled area less amenable to being gripped onto by whatever substance might want to grab hold and start the corrosive process. Of course beveling is often found on movements that have more than a few other very "grippy" surfaces, so while one's beveled edges won't corrode, the other surfaces will.

I don't generally tout the functional benefit of beveling because I feel that in this era, it's something of a moot point. As a matter of trying to provide as candid info as I can, I suppose if a person asking me for input shared that they desire their watch to be in the best shape possible 300+ years hence, sure, I'd suggest they go with something having as much beveling as possible. But nobody asking me for input has identified that as a requirement.

Side Note: With nearly every watch made being waterproof at surface pressures, the chances of a corrosive substance getting inside the case is very slim. If the person servicing a watch is top notch, they will perform the work in a sterile environment to avoid contaminating the movement. Indeed, that last bit is probably the one reason to send a relatively basic watch to the factory for service if one has an expensive watch that doesn't have a super complex or esoteric movement.

Beveling is also a good example of something about which companies will tell half the story in order to convince the buying public that their product is better. It also highlights an aspect of the value proposition: how much does it really matter relative to the price one must pay to have beveled edges and relative to what one's expectations are for the watch.

Fake Non-Rolexes
Whereas a fake Rolex is pretty easy to assess -- it really just comes down to how important to you is the over-engineering in a Rolex and how much you are willing to pay for it -- it's a slightly different game with most non-Rolex watches that are replicated in the fake world. What's different is the quality of execution in the decorations and the effectiveness of non-basic complications. In some fakes, the decoration may not exist at all. Provided the watch is one that is only supposed to have decorations on visible parts, you can look at it and tell what's what. If it's a watch such as a PP that is supposed to have beveling even on edges one can't see, you need to remove and disassemble the movement to tell.

Another thing is that the complication(s) may not work accurately/consistently, or it may just look like it exists when in fact it doesn't. Take a fake (or real for that matter) perpetual calendar watch. Unless you set it so the watch thinks that it's February 28th or 29th, you won't know whether it actually is doing what a perp cal complication does. If it's a moon phase, you need to set the time and spin the hours by, noting exactly when the moon rises and sets and whatnot and then compare that against the known cycles of the moon if you expect to determine how effective the fake is. (You have to do the same with a real one too if you aren't of a mind to trust the maker's assertions about the accuracy of the moon phase.)

I think after reading the preceding, you'll understand why some watches are faked and some aren't. It's not so hard to fake a watch that doesn't have a presentation back. Since no Rolex Oyster does, that brand is an easy faking target. Ditto almost every dive watch. Once one gets beyond the simple and basic sorts of watch that can easily be replicated, at least visually, the value proposition of even the fakes comes into question.

For example, even a person buying a fake perp cal at least wants some semblance of the complication actually functioning as its supposed to. A buyer of a fake watch that is supposed to have an exhibition back and a decorated movement wants there to be at least enough decoration that it looks like the real thing. Why? Because the whole point of buying the fake is to get the look while compromising on other things that that user feels don't matter too much and that s/he doesn't want to pay for.

Does that make the non-Rolex high end watches that cost huge sums a better value? No, not at all. It just makes the fakes less of a good value proposition because they just can't do or have enough of the "cool stuff" the authentic ones have to make spending the money worth it. The fakes are so obviously dim shadows of what the real thing is that there's no point. A good fake Rolex, however, much more adequately apes the real animal.

Obviously, that's something of a personally biased, subjective assessment on my part. I'm sure there are some folks whose desire for similarity stops at the watch face. I choose to believe that no matter whom one is, one still wants a good quality watch, and one that does what it's supposed to do. A slightly different crown guard, for example, is one thing. A fake perp cal that doesn't skip to March 1st or a fake Piaget that doesn't have the lovely, circular Geneva stripes is another.

What this makes clear is that folks who do spend large sums on luxury items, watches, cars, clothes, etc., do so because they can. Folks who buy fakes, do so because they are unwilling to spend such large sums. Some folks who buy fakes and who buy authentic goods may do so for other reasons, but all those other reasons are emotional, not rational.



TY. Glad I could help you find a bit of perspective. I find for myself that that sort of perspective makes my life a lot less stressed and confusing.

Nice to see you posting again. Hope all's well in your world.




I fully respect your 2 and I appreciate and applaud your living by it. I only want to say that the ownership experience will be devalued only to the extent that the hypothetical fake M3/GT3 (or whatever) doesn't meet the expectations of the person who buys/uses it.

To put it another way, I believe an M3 can outperform my E92. However, if I'm the one buying it, other than straight line acceleration, the fact that the M3 can corner better, has better braking response or better cornering ability, etc. is moot. I don't drive in any way or anywhere that the added capability is something I'm realizable by me. Sure, I probably could tangibly feel the greater potential in the way the car performs when I drive it in the mundane ways and places I drive, but if I don't use those capabilities, or if I only use/benefit from them once or twice, the value proposition associated with spending the premium for the M3 is pretty low.

All the best.
I read this post in detail and I just have to say again - thank you so much for taking the time to write this up!

Your point about certain watches being hyper-susceptible to "design theft" is well taken. As a casual, "outside" observer when I think about "high end watches" the very first watch brand that comes to mind is Rolex, and the very first watch that comes to mind is a diver watch like a submariner. I realize now that it's a mistake to think the degree of worksmanship on submariner replicas applies to fakes of other brands just as well. And, even if you consider rolex submariner replicas in isolation, the question becomes what are you willing to pay for the over-engineering and authenticity that comes with owning the real thing.

I agree that the poor workmanship on the replica SELs stood out the most.

You know in hindsight, I actually do understand the premium placed on the "intangible" aspect of owning a fine, authentic watch. Take cars, for example. Our family has a policy of only buying brand new cars. My dad feels like used cars have been "sullied" (note: he doesn't actually use that term but that word best captures the essence of what he's talking about) of their reputation or prestige somehow and he doesn't sit well with the idea of owning a used product. When you consider the fact that cars depreciate anywhere from 10-20% the moment they're taken off the lot, some might view this line of reasoning to be financially imprudent, but it only means that we place high value on the "intangible" aspect of being able to say to ourselves that we own a brand new, untouched vehicle. It seems perfectly reasonable to me that others would place similar premiums on the intangible aspects of other luxury goods.

Your enthusiasm about watches is palpable. As a self-proclaimed "non-watch guy" even I get a little excited about the subject after I read your posts