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Watch Prophecies and Limited Editions

  1. queriver

    queriver Sep 7, 2018

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    On the back of recent threads about the high number of Speedmaster LE launches this year and the reactions they have provoked amongst the OF community, I thought I would put down some of my thoughts at a higher level.

    I’m not employed in the watch industry or by any of its eco-system of suppliers, retailers, analysts, journalists, etc., so I don’t have an insider’s point of view about the future of the watch industry, let alone visibility of Omega’s corporate POV. These are just my observations about what might be emerging with the Speedmaster line and in more general terms.

    I think most of us agree that hype and interest in Speedmasters will build in 2019 for the Apollo XI 50th anniversary. But, after next year I think interest in buying new LE Anniversary Apollo's will drop off significantly and stay down. After the climax of the Apollo XI 50th, everything else that follows will seem a bit ho-hum, except to hard-core enthusiasts, much as the space programme itself became anti-climactic after the 1st moon landing in 1969. Therefore, whereas Omega has been able to rely on a stream of Apollo Anniversary LE sales in the past, perhaps that’s not such a sure thing after next year. With good marketing, the rest of the Speedmaster range should also get a sales uptick next year but that will eventually taper off too.

    Long term, the mechanical watch industry will continue to be challenged by disrupters like Apple watches and smartphones, particularly amongst younger age groups who don’t see any reason to own a watch, let alone an expensive one, and that is unlikely to change.

    In more general terms, prestige watch companies have done well for a long time on the back of increasing wealth in emerging markets, particularly China where watches are seen to be a status symbol. Rapid China growth won’t continue far into the future in the same way as it has in the past and I don’t see much growth coming from developed economies in the future. Therefore, the questions are: from which countries will significant market growth come from after China and how far away will that be, and will consumers in those emerging markets still regard mechanical watches as status symbols, particularly if film stars, sportspeople, CEOs, and the like, don’t wear them as much as they do today? It is a risky thing for a company to rely heavily on this for its future success.

    Perhaps watch companies like Omega believe one answer to the long term growth dilemma is to shift emphasis much more towards producing niche offerings that appeal to specific market segments and geographies rather than continuing to primarily push “vanilla” products to a global customer base. Social media platforms like IG and FB obviously enable this, as can niche sites such as those us WIS-types go to including OF and Fratello. We're seeing companies, including Omega, leaving Baselworld which represented the old way of going to market. I think we are only in the early stages of this transition. ST#1, Ultraman and the Hodinkee LE are helping test the concept and we have already seen how much faster Omega has been able to get ST#2s out of the factory compared to the ST#1 production experience. Taking this further, as design & manufacturing technologies improve, perhaps companies including Omega will eventually be able to produce customer-specific watches at close to mass-market pricing.

    Anyway, these are just my observations as a novice and outsider. Please share your thoughts about what you think the future might look like for watch manufacturers such as Omega and what you think they should do to ensure their success.
     
  2. nonuffinkbloke

    nonuffinkbloke Sep 7, 2018

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    'Fakkinell'! ::confused2:: .............. I'll give it a bit of thought mate, but I'm still eating my porridge, so you'll have to hang on a bit. ::confused2::
     
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  3. Mouse_at_Large

    Mouse_at_Large still immune to Speedmaster attraction Sep 7, 2018

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    As per Mr Micawber's famous, and oft-quoted, recipe for happiness:

    "Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

    Charles Dickens, David Copperfield

    That's what they need to do. How they achieve this happy state of affairs is open to debate (probably long and involved debate :D)
     
  4. queriver

    queriver Sep 7, 2018

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    Mr Micawber's quote only tells part of the story for a publicly listed company because shareholders, and therefore management, expect both the revenue and profit lines to grow year on year. If income exceeds expenditure but revenue decreases year on year, that is not success because shareholders don't want to see their dividends in a downward trajectory. It comes back to the question about what are they doing, or should they do, to achieve consistent top line growth.
     
  5. Mouse_at_Large

    Mouse_at_Large still immune to Speedmaster attraction Sep 7, 2018

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    Just as long as the total funds available for distribution to shareholders increases year on year, most companies will be pretty happy. Sometimes this can be done by decreasing total income but reducing costs and thus increasing nett profit margin to compensate. Cutting loss-making or low margin items can achieve this. However, a sustained downward trend in revenue generation will eventually overcome this sort of compensatory mechanism.
     
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  6. abrod520

    abrod520 Sep 7, 2018

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    Have been thinking this for a while now. However, I think Omega will continue to innovate and may produce some interesting LEs going forward - after all, look at the fallow period between 2004-05 Gemini IV and Apollo XI-35th and 2015 with the Apollo XI-45th. Not many great LEs in that time period, but Omega's on a 4 year roll now after the XI-45 (followed by Snoopy and then the Speedy Tuesdays). Also, I wonder if all of the non-watch-related coverage of the 50th anniversaries of the moon missions over the next 3 years will drive a bit more interest in Omega, more than there has been before. After all, Omega will surely go all-out to ensure people see their advertisements. So I'm of two minds, really, and can't say for sure what I think will happen
     
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  7. Foo2rama

    Foo2rama Keeps his worms in a ball instead of a can. Sep 7, 2018

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    Data seems to show that Apple watches have actually gotten more people into real watches...

    Smart watches are not destructive to luxury watch sales.
     
  8. Waltesefalcon

    Waltesefalcon Sep 7, 2018

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    I have no problems with LEs until everything starts being "limited." I own an LE, not a Speedmaster and not even an Omega; recently I bought an Eterna Kon-Tiki 1973 and I'm pretty happy with it. I'd love to have the real deal IDF issued Kon-Tiki but this was something I was cool and I could afford.
     
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  9. lillatroll

    lillatroll Sep 7, 2018

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    I think Omega are doing what they have always done; produce a wide range of watches that individually appeal to some and not to others, but there is something for everyone.
    I personally don t care if they call it an LE, only make a few hundred or a few thousand or 25, if I like it and can afford it,I buy it, if I don t like it or can t afford it then I don t buy it. Reading throught the threads about LEs, some commentators seem like they feel they have been robbed in some way because another watch has been released. I really don t get the idea that Omega is somehow diminshed as a brand in someway if they release 20 watches every five minutes. If its a quality, good looking product it will sell, if its crap it will sit on the shelf. I wonder if much of the negativity comes from people who are worried their LE will not be the next Snoopy because another LE is on its way. In short, I think Omega will do just fine as long as it keeps making nice watches.
     
    Edited Sep 7, 2018
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  10. Foo2rama

    Foo2rama Keeps his worms in a ball instead of a can. Sep 7, 2018

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    @lillatroll well said

    What drives me nuts is some of the same people are complaining about too many LE and price dilution while complaining about people selling them for profit...

    Umm argueing both sides much?
     
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  11. Bushido

    Bushido Sep 7, 2018

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    This is a good point too. I think it gives a glimpse inside people's motivation and drive when it comes to watches. Is someone in it for enjoyment as an enthusiast? Or, what seems increasingly common, is the motivation driven by hubris and/or profiteering? (I know this is a bit reductive)

    I don't necessarily take issue with any of it. However, as an enthusiast on an enthusiast forum, the inundation of threads and comments asking about "how much is this worth?" and "what will the value be?" speculation is far less enjoyable to me than the threads focused on "Here's my new watch that I am so excited about!"
     
  12. Edantony

    Edantony Sep 7, 2018

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    People have to stop saying the Apple watch is disruptive to high-end mechanical watch manufacturers. They barely compete on a price level. I don’t think there is any canibalization. As for LEs, I think you guys are putting too much romance into devining Omega’s strategy. They sell an LE one year, and have to find a way to anniversarize the sale next year. As easy and simple as that. I also dont think they will go into mass customization as OP suggests, it all but dilutes and kills a brand - when everyone has something special, then nobody has.
     
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  13. Edantony

    Edantony Sep 7, 2018

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    A limited edition/ flanker is the cheapest way of animating a product line, and brings in much needed sell-in with retailers.
     
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  14. abrod520

    abrod520 Sep 7, 2018

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    I tend to agree with this but for one point: For most people just getting into watches, they want to know that their $3k purchase isn't going to just go poof if their economic situation changes. So yes, there are a lot of people showing up asking "will this appreciate?" but also some of those people are probably simply asking "will this hold its value?". I know for me, it's much easier to decide to buy a vintage watch knowing that if I need to raise some funds (and I usually do in order to buy another watch), I could probably get back what I paid for it.
     
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  15. queriver

    queriver Sep 8, 2018

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    It would be interesting to see data about Apple watches encouraging people to buy mechanical watches but I think it is too early to draw conclusions about the impact of Apple watches and, more importantly smartphones, on future sales of mechanical watches.

    I wouldn't anticipate sales of "high-end" watches being disrupted but, to me, that is ultra-expensive low-volume watches from companies such as Patek, Vacheron and AL&S. Their prestige should insulate them.

    Omega and other mid-tier watch companies are not in the high-end insulated category and neither do they sell at a similar price point as Apple watches but I think their future sales will be at risk - not so much from Apple watches as from smartphones.

    Put it this way, when we had the quartz crisis people still wore a watch, it’s just that many chose quartz over mechanical. If someone wanted to know the time they still had to wear a wristwatch. Now is different, particularly for young people. Look around the streets or on public transport and we see a generation of teenagers walking around with their eyes glued to their smartphone screens with the time right in front of them, along with time-zone and chronograph functions. Ask your kids and their friends whether they have any desire to wear a watch and the answer will, more often than not, be negative because they regard a watch as redundant.

    So, if these teenagers don't grow up with a watch, the challenge for the mid-tier mechanical watch companies will be to persuade them to start to wear one later in life when they have disposable income. This will be more difficult than encouraging people to switch from quartz to mechanical because we are talking about people who aren’t used to wearing a watch and will still be going about their lives with a computer that tells the time in their hands.

    Apologies for another long post. This may be an overly pessimistic view about future challenges – there are certainly many in the world today – but that is why I would like to understand what others think and what we collectively see the industry’s response/s looking like.

    Every thread needs some images so here is the robotic stock-picker at Omega’s new manufacture in Bienne. If they do shift their emphasis from mass-market “vanilla” products for a global audience to mass-customised "limited editions" they already have some technology in place to support it.

    Quote from Omega website: At the core of the building, OMEGA has installed a fully automated storage system that rises up through 3 floors of the building. Like something from a science-fiction movie, the fireproofed system contains over 30,000 boxes filled with all the necessary stock required for the brand’s watchmaking.
    20171102_omegas_newest_factory_is_opened_7-s1-large.jpg
     
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  16. Sweli

    Sweli Sep 8, 2018

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    I'm just waiting for the day when Omega breaks in to the Fit Bit market. The Omega Fitmaster...waterproof to 300m! Full compliment of color bezels and straps of course. There's a reason why they're a part of the SWATCH group--they'll do what they need to do to stay profitable and survive. If the LE's aren't selling, they'll stop making them. They owe no allegiance to the collectors.
     
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  17. queriver

    queriver Sep 11, 2018

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    In this politically correct era they'll alienate 50% of the fitness community if they use FitMASTER. It'll have to be something like Fitperson or even Fitpersxn. Or select from a list of a gender appropriate names along with bezel colour. How long before they get pressured to drop Speedmaster and Seamaster? ::rant:
     
  18. Sweli

    Sweli Sep 11, 2018

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    And they say all the watch complications have been done, but I think you just found a new one.
     
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  19. igloe

    igloe Sep 11, 2018

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    I will keep on buying Watches. No matter what anniversay the moon landing has. Always a mixture of vintage and new modern ones.
    Why? I love both!
     
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  20. queriver

    queriver Dec 30, 2018

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    After listening to the Hodinkee 10 audio interview with Jean-Claude Biver ( https://www.hodinkee.com/articles/hodinkee-radio-episode-25-jean-claude-biver-h10 ) I thought it worthwhile resurrecting this thread.

    JCB spent some time pointing out the significance to the watch industry of the introduction of the Swatch in the early 1980s and that people underestimate(d) its enduring impact. As he so passionately puts things, he said the Swatch put a watch on every child from 6 to 16 years of age for the first time in history. As a result of the price point at which they were sold, the variety of colours and the marketing approach, kids became watch conscious for the first time ever and once they became watch conscious they remained so after they grew up. Eventually they bought more watches and that was one of the contributors to the success of the mechanical watch industry in subsequent decades.

    He then asked this question: Who does it today? i.e. who is doing today what Swatch did in the 1980s to further the future success of the watch industry? He hopes Apple might but noted that Millennials say they don't want to wear a connected watch, and that most sales of Tag Connecteds are to 40-45 yos.

    His closing message was that Millennials today need to be educated to wear a watch much the same as kids in the 1980s were educated by Swatch.

    As stated earlier in this thread, in some respects it will be more of a challenge to educate the young people of today because, whereas young people in the 80's needed to wear a watch to know the time, now they have their smartphones.

    PS: edited the title by bringing "prophecies" before "limited editions".
     
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