ciaca
156
I agree again
Mar 17, 2015,04:50 AM
You're right, again.
The signals are all converging in that direction, but the question is: how all this reflects in terms of gain reduction?
I guess not much.
Pumping up production volumes create ecomy of scale, margins on the single piece grow up a lot, rebates and full inventory are risks that afflict the sales network when the company sell the watch to the dealer all that remains is a huge margin of profit and a big smile on the faces of mr. Philippe and mr. Therry
In a short term view, that kind showed by the young Stern in these last years, it's a global gain in terms of profit, not a loss.
Of course the loss, very important, is in terms of reliability, prestige and credibility of the brand, at least on a long term horizon. But this is not a prerogative of Patek, i guess is something related to the whole sector of high end horology.
it's almost 30 years that this kind of strategy started, during the mid 80's, and nothing has happened. Because all this is related to the quality of the watch, something that who buys Patek Philippe usually doesn't care
As long as their watch will keep on being considered a status symbol, a good investment or at least easy to sell back without great loss of money, or a mix of these two things, everything will remain the same or get worse. People are always well ready to "believe" in such a strong brand, auctions and literature still help in that way because too many guys have tied their hands (and their money too) to this stuff; it's a phenomena which lives a own life itself not related to what Patek does and how does it.
On the other hand if the supply have raised too much and the request has gone down, i guess, it's not because of a better consciousness related to the buyers but a bunch of macroeconomic facts that created a global negative occasion.
These, anyway, are diverging visions of the same business, who still believe in the true excellence, and operates in the way he can still guarantee a true excellent product (necessarly reducing volumes and increasing the investment in working hours and skills to achieve it) and who believe he has to pump up the volumes, create a huge margin of profit and a stronger financial position, taking advantage of a strong brand, just to compete against the colussus of the luxury which are making horology to shift more and more, day by day, in the field of fashonable trendy luxury toys.
It's pretty intersting to observe how the first vision is shared by all the independent watchmakers and some industrial company too, generally those not having a strong brand and looking for the fame and credibility alla over the world. The second one, on the other hand, is the inertia we can observe from the early 90's in the production of every of the mayor brands whatever is their name. No matter if independent or part of an holding, you call it Breguet or Vacheron, Patek or Audemars, the "rules" of the game are always the same. A lot of gain, may be too much, like in every ponzi scheme
I agree with the scenario you painted, but i don't blame the strategy of a "small" company which must compete with the giants just to keep on existing as an independent family affair, i blame the way they act out it.
Regards