Is the pre-order business model a ponzi scheme?
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  1. #1
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    Is the pre-order business model a ponzi scheme?

    I posted this in another thread, but would love to get opinions of those that know more than I. Because, I love some of the new offerings, especially the Marine GMT, but am very apprehensive given the long delays, no AD support, and the business model.

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    This whole pre-order process seems a bit of a Ponzi scheme to me. Let's say they sell 1,000 watches at 2,000 a pop. So they gross $2,000,000. That's not $2m in profit; that just in revenue. With all the watchmakers, execs, and product, let's say that $2m allows them to operate for a couple months (no, I have no idea what their monthly/annual expenses are). If the lead time is 6 months, that $2m isn't even paying for the amount of time to build and ship the watches. So, they need to come up with another pre-order to fund the next couple of months.

    Since they have cut out the ADs, they don't really have a consistent source of income. So, they have to keep coming up with new pre-orders in order to fund past pre-orders. At some point, it will come crashing down. Now, factor in delays, etc, and I don't see how they can sustain this.

    JMHO
    "The quality of a person's life is in direct proportion to their commitment to excellence, regardless of their chosen field of endeavor." Vince Lombardi.



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  2. #2
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    Your logic is right only if your data is right. The problem is I think your data is way off even though I myself dont have the actual numbers. For example, they r selling their LE watches at ~2.5K, and most are limited at 2000s. So assuming all the LEs are taken they have $5M, not $2M. Now the LEs are based on “normal” editions, which they are selling regularly at lower prices. They also have a ton of other ongoing models that they dont mention in their facebook and insta pages. Now we r talking about a few dozens millions per year. Again, no actual data at hand but for all luxury products, the production cost is 10%-20% of MRSP, majority of price is distribution cost, marketing and profit. I assume Ball cuts distribution and marketing cost heavily in the last few years so their profit must be healthy. Or at least they struggled with profitability with the old model so they have to switch to online direct distribution.

    And no, the strategy has nothing to do with ponzi scheme.

  3. #3
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    Re: Is the pre-order business model a ponzi scheme?

    Quote Originally Posted by diablogt View Post
    Your logic is right only if your data is right. The problem is I think your data is way off even though I myself dont have the actual numbers. For example, they r selling their LE watches at ~2.5K, and most are limited at 2000s. So assuming all the LEs are taken they have $5M, not $2M. Now the LEs are based on “normal” editions, which they are selling regularly at lower prices. They also have a ton of other ongoing models that they dont mention in their facebook and insta pages. Now we r talking about a few dozens millions per year. Again, no actual data at hand but for all luxury products, the production cost is 10%-20% of MRSP, majority of price is distribution cost, marketing and profit. I assume Ball cuts distribution and marketing cost heavily in the last few years so their profit must be healthy. Or at least they struggled with profitability with the old model so they have to switch to online direct distribution.

    And no, the strategy has nothing to do with ponzi scheme.
    Yes, I know my #s are off, just had to plug something in. Take Rolex, for example. They use the same design for years, if not decades. All the R&D is paid for within x years, and the rest is gravy. Ball keeps coming out with these new offerings (the new Marine GMT is very nice IMHO), which means they have to re-tool, etc. which adds to their expenses and the bottom line.

    I'm on the fence about this new GMT. Just don't want to be left out in the cold if they decide this business model us unsustainable.
    "The quality of a person's life is in direct proportion to their commitment to excellence, regardless of their chosen field of endeavor." Vince Lombardi.



    Current watches:
    Archimedes 39mm Destro
    Seiko SARB033
    G-Shock

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  5. #4
    Member timefleas's Avatar
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    Re: Is the pre-order business model a ponzi scheme?

    The ponzi suggestion seems to be a wild leap into darkness based on nothing other than pure idle speculation--as suggested, I think your hypothetical numbers are way off, and one thing I know for a fact is that their LEs rarely if ever sell out, and the stated run targets are almost never actually produced, where for example 333 is targeted, and less than 100 produced, where 149 targeted, less than 16 produced--and of the ones produced, most were not sold out, at least in the short term.

    I think at best what the pre-order does is simply prevents them from over-producing--they are equipped to handle a certain threshold--thus, their projected limited edition number (where most of their "new" designs rely heavily on existing parts and pieces of models already in their regular inventory, that require little reworking), get a bunch of orders and at the end of the campaign, work to fill the orders, without needing to produce any more--they are basically saving on not having unsold stock laying around, which is the undesirable baggage when following the more traditional approach of most production runs.

    Ball's pre-order approach is basically set up to determine demand, then supply enough to meet that demand, rather than to produce a supply, and hope there is enough demand to empty the shelves. In this way, they make only as many as they need to make and they don't have any leftover to populate the gray market shelves, thereby saving significantly in production costs--it is actually a fairly sound economic model, but is hinged upon the fact there there is enough demand to make a production worthwhile--I think in that respect, this may be a point of diminishing returns, over time. There are already clear signs of consumer dissatisfaction with regards to customer service, limited market access, disgruntled ADs and so forth.
    Last edited by timefleas; 1 Week Ago at 07:49.

  6. #5
    Member Dogbert_is_fat's Avatar
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    Re: Is the pre-order business model a ponzi scheme?

    Doubt that the marketing model is an elaborate Ponzi scheme. I think you got to give them the benefit of doubt as they are operating in a saturated market and competing with a lot of start ups.

    As @timefleas has stated, the pre-order helps them understand the demand and commit to a known production quantity with the factory. So far, Ball Watches has been honouring all their pre-orders so there is nothing to fear about losing your deposit (or full amount paid). Everyone who eventually got their watches have got nothing but praise for the quality and workmanship.

    One thing I know for sure is that once the quantities are confirmed when the pre-order period is over, they will not refund a change of mind as they would have negotiated the production numbers. But if you are willing to commit, then the wait is well worth it - as I had with mine last year - although it was an anxious 9 months.

  7. #6
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    Re: Is the pre-order business model a ponzi scheme?

    I think it’s a way to gauge interest and guarantee commitment to a design prior to investing so much in it. This way the company knows its relative success and budget in a particular model and release without a huge initial capital for the unknown
    For established brands and newer ones it makes sense.
    Issue arises form smaller brands that over stretch themselves in certain scenarios. ( many reasons or factors come into play here - suppliers , priorities, scale etc etc etc)
    Where no counsel is the people fall, but in the multitude of counsellors there is safety.

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  8. #7
    Member Triton9's Avatar
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    Re: Is the pre-order business model a ponzi scheme?

    Ball is long established and well funded watch companies. I do know of their delayed for their pre order watch. Yes, it can be frustrating but I rather wait longer than getting a shabby watch.

    I bought my Roadmaster Challenger 18 with in house movement(COSC) and less than $2000 with full metal bracelet. Its is really a steal even given the long wait.
    " A great time piece on your wrist show you are serious of time "

  9. #8
    Member Nokie's Avatar
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    Re: Is the pre-order business model a ponzi scheme?

    I think Ball's credibility is very well deserved and I can't imagine them being part of anything that involves a potential scam, IMHO.
    Triton9 likes this.
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