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  1. #41
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    Re: All roads lead to Patek ...

    Haha how did so many patek threads turn to fpjourne discussion.
    tony20009 and lmcgbaj like this.
    W.A.S. Watch Acquisition Syndrome Patient.

  2. #42
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    Re: All roads lead to Patek ...

    Quote Originally Posted by renovar View Post
    The reality of the matter is the name itself means nothing and deserves no premium, Patek, Rolex, etc. It's what the brand's prior activities and preceived value.
    For example. Lets just say if Patek tomorrow decides to:
    1. Increase their factory output 10x to meet demand
    2. Allow their dealers to give 30% discount to increase sales
    3. Put their watches on Amazon and Alibaba to increase the mass appeal
    4. Dump some unsold stock to greymarket dealers for some quick profit
    5. Sell their company to Swatch and start to sell their movements to Tag Heuer for a quick buck

    Very quickly their brand equity will disappear. The premium a collector willing to pay for the word "Patek Philippe" on the dial will disappear.
    I think the collectors appreciate that Patek will not do any of that today or most likely tomorrow, and is willing to assign a premium to it. To me it's a fair preposition.
    #2 & #4 - Kind of related things from the standpoint of the AD.
    I'm not so sure how much control PP have over their ADs regarding the extent of discount at which an AD decides to sell to a customer. Those ADs are independent businesses and they need to manage the profitability of their retail floor space. While they are quite likely prohibited from advertising prices and/or discounts, giving them is entirely their decision. Naturally, the AD doesn't want to offer larger discounts than it needs to, but in response to the laws of supply and demand the AD faces in his/her market, retail discount percentages, as well as list prices, are the AD's decision. Once the AD retailer has taken delivery of product from PP, PP has made their money. Could PP have a unique business model whereby they carry the burden for retail sales even though the watches are held by their ADs -- something akin to a consignment arrangement? Sure they could; maybe they do, but that'd be most unusual.

    "Dump" is a stronger term than I'd use. Nonetheless, there are plenty of GMSes offering PP watches. It might be that PP doesn't sell to them, but PP's retailers must necessarily then be who does. There are only two sources from which the GMSes can get them: PP themselves or the retailers. Rapid inventory turnover is critical to to both retailers and manufacturers; neither can really sustain themselves as a going concern if they can't move the product in a timely manner. GMSs fill a business need for both types of company -- they provide a market of buyers -- and no matter how much a high end (or low end) maker may not like that GMSes exist, they also know they need them.

    One factor that can affect the nature of terms between a maker and retailers is the structure of the maker's business organization. PP is privately held rather than publicly traded. Privately held companies, not having to meet the expectations of "The Street," have some options that public companies do not. On the other hand, they also don't have the advantages that accompany being a public company. Since PP is a private concern, whereas at a basic level one can pretty well be sure they follow accepted business practices, the company may not as it doesn't live under the profit maximization constraints of public ones. They need only be sufficiently profitable -- or not -- to satisfy their owner, and they don't have to achieve margins and other measures that are common in their industry. And of course, since they don't release their audited financial statements, nobody knows exactly what their actual performance is.

    As for the "willing premium collector," seeing that even at GMS discounted prices, PPs are still $20K+, I don't think those collectors are too concerned about their PP being cheapened as a result of their being available at a small discount. I know that it may feel like Rolexes are "a dime a dozen" to many folks here, but the reality is that the overwhelming majority of people do not own/wear a Rolex. Fewer than 1% of the people in Western countries do. If one includes the rest of the world, the percentage shrinks further. PP's representation "in the wild" is vastly lower than even Rolex's. PP's annual production is currently thought to be somewhere around 45K watches; you can do the math.

    I think many folks -- especially folks in the watch collecting world such as WUS members -- lose sight of reality because they live in economically privileged "worlds" and/or they are in "close proximity" to many other people who share their hobby. If one were, for example, to drive around the D.C. Metro area, one would likely think that ~$500K - ~$700K is a normal price to pay for a new home because it's actually hard to come by new homes in the area listing for less than that. Leaving D.C., however, one will see that those prices are well above the average or median home price.

    All the best.

    The parties with the most gain never show up on the battlefield.
    ― Naomi Klein, The Shock Doctrine: The Rise of Disaster Capitalism
    2muchtimeonmyhands likes this.
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  3. #43
    Member 2muchtimeonmyhands's Avatar
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    Re: All roads lead to Patek ...

    One part of the Patek ethos that I don't quite understand is getting the written permission to buy a grand complication. On one hand, Pateks hold their value but then you are not supposed to flip them. I understand that adds to the exclusivity but surely this negates one of the main advantages?
    It seems to me that unless you are planning on becoming a serious collector of Patek grand complications, there isn't much point in buying one based on resale value. You would certainly have to be very sure of your purchase.
    Am I missing something here?

    Dan
    Last edited by 2muchtimeonmyhands; August 2nd, 2014 at 16:52.
    Rolex Daytona white dial (116520)

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  5. #44
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    Re: All roads lead to Patek ...

    Tony:
    Without risking clogging the thread up more, this is what I understand:
    1. I dont think anyone can control what an AD and a customer do in a transaction. Not Patek or anyone can force 2 willing parties from doing a transaction on an individual level. But I think PP (and Rolex) have a stronger discount policies compared to other luxury watch brands that if one particular AD discount too much (overall) they risk losing their AD status. Whether or not this is truth is unclear, but this is quoted time and again through multiple AD's through many different countries I have visited when the discussion of discount comes up.
    2. As far as GMD inventory is concerned, yes, it's usually AD's that will sell their unsold inventories to GMD's. From my knowledge (lots of my friends goes to the Diamond district in NYC, probably the biggest GMD network in the world), the inventory of Pateks, especially complication pieces are much tighter than other brands. And sometimes GMD's can't even offer a complete line of many popular Pateks and sometimes no discount. PP 5960p is a good example. A friend of mine was told by multiple GMD's that they can't get it for 3 months and no discount. Whereas almost every other comparable brand (think AP, Breguet, JLC, etc), they have assess to their entire current models at 20% off.
    3. Being privately held. Yes they are private held company with estimated (by Fortune) $1.2B annual revenue. I think that's probably an important reason why they have as much control as they did. They are not obligated to maximize EPS to satisfy the street, as opposed to Swatch, LVMH, Richemont, etc. You can be sure Patek is quite profitable, but the fact that they are willing to sacrifice some profit to maintain their brand equity is undeniably a good thing for their collectors.
    4. You are absolutely right that even Rolex and Omega, in real life, are considered "high-end" to the vast majority of people. A Patek Phillipe, gosh... It's extremely rare in the wild. However, with most "ultra high-end" purchases such as a super luxury yacht, super luxury motor boat, a custom Ferrari, a private Gulfstream jet, a 5 carat Graff diamond - whats common with all these things is the massive depreciation they will get hit with. Yet with a Patek, it's a reasonable investment for people with money to burn. Somebody like the Continental airlines CEO who recently sold $50m worth of watches The Do's and Don't's of Collecting High-End Watches. A large % of these watches are concentrated in a select few hands.

  6. #45
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    Re: All roads lead to Patek ...

    Quote Originally Posted by renovar View Post
    The reality of the matter is the name itself means nothing and deserves no premium, Patek, Rolex, etc. It's what the brand's prior activities and preceived value.
    For example. Lets just say if Patek tomorrow decides to:
    1. Increase their factory output 10x to meet demand
    2. Allow their dealers to give 30% discount to increase sales
    3. Put their watches on Amazon and Alibaba to increase the mass appeal
    4. Dump some unsold stock to greymarket dealers for some quick profit
    5. Sell their company to Swatch and start to sell their movements to Tag Heuer for a quick buck

    Very quickly their brand equity will disappear. The premium a collector willing to pay for the word "Patek Philippe" on the dial will disappear.
    I think the collectors appreciate that Patek will not do any of that today or most likely tomorrow, and is willing to assign a premium to it. To me it's a fair preposition.


    Especially relevant seeing how Ulysse Nardin just got bought out by Gucci. Thank God I skipped on their Marine Chronometer. It could very well go down the same path as Heuer.

  7. #46
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    Re: All roads lead to Patek ...

    Quote Originally Posted by daddywalrus View Post
    Especially relevant seeing how Ulysse Nardin just got bought out by Gucci. Thank God I skipped on their Marine Chronometer. It could very well go down the same path as Heuer.
    Truth be told the UN Maxi Marine divers look pretty damn cool (but obviously quite expensive for an ETA mod movement). I was looking at the limited edition Blue Surf diver, but I just cannot bring myself to pay 10k MSRP for an ETA based movement. I certainly hope Kering dont mess with UN too much.

  8. #47
    Member heuerolexomega's Avatar
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    Re: All roads lead to Patek ...

    Quote Originally Posted by daddywalrus View Post
    Especially relevant seeing how Ulysse Nardin just got bought out by Gucci. Thank God I skipped on their Marine Chronometer. It could very well go down the same path as Heuer.
    Glad that I sold my Black Toro just in time
    Jorge
    Patek Phillippe - Audemars Piguet - Rolex

  9. #48
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    Re: All roads lead to Patek ...

    Quote Originally Posted by daddywalrus View Post
    Especially relevant seeing how Ulysse Nardin just got bought out by Gucci. Thank God I skipped on their Marine Chronometer. It could very well go down the same path as Heuer.
    Quote Originally Posted by renovar View Post
    Truth be told the UN Maxi Marine divers look pretty damn cool (but obviously quite expensive for an ETA mod movement). I was looking at the limited edition Blue Surf diver, but I just cannot bring myself to pay 10k MSRP for an ETA based movement. I certainly hope Kering dont mess with UN too much.
    I'm in the same boat. Aesthetically, the UN Maxi Marine divers are pretty kickass (sans the stupid cyclops), but it is definitely overpriced for an ETA-based movement.

    However, this was from Timezone's Ulysee Nardin Baselworld 2014 article:

    For years, Ulysse Nardin has focused on in-house developed and manufactured calibers for its hi-tech and high complication timepieces. For the past year, Ulysse Nardin started to implement in-house calibers for its basic day/date timepieces. For 2014, manufacture movements find their way into a Ulysse Nardin chronometer, chronograph and dual time with an eye towards the Spring 2017, when Ulysse Nardin will be entirely independent and fitting in-house movements in all its timepieces.
    That article appeared before the Kering takeover; however, according to this Quill & Pad article, UN CEO Patrik Hoffmann seems to suggest that the new Kering-based UN will stay true to its core movements and technology:

    One of the burning questions, though, is what the takeover will mean in terms of changes for Ulysse Nardin. Hoffmann answers typically pragmatically. “You know, there are always changes. Very clear, as I said before, is that our DNA will not change. Neither will our product philosophy, the direction of our own movements, the vertical integration, or our whole silicon technology..."
    Another positive is that Kering plans on retaining UN's executive management team, which to me seems to be a step in the right direction insofar as keeping the management team supports Hoffman's claim of "our DNA will not change."

    Nevertheless, this takeover is obviously a huge transition for UN and change is inevitable as a result, so who knows what may or may not happen:

    “There are always changes, but I couldn’t really tell you [anything will] happen because of this acquisition..."
    Last edited by Vig2000; August 6th, 2014 at 22:58.

  10. #49
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    Re: All roads lead to Patek ...

    Quote Originally Posted by daddywalrus View Post
    Especially relevant seeing how Ulysse Nardin just got bought out by Gucci. Thank God I skipped on their Marine Chronometer. It could very well go down the same path as Heuer.
    Don't you think it's a bit early to presume that the Kering acquisition will be a bad thing for UN? GP is also a Kering-owned brand/company and they manage still to put of very nice stuff. Also, inasmuch as UN's management team is, for now at least, remaining in place, I'm inclined to think that UN will continue in the direction it was already headed. Moreover, UN wasn't in need of a "white knight." UN has been a profitable concern, so I think the acquisition/merger is more likely a synergistic way to bolster Kering's revenues by building upon not only it's market presence, but also by opening new opportunities for them to generate greater collaboration among their watch lines.

    All the best.
    __________________________________________________ _____________________________
    Cheers,
    Tony



    Good judgment comes from experience, and experience - well, that comes from poor judgment.
    ― A.A. Milne







  11. #50
    Member lmcgbaj's Avatar
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    Re: All roads lead to Patek ...

    Quote Originally Posted by renovar View Post
    Tony:
    Without risking clogging the thread up more, this is what I understand:
    1. I dont think anyone can control what an AD and a customer do in a transaction. Not Patek or anyone can force 2 willing parties from doing a transaction on an individual level. But I think PP (and Rolex) have a stronger discount policies compared to other luxury watch brands that if one particular AD discount too much (overall) they risk losing their AD status. Whether or not this is truth is unclear, but this is quoted time and again through multiple AD's through many different countries I have visited when the discussion of discount comes up.
    That is very true. Control, control, control. Specially Rolex is extremely strict on controlling discounts. ADs are being policed and bullied around all the time. Even big ADs. Getting to sell Rolex is not as easy as one may think and losing your Rolex AD status is a big deal for the business. I know this first hand from a couple of local AD. Remember every AD dreams to have Rolex in their shop. Only some get the privilege. Patek is the same at the next level.

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