In late November 2022, Brandon Moore (2022) of Jiaxian Su's team at WatchesBySJX signed (Insight: Fine Watchmaking Market Map in 2022) a very enlightening essay that introduces the concept of watchmaker-hours metric to explain finishing grades.
There are plenty of self-compiled tier lists from various opinion leader, but these are almost always limited by their originator's subjective perception of brands and their products, or the positive or negative valence associated with them.
The author of this document has extensively been using the model of Erwan Rambourg's Luxury Pyamid, albeit after adapting it to the watch industry to map out brands from a quantitative perspective.
The watchmaker-hours model touted by Watches By SJX opens up the possibility of representing brands from a qualitative perspective as well.
While the SJX article focuses on high-end and ultra high-end watches, the author wanted to see what results this method would give when applied to lower price segments, considering that figures from 2013 to 2020 are available from various sources such as: Watch Insider (Linz, 2013), the Fédération Horlogère Suisse FHS (2014), PME Magazine (2015), Armband Uhren (2018), Business Montres (Pons, 2019).
The author is in the process of compiling those figures in a Wiki at https://stats.watchprojects.com.
The concept behind watchmaker-hours consists in dividing the amount of yearly working hours (in this example: 2,000) by the quotient of the amount of watches sold per year (volume) for 85% of the employee count.
Although these numbers were either volunteered by brands in the first place, or extrapolated from export figures, one limitation is that the information about employee count is not regularly updated. It does then introduce a small error in the formula, which can still be taken as indicative of the economics involved.
Another caveat is that, while the man-hours reflect the level of internal operations that a brand sets up to take care of business, it does not include outsourcing. So the figure is more representative of the internal work that takes place between inbound component deliveries and outbound shipping of finished products.
Another metric is the price of watches. While the retail price has to be mined from price lists, the wholesale price can simply be deducted by dividing the company's turnover by its volume of watches sold.
In the SJX article, Moore (2022) sorted brands in 4 groups that he labelled as following:
- The peak (300+ MHpW)
- Artisanal-industrial (100 to 299 MHpW)
- Industrial haute horlogerie (30 to 99 MHpW)
- Industrial fine watchmaking (10 to 29 MHpW)
- Industrial prowess (1 to 9 MHpW)
In this document, brands organically fell into four separate groups: under 1 MHpW, under 10 MHpW, under 50 MHpW and under 100 MHpW. The main differences with the SJX article are the following:
- The author used 2020 figures for reference, since they could be matched with the corresponding head count. The SJX article focused on 2021 figures, or tried to make up for the lack thereof.
- The heat map is reversed from the SJX article, the reason being that the upper left of the chart seems to be an advantageous place for a brand to be: it can command a high wholesale price while at the same time it enjoys a low man-hours per watch for the price segment. So green means good performance, red means under challenge. As explored in the next paragraph, this does not necessarily reflect on the cosmetic quality, but is more indicative of the economies of scale achieved.
- The amount of hours per year was rounded off to 2,000.
- Watchmaker-hours are expressed as man-hours, since in high volume brands, most people involved in the manufacturing process are operators and not watchmakers.
A silver lining amongst the brands that appear on the left half of the charts, up to 50 MHpW included, is that their output is amongst the highest volumes of their segment.
Inversely, brands that are near the bottom right part of the chart could be seen as underperforming: they are spending significantly more man-hours while not managing to command a high price.
Example of clusters
Prior to the launch of the Moonswatch collaboration with Omega, Swatch seems to have been falling from grace, while seeing nearly two thirds of its 2014 turnover of USD 750 million shring to USD 220 million in 2020 (The Long Chron, a 2022). The high MHpW for the segment might be attributed to the heavier head count in comparison to the production output, as Nick Hayek, much to his merit, tries to avoid laying off staff (at least Swiss employees) during economic slumps.
The Titan figures (The Long Chron, b 2022) are probably the most indicative, since the brand produces most of its components domestically. Timex, Festina Group, Fossil Group and Seiko do heavily rely on outsourcing in China. Their labour probably consists in unloading the truck and storing the watches, possibly after an inbound quality control, and packing them for delivery to the sales channel. Interestingly, Swatch used to have the same level of efficiency, while relying on expensive Swiss wages.
The strong performers are Tissot, Longines and Tudor, and while Longines managed to raise their wholesale price at the cost of additional man-hours, Tudor seems to have raised their wholesale price while optimising their man-hours.
Eterna in particular, and to some extent, Maurice Lacroix, seem to be trailing behind. TAG Heuer comes second after Tudor when it comes to commanding the highest wholesale price.
Here again, the undisclosed proportion of outsourcing might skew the ratio and give them a lower MHpW than it should be.
Just like The Swatch Group's Longines and The Fondation Hans Wilsdorf's Tudor in the previous chart, the groups' respective brands Omega and Rolex have been sliding upwards over the years. The same happened for Breitling. Hublot dominates the chart, and Girard-Perregaux and Jaegel-LeCoultre seem to be trailing behind. Girard-Perregaux saw its sales nearly vanish, from USD 180 million in 2014 to USD 15 million in 2021 (The Long Chron, c 2022).
The clear winner on the under 150 MHpW chart seems to be Audemars Piguet, with its steady growth. Just like its sister brand Swatch, Breguet seems to have hemorrhaged profits, with sales shrinking by two thirds from USD 750 million in 2014 to USD 272 million in 2020.
This method offers a new way of looking at a brand's figures to make comparisons possible. It is effective for sorting brands in clusters according to MHpW and price, it remains limited by the challenge of representing a brand's economies of scale.
It does however help to debunk claims that all similar designs offer similar quality, and it helps to articulate the difference in added value. So if a Festina, a Tissot and a Tudor that each offer a similar design are respectively priced at USD 400, USD 1,000, USD 1,500 and USD 1,775, there is more to it than just arbitrary pricing.
According to the MHpW model, the Festina and the Tissot both required a little more than 10 minutes to process, while the Festina is Made in China with a 50 years old movement design, and the Tissot is Swiss Made with a 40 year old movement design that has been re-engineered 3 years ago. The Tudor required almost 3 hours of labour, while the Eterna requires more than 10.
The model does allow to group brands in clusters based on price point, but it raises questions when it comes to interpretation. Does a 17 MHpW ratio VS a 6 MHpW ratio means that IWC Schaffhausen gives its watches three times more finishing than Rolex does?
- Armband Uhren, 2018.
- Fédération Horlogère Suisse FHS, 2014.
- Gretler, C., 2015. Rolex Offshoot Tudor Comes of Age in Threat to Midpriced Rivals , Bloomberg. Available from https://www.bloomberg.com/news/articles/2015-03-25/rolex-offshoot-tudor-comes-of-age-in-threat-to-midpriced-rivals
- Linz, A., 2013. FIGURES FIGURES FIGURES … Estimated Watches Sold And Estimated Turnover Of The Major Watch Brands In Switzerland And Germany (Updated 09.06.2013 & 06.08.2013), Watch Insider. Available from https://watch-insider.com/economy/figures-figures-figures-estimated-watches-sold-estimated-turnover-major-watch-brands-switzerland-germany/
- Moore, B., 2022. Insight: Fine Watchmaking Market Map in 2022, Watches By SJX. Available from https://watchesbysjx.com/2022/11/watchmaking-market-map-2022.html
- PME Magazine, 2015. Produzione delle Maisons, Orologico Forum. Available from http://www.orologico.info/index.php?topic=20351.0
- Pons, G., 2019. Le sniper du jeudi. Richarch Mille vient de se faire coiffer sur le fil par un jeune horloger français totalement inconnu., Business Montres. Available from https://businessmontres.com/article/richardmille-vient-de-se-faire-coiffer-sur-le-fil-par-un-jeune-horloger-francais-totalement-inconnu-valentinremontet-tagheuer-hublot-watcharound-rolex-reservoir-xavierdietlin-patekphilippe-gphg-
- Pons, G., 2019. Baromontres 2019 #10 (octobre). Les faits, les hommes et les marques qui ont influencé la météo horlogère d'octobre 2019. Business Montres. Available from https://businessmontres.com/article/les-faits-les-hommes-et-les-marques-qui-ont-influence-la-meteo-horlogere-doctobre-2019-breitling-theunnamedsociety-richemont-swatchgroup-nickhayek-alangesohne-louiserard-longines-greubelforsey-riskers-
- Statista, a 2022. Number of employees working for Citizen Watch Co., Ltd. from fiscal year 2012 to 2021. Available from https://www.statista.com/statistics/1336793/citizen-watch-number-of-employees/
- Statista, b 2022. https://www.statista.com/statistics/1326806/seiko-holdings-number-of-employees/. Available from https://www.statista.com/statistics/1326806/seiko-holdings-number-of-employees/
- The Long Chron, a 2022. Swatch, Woodshores AB. Available from https://stats.thelongchron.com/homepage/brands/r-s-t/swatch
- The Long Chron, b 2022. Titan, Woodshores AB. Available from https://stats.thelongchron.com/homepage/brands/r-s-t/titan
- The Long Chron, c 2022. "Girard-Perregaux", Woodshores AB. Available from https://stats.thelongchron.com/homepage/brands/f-g-h/girard-perregaux