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Old 26 May 2018, 02:14 AM   #1
DLRIDES
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$500M of Watches Destroyed

This may be old news to some, but I found it interesting. Says a lot about the industry as a whole. A couple of manufacturers have “lists”, while others are destroying unsold watches to protect image and pricing.

A look into the future ?



https://www.theguardian.com/business...buyback-policy
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Old 26 May 2018, 02:19 AM   #2
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wow. i had not seen that. thanks for sharing. I guess this could be another reason Rolex is slowing down production. with less going to stores it means less going to resale market and keeping the brand "exclusive". In the long run this would be cheaper i would imagine compared to having to go the Cartier route of taking back 500 million worth of items.
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Old 26 May 2018, 02:37 AM   #3
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Interesting.

I'm sure the £400m is a retail number though, as it's a catchier headline. The actual cost to Richemont is likely just a fraction of that.
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Old 26 May 2018, 03:17 AM   #4
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it protects the value of the brand.... at least what value there is. I think luxury watches on sale is about the worst image imaginable for a brand.

Honestly i would do the same. If the best i could get for one of my watches was a tiny fraction of retail, i would throw it away before i sold it to someone else.
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Old 26 May 2018, 03:24 AM   #5
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Quote:
Originally Posted by Cryten View Post
Interesting.

I'm sure the £400m is a retail number though, as it's a catchier headline. The actual cost to Richemont is likely just a fraction of that.

If their cost is 30% of retail, that’s approximately $130M USD.
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Old 26 May 2018, 03:26 AM   #6
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If their cost is 30% of retail, that’s approximately $130M USD.
i think its the other way around... 60% of retail. Otherwise that is a huge margin. Rolex AD's is like 62% of RRP. I assume they buy back for the same price they sold the watches for.
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Old 26 May 2018, 05:21 AM   #7
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Honestly i would do the same. If the best i could get for one of my watches was a tiny fraction of retail, i would throw it away before i sold it to someone else.
As would I.

What does that say about the luxury watch market future ?

Or is this an indicator of said future ?

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Old 26 May 2018, 05:40 AM   #8
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Zenith bought back all their watches from Ashford 2 years ago, I guess this is what happened to them. Destroyed rather than see them at 50% msrp.
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Old 26 May 2018, 06:59 AM   #9
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Good business move, protects the brand and ADs from sitting on inventory that can't move without a fire sale, except then I can't buy a Lange brand new for 50%+ off
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Old 26 May 2018, 01:55 PM   #10
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Interesting read. Thanks for posting.
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Old 26 May 2018, 03:57 PM   #11
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Yes it is a look in. Many brands will be gone in ~5 years in my opinion. If they are struggling now when the stock market is hot...god help them when it turns.
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Old 26 May 2018, 08:54 PM   #12
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Yes it is a look in. Many brands will be gone in ~5 years in my opinion. If they are struggling now when the stock market is hot...god help them when it turns.
Agreed

Will add ................. in ~ 10-15 years, ~ 50% of brands will disappear, and in ~ 40 years all but very few will no longer exist.

I think there is a way for many to survive, but their refusal to accept change solidifies their doom.
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Old 26 May 2018, 10:07 PM   #13
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Good business move, protects the brand and ADs from sitting on inventory that can't move without a fire sale, except then I can't buy a Lange brand new for 50%+ off
sounds bad to say, would you want a Lange that everyone knows is only worth 50% of retail? For me its not the price specifically but the on sale nature of the product.

Im always reminded of one of my favorite stories about my grandpa. He was going on a vacation and had been looking to buy some boat shoes before the trip. He had been eyeing a pair and then the next week they went on sale. He bought another paid instead. When asked why he responded "they went on sale, there is probably something wrong with them"
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Old 26 May 2018, 11:05 PM   #14
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Yes it is a look in. Many brands will be gone in ~5 years in my opinion. If they are struggling now when the stock market is hot...god help them when it turns.
I think so, many punters are already jumping ship to Rolex and AP and PP as they are the solid, reliable bets now and we can all see the younger gens will not be so interested in watch tech in future, they are not even that interested in each other, just showing off pics and gossip with them.
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Old 26 May 2018, 11:08 PM   #15
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Quote:
Originally Posted by Cryten View Post
Interesting.

I'm sure the £400m is a retail number though, as it's a catchier headline. The actual cost to Richemont is likely just a fraction of that.
I agree
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Old 26 May 2018, 11:28 PM   #16
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Their cost of goods will be be around 20% at most.
Plus, the watches weren’t tossed into an incinerator, they were stripped and recycled, so movements, straps, cases dial hands will all be reused.
I’m sure many complete watches will just be warehoused out of sight, then gradually dribbled back into the market
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Old 26 May 2018, 11:37 PM   #17
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Definitely a way to control supply and demand. Great read. I was surprised that they didn’t see it as “profit is profit”. I guess if your aim is to only have the elite of the elite wearing your brand, that’s one way to do it.
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Old 27 May 2018, 12:01 AM   #18
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Definitely a way to control supply and demand. Great read. I was surprised that they didn’t see it as “profit is profit”. I guess if your aim is to only have the elite of the elite wearing your brand, that’s one way to do it.
discounts create a price ceiling and then its the expected maximum price anyone will pay going forward. PM watches have this issue and even Rolex. No one pays 35K for a watch, because no one else does. If everyone else did, then you might too. The price isnt really the point, its that no one wants to buy a product someone else gets for way, way less. Without being fairly certain that won't happen, people buy something else instead.

Long term it devalues the brand and a high end brand becomes a lower end brand.
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Old 27 May 2018, 12:03 AM   #19
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Originally Posted by csfischer20 View Post
Definitely a way to control supply and demand. Great read. I was surprised that they didn’t see it as “profit is profit”. I guess if your aim is to only have the elite of the elite wearing your brand, that’s one way to do it.
the game has elevated and the lesser luxury brands are taking
a serious beating... Sad but true.
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Old 27 May 2018, 05:49 AM   #20
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This is why it’s important to price your product correctly.
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Old 27 May 2018, 03:08 PM   #21
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I have a very hard time believing they bought back and "destroyed" anything from Lange, VC, Roger Dubuis, JLC, IWC, Piaget, and Cartier, as they don't make very many watches, except for Cartier and I think the latter sells well. I'm guessing these are mostly from the lesser brands in their portfolios like B&M, etc.
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Old 27 May 2018, 05:15 PM   #22
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I have a very hard time believing they bought back and "destroyed" anything from Lange, VC, Roger Dubuis, JLC, IWC, Piaget, and Cartier, as they don't make very many watches, except for Cartier and I think the latter sells well. I'm guessing these are mostly from the lesser brands in their portfolios like B&M, etc.
It'd be interesting to see the breakdown for what was bought back and 'dismantled.' There are definitely JLC, Lange, etc watches that are all over Chrono24 and grey dealers / forum sellers at 30% discounts.
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Old 18 June 2018, 04:00 AM   #23
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Old 20 June 2018, 03:01 AM   #24
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discounts create a price ceiling and then its the expected maximum price anyone will pay going forward. PM watches have this issue and even Rolex. No one pays 35K for a watch, because no one else does. If everyone else did, then you might too. The price isnt really the point, its that no one wants to buy a product someone else gets for way, way less. Without being fairly certain that won't happen, people buy something else instead.

Long term it devalues the brand and a high end brand becomes a lower end brand.


I got 5% on my 44. I’m not sure if discounts on this piece are normal. In the UK I don’t think they are but the US it seems to be a different story.


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Old 20 June 2018, 03:30 AM   #25
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Thanks for posting
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Old 20 June 2018, 05:06 AM   #26
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I've heard of this but did not know it was that large a number.. wow thanks for posting!
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Old 31 July 2018, 08:45 AM   #27
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It's to preserve brand image. It makes sense. Once the brand becomes "cheap" trying to get back to premium status is extremely expensive. The best example is probably Coach bags.
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