Swiss watchmakers are making more money and selling fewer watches as the industry shifts away from affordable timepieces

A June 2022 article on Business Insider talks about how luxury Swiss watchmakers like Rolex, Patek Philippe, and Audemars Piguet are making more money by selling less watches. On the surface this sounds counter intuitive and counter to what makes business sense. Wouldn’t you make more money by selling more products? 

In the case of luxury goods as you may have studied in marketing, luxury products can bend the demand curve whereby charging more can increase demand. With the right branding consumers would perceive a greater value and worth to higher priced products and then by adding the component of scarcity / limited supply this becomes a formula to drive up demand and the price consumers are willing to pay. 

Some entrepreneurs come up with a business model that is solely predicated on being cheaper than the competition. Unless there’s an innovation or technology that can make the same product cheaper, just pricing something lower is oftentimes a race to the bottom and if you’re a start-up you’re less likely able to sustain lower prices versus entrenched competitors over time. 

These luxury Swiss watchmakers have been able to create a luxury brand image and demand from consumers willing to pay a higher price for their products even when demand for cheaper competitors diminish. This was the case during the 2008 Great Recession when luxury brands outperformed cheaper alternatives. With the looming recession that’s currently being predicted, we’ll see if luxury brands can perform as well as they did in the previous.

Business Insider Article
Swiss watchmakers are making more money and selling fewer watches as the industry shifts away from affordable timepieces by Dominick Reuter