The Business of Watches [006] Audience Q&A Special With Hodinkee's Editor-In-Chief James Stacey

0:00This episode of the Business of Watches is brought to you by Panerai. 2025 marks the year of the Luminor, a celebration of bold Italian design, technical innovation, and the legacy of Panerai's most iconic collection.

0:19Welcome to the Business of Watches, where horology meets high finance and each tick tells a story of markets, margins, mishaps, and mechanical mastery. I'm your host, Andy Hoffman, Senior Business Editor at Hodinkee. In this series, we dive deep into the global watch industry, a place where centuries-old craftsmanship intersects with billion-dollar valuations, executive brand strategy, and investor speculation. From Swiss Valleys to Silicon Valley, we trace the movements shaping this uniquely resilient sector. Just how big is the business of timekeeping? Well, some estimates place the entire watch industry from ultra-luxury maisons to smartwatches and microbrands at north of$100 billion globally.

1:10But behind that figure is a complex web of legacy, innovation, and ever-shifting consumer tastes and demand. This is the podcast for collectors, analysts, watchbuyers and sellers, and anyone who's fascinated by the intersection of riskwear and wealth. Because if time is money, then money is most certainly time. So let's get down to business.

1:40So this week on the Business of Watches, we are going to do something a little different. We are going to hear from you, our amazing listeners and supporters, and we're going to try and answer some of your watch industry business-related questions. I'm your host, Andy Hoffman, Senior Business Editor at Hodinkee in Geneva. And today I am joined by a very special guest, James Stacey, the Editor-in-Chief of Hodinkee. James, welcome. Hey, Andy. Thank you for coming on the podcast. How are things over there on that side of the pond? Things are great, man. Happy Halloween. Things are real spooky over here.

2:19It's a dark and rainy sort of night. I think it's going to be a bit of some wet trick-or-treating, but I'm looking forward to the chance to go out and enjoy it. It was always a highlight when I was a kid. Let's start the questions off with this. One, is Halloween really big, as big in Geneva as it is in Canada and the States? And two, what are you going as tonight? Right. So the answer is no. It is not as big a holiday. But in the time that I've been here, about 10 years or so, it has certainly become more of a holiday and more of an event that people celebrate and recognize. For this evening, I will be dressing up as someone who sits on their couch with their partner and has dinner and watches a movie, which is a very good costume.

3:08Are any movie planned or hasn't been picked just yet? We have not picked the film just yet. hmm what can i recommend later yeah what would you recommend let's see let's see william friedkin sorcerer is probably the move ah halloween oh that's right it's pretty intense film we could go lighter if you want it is a friedkin after all i'm i'm up for intense i'm up for intense but but it's a good one that's great well thank you for that and i will i will see if that is available in switzerland well fingers crossed so we should get down to business because that is why we are here. So what we're going to try and do is answer business related questions from listeners that you put out the word on Instagram and we got a whole bunch of great questions.

3:55So yeah, why don't I get you to start off with the first question? Absolutely. Yeah. We got a handful of great ones from the Instagram. So always keep an eye out as I think, you know, it's usually CEO interviews and those have been going really well. Andy, I'm a huge fan of the show, of course, but we thought we'd mix it up every now and then with a chance for people to ask questions. We have a business, a senior business editor, which is amazing for Hodinkee. And I think there's a lot of interest in this at a general level. And I'm here to kind of facilitate or represent to a certain extent the audience, which of course I do number among.

4:26So yeah, let's kick off the first question here, which is from Doc Thrillman, who says, how does the current downtrend in the market affect small or newer Holt Orology brands? Yes. Well, indeed, we will confirm and acknowledge that there is a downtrend in the market. It is very much a different time than the post-pandemic era boom, which was sort of the most unprecedented increase in demand and interest for watches that we've seen. But we're still in a very elevated place for that. And so how does that affect, you know newer small high-end watch brands so i mean i think it's interesting in in some ways a smaller brand that is at least already you know gotten notice um you think of someone like simon brett uh or obviously rekshep rekshepi and acrivia someone like that who has interest and profile.

5:27I mean, these are brands that are making, you know, 50 to 100 watches a year. And so when interest in demand and, you know, the size of demand and the audience that is buying high-end watches shifts and maybe downshifts a bit as people spend their hard-earned money on other things or look for other kind of experiences. For a small brand like these, the change isn't that much. They've got their core audience, their core customer base who can fulfill that demand for 50 to 100 watches a year. Even someone like MB &F, 400 watches a year there. I mean, Max has been around 20 years with that brand now, and the audience has grown, The customer base has grown.

6:19And so in the absolute boom era in 2022 and 2023, they couldn't keep anything around. The demand was so high. Right. But now the production size is such that the audience is still there. Where we see difficulty is in smaller brands who have yet to establish a high profile, who have yet to sort of gain that mainstream interest. And when they're trying to find that buyer for the 500 or 1 ,000 or 2 ,000 or up to 10 ,000 watches that they make a year, when the market demand turns down, that becomes much more difficult. So we do see that with some of the smaller brands who aren't as well established at this point.

7:14Right. And I think the other thing that at least jumped to my mind when I read this question was with some of these small brands and you list, you know, brands like Recep, Recep, Burneron, you know, et cetera. Even if there is a downturn, depending on the delta of the downturn, they might have orders that span it. So they may be able to bridge a low point or even a low season or two without that much work. And then with some of these guys, I mean, it's one thing to have the orders of the allocations. It's another thing to have, you know, a Gmail inbox full of people champing at the bit to pick up one of those allocations if somebody decided they didn't or couldn't afford it at that point in their life.

7:51So there is a little bit of an insulation when you have, like you said, that kind of fan base. And if you haven't developed that yet, and then you have to go through a time like this, it could be harder. Yeah, absolutely. I mean, yeah, we had Sylvain Benarra on the show a few episodes ago to talk about the business side and how he's managing that of his business. And indeed, I mean, he's sold out until a few years down the line. And so when things turn down it's actually an advantage for a small producer like that because they have better access to the components and parts oh yeah that you know they were fighting to get previously because obviously this you know the smaller player that you are you're making 50 to 100 watches a year you're not going to have as much influence or status with the supplier who's maybe selling similar parts to one of the giant names in the industry who's buying tens of thousands of parts.

8:47Right. Yeah, that makes sense. Good question, Doc Thurman. That's a solid one to kind of kick off the show. Let's jump into the next one from Clark Maxwell. Shout out, Clark. Do you think Omega's master chronometer and iconic lines like the Speedmaster and Seamaster justify the price slash cost in the marketplace? This is an interesting one because it's a little closer to the product zone than just the normal, you know, sort of like a business question directly. But I think it's also fascinating because, you know, Omega makes a ton of watches, you know, at least on paper, the second biggest and most prolific watch brand in the world, as they're well known.

9:21And they make a lot of different models. But, you know, I think Clark probably has been around. I've definitely recognized the name and that sort of thing from Instagram has been around for a while. And Omega has really come up market. And over the course of the last, I mean, decade, you could probably compress it into less than a decade as they kind of went towards Rolex and opened up a gap in the, in the swatch system for other brands to kind of fill in. Yeah, I think that's exactly right. And indeed we have to think, I mean, we are talking specifically about Omega here, but what we're really talking about is price, right?

9:53And what we've seen in the past few years, post pandemic era boom, is that we've seen some brands really take a lot of price and there's many reasons for that. Obviously, inflation has become an issue in the marketplace for the first time, real inflation for the first time in a long time. Also, the Swiss franc and all these watches are deemed Swiss made and the Swiss franc has continued to strengthen against various currencies. And then just labor costs, all these costs in general have increased. And so we've seen a lot of brands take a lot of price and Omega has been one of them. However, I think you're exactly right.

10:34When we think about who Omega sees as its competitor in the marketplace is Rolex. And if we think about the equivalent timepieces at Rolex, so we're talking about a Speedmaster, we're talking about a Daytona and what does the Speedmaster professional cost? I think eight, seven, 8 ,000, depending on the glass. That's still quite a bit cheaper. than a Daytona. Of course, availability is a different question, but it's a similar equation with the Seamaster, with the diving watch and the Submariner. It's still, if you believe in what Mega would certainly tell you that the quality of their product is at the same or if not a higher level.

11:18And many people say that the coaxial movements are a superior movement to what some other competitors are doing. So yeah, they're getting closer in price. But I think the issue that people have is that we've seen price move quite quickly in a short period of time. And many people could say, well, I can remember when a Speedmaster was$5 ,000 and it's not anymore. And that's just the new reality. Yeah. And I also think over that span of time, not only did the price go up, but they invested a lot in movement architecture. We saw them go from coaxial modified, you know, 2500 base movements to in-house coaxial movements, hand wound movements that are using the master chronometer certification, then the adoption of metas and this sort of thing.

12:06And I think, you know, we've seen them kind of progressively up the ante on the quality and technical attributes of the movements. And, you know, I don't want to sound glib about it, but they don't seem to be having a tough time selling watches. And I see in many ways, Seamasters and Speedmasters on both sides of what I would call the market divide, both on enthusiasts and on general buyers, people who might only know James Bond, people who might only have wanted to spend some money at the duty free. And that was available. And maybe the Rolex that was also on their list certainly wasn't. So I think in many ways, yeah, the price has gone up, but you have to credit them.

12:42I think even their most in-demand watch that I can remember in the recent history, the white dial speedy, even that one, while maybe difficult to get was, was not one where you were waiting years. I don't believe certainly not, uh, in, in the feedback that I've been given anecdotally, of course, but these are watches that, that are gettable if you're patient. And, and certainly I think it's nice that a brand of that profile and that's making a watch at that caliber. And look, I've, I owned 1120 Seamasters. The modern stuff is better on every single measure. I might prefer a sword hand to a skeleton hand.

13:14That's just me, but the new stuff, the new Speedmasters, the new Seamasters are a higher quality watch than I think what they were making when they were more in the Tudor, Tudor plus price category. And certainly, I think the Planet Ocean was the thing that really kicked that off, this sort of next generation of their manufacturing. And I think we've seen that now kind of reflect into a lot of different watches. And then you have the stuff that stacks on top of it, like, you know, they just released the latest generation of the Dark Side of the Moon models where they're taking the Speedmaster idea and really making it a truly modern ceramic and the rest of it.

13:48So yeah, I don't think the pricing feels out of line for 2025, but I can understand if you came to the brand in say 2008, 2010, to be able to see the scope of that difference could feel jarring or even if you were more at home with the brand in the 1120 era, it might be a little bit more difficult to figure out an 8500 or something like that now. Yeah, totally. But I mean, I think you bring up a good point in that, But although there are many, many models, and some would say too many SKUs for some of those models for Omega, we do see innovation. We do see iterations. We do see new technology and newness and innovation there.

14:29And so, yeah, I mean, we had George Kern from Breitling on the podcast a few episodes ago. And, you know, he talked about price and he said, you can continue to raise price, but you have to offer the consumer something new and something, you know, value for that price increase. And so I think, yeah, Omega is certainly doing that. And but yeah, you know, people complain about about prices. Absolutely. Yeah. Should we jump in the next question, which I can find us here? Yeah, let's do it. So Uncoverist has a somewhat related question, and they say, what is the best perpetual calendar watch under$20 ,000?

15:14Now, I'm not really a perpetual calendar watch kind of guy, and I'm not sure that that's your style of watch either, James. But I mean, this is the sort of pinnacle of complications for many in the watch world. And Uncoverist is asking, what's the best one under$20 ,000. So, I mean, you know, in the last episode, we just had on the CEO of Frédéric Constant, the Swiss-based brand originally of sort of Dutch origin. And, you know, one of the sort of pillars of their high horology manufacturer aspect of their business is a perpetual calendar, which is under$10 ,000. And he talked about how difficult that is to achieve.

16:05And especially these days, the stronger Swiss franc, higher labor costs, et cetera, et cetera. But it is a extremely important sort of price level and number that they want to keep that model priced under. It's just a psychological number there, and that's what they do. So they work hard and they basically, as the costs increase, they basically take less margin because they think it's very important for the brand to do so. So Frédéric Constant is certainly, when it comes to prices, is one of those brands that can offer you some value across various models for a perpetual calendar well under$20 ,000.

16:47Yeah, I would agree. I think Frédéric Constant are the one that leaps to mind. I believe Furlan Mari is in the process of figuring out a number in a serially produced option for a QP that we've seen from them in the past. The one that leaps to my mind isn't 20 anymore, but when it came out, I was at the launch in Vegas many years ago. I think it was actually the first time I hung out with Ben, was the JLC Master Ultra Thin. Nice. It was just under 20, but we're talking like 2014, 2015. So you'd have to adjust for that, This is the steel model, black dial. I think an incredible watch. If you're going to spend$20 ,000 on a watch, I think JLC is a nice way to do it, especially in something kind of traditional.

17:28And at the same time, like Watchmaker-y, which is, of course, the JLC's kind of raison d 'etre. And yeah, I think it's a great watch. I'm assuming it's going to be a little bit more than that now brand new. You know, we're recording this over Zoom, so I can't turn on the VPN that allows me to see USD pricing. Right. It'll disrupt our phone call. but I'm seeing like 40 ,000 Canadians. So that's probably in the 28 to 30 range for something like that. Who knows? I mean, that's going to give you the range for that anyways. Yeah, I think if I was in the market, and I would love to be a perpetual calendar guy, the reason I'm not is because most of them are more than$20 ,000, right?

18:07I do think it's a fascinating complication and one of my favorite to kind of dig into the history of. I do think there's some pretty compelling options in the second-hand world as well. The JLC would be an option. Baum at Mercier made a QP Clifton, which I think was in the mid-20s, depending on case material. Mont Blanc also had a model for theirs in the Heritage line. I don't know the real-world pricing for that, but it would be worth checking because I think it's kind of a nice-looking watch. It's in the same aesthetic space as the JLC. So yeah, I think there's some options out there. You don't have to be pinned down by the Vacherons and the Pateks and that sort of thing.

18:46But it's definitely, it remains a flagship for, even when you hit a price point like Frederic Constant can, it's still their flagship because of the complexity. Absolutely, yeah. No, it remains the sort of center of the complication world for many. And indeed, I think when we're talking about secondary market options, I mean, IWC. Oh yeah, the GST series. If you can do 43, 44, 45 millimeters, there's a lot of options there. And you don't even, I like the big pilots. They're very big, but some of them are quite colorful and cool. But yeah, the stuff from the GST line, they made some neat models in there as well.

19:23Yeah. And on the more dressy side, you know, vintage Da Vinci models, you can find those in, I think, in precious metals, perpetual calendar, certainly under 20 ,000, I think. So there's some good value there. For sure. Yeah. Cool stuff. Good question. Yeah, QPs are fun, but they are seldom inexpensive. Absolutely. We're proud to have Panerai supporting the business of watches. For this episode, we're spotlighting the new PAM01574, a Luminor GMT power reserve in a sleek 44mm black ceramic case. It features a sandwich dial, dual-time functionality, a three-day power reserve, and Panerai's new click-release strap system for easy swaps.

20:11This reference represents Panerai's forward-thinking approach to its Luminor collection, combining heritage, high-tech materials, and bold design. And it's just the beginning. Expect more exciting Luminor launches throughout 2025. Alongside the depths of time, a historical showcase taking place this October at Casa Panerai Madison in New York City and this November at Panerai Miami Design District Boutique. Experience never-before-seen archival pieces and exciting novelties up close. Learn more at panerai.com or check the show notes. Thanks again to Panerai for their support of the business of watches.

20:56And now back to our special Q &A episode of the business of watches with Hodinkee editor-in-chief James Stacey. All right, next up we've got a question from TimeTheDestroyer, good tag there for Instagram. He says, Swiss watch exports rose 15 % to the UK in September. What do you think is behind that relatively huge spike? So this is a great question and it's quite interesting and strange. So this year, starting back in 2020 was 2020, and obviously the market was completely disrupted. Beginning in 2021, Swiss watch exports have been hitting record levels by value year after year up until last year when they declined slightly for the first time since then.

21:44This year has been just an absolute roller coaster. And if you're trying to track the Swiss watch export statistics from month to month, and that's all because of tariffs. So we're coming along in the year that we thought was going to be perhaps slightly better or certainly at the same levels as 2024. And then the tariffs situation happened in the United States. So we saw a massive surge in Swiss watch exports to the US beginning in March and April as manufacturers tried to get product to retailers to avoid. At that time, I think it was a 31 % tariff, and then it kicked in to be a 10 % tariff for a while.

22:32And things kind of normalized a bit. And then when we had the latest announcement of tariffs, and so yes, it's October 31st, it's Halloween right now. And so as of today, it's a 39 % tariff on Swiss goods imported into the United States. And so in August this year, before those tariffs kicked in, we saw a massive spike in Swiss watch exports to the US. And so now in September, we saw a massive drop in Swiss watch exports to the United States. And so one of the strange standouts, though, of that report for September was this big jump in exports to the UK. So the UK and the US are very different watch markets.

23:20Obviously, the UK is extremely mature market, very well-educated, quite well in terms of watch knowledge, and certainly well-established, lots of retail locations, et cetera. And so that market has been sort of flat or not particularly strong for the past little while. And so I think maybe what's happening there is that, you know, the U.S. market is obviously pretty well supplied after we've seen these various surges in exports to the U.S. And so I think that retailers, whether they be, you know, Boucher, Tourneau, or Watches of Switzerland, which is the parent company of Hodinkee, you know, when they're taking delivery of watches, perhaps watches that were destined originally for the United States or maybe now going to the UK.

24:12And obviously, you know, retailers and brands are trying to be a little more diverse and not as concentrated in the US as they have been. The US is still the biggest single country market for Swiss watch exports, but obviously that's, it's a market that's in flux and under pressure because of those price changes. So that may be one of the reasons, but we also saw mainland China and Hong Kong have quite a substantial jump in September. So, you know, and that gives people some hope that, you know, maybe the Chinese market is finally starting to recover a bit because it's been very weak for the past, you know, 18 months, two years.

24:55Absolutely. Yeah. I don't think I can put it better than that. I think that's a pretty succinct answer to what's an interesting question and sort of an evolving scenario that's based more in what's happening outside of the UK than necessarily what's happening inside, which is fascinating. So a good question for sure. I mean, yeah, I mean, you know, obviously the manufacturer, most of, you know, obviously the Swiss manufacturers are here, but it's a global market and, you know, where the watches are exported to shifts over time as certain markets become more important for sure. But let me ask the next question, which is from Lori D.

25:33And they ask, with the economy worsening post-COVID, do you see it hitting the big groups like Swatch, Richemont, or LVMH, or the Indies? So when things turn down economically, who is more vulnerable and who gets hit harder. Is it the big groups or is it the indies? Do you want to take this one, James? What do you think? I can definitely kick it off. I think this would be one to rely on the kind of data that you track quite carefully. But I think the last few years have been tough for a lot of the big groups, especially trying to decide what to do with the resources and spoils that they used to appreciate out of China, which in many ways have diminished or in some brands, the doors almost closed entirely.

26:23And a very, I think, an almost not surprising, but probably the speed at which it happens is difficult for an industry as slow as Swiss watches. But catching up with the fact that America became kind of the number one market, and then at the same time, we have this trigger of the tariff on the product. So it's obviously a complex scenario. I'm not an economist, but I think I would be if I had to pick a chessboard to be playing, I would prefer to be, you know, independent with flexibility and a waiting customer base than a large scale, you know, conglomerate that has to deal with not only distribution, but also now warehousing theoretically watches around parts of the world to try and preempt what could happen, you know, in the news cycle of a given day.

27:10Is that off base? Am I only seeing one slice of it? No, I think that's exactly right. And indeed, we obviously swash Richemont, LVMH, the big groups. I mean, these are all publicly traded companies. And they break out the performance of their watch brands to various degrees in terms of the amount of information that we can take from it. But we don't know exactly which swatch brands, at least from what they disclose, are doing better than others. But we do know, obviously, that revenue and profit have been down quite sharply. We've seen the same with Richemont, where it's broken out in terms of their specialist watchmakers group.

27:53And quite interestingly with Richemont, which always makes it, if you're looking at their financial results and you're looking in the specialist watchmakers section for clues about how the watchmakers are doing, you have to bear in mind that they do not include Cartier and Cartier watches because Cartier is in the jewelry section of those financial results. And if you look at the results, the jewelry division has been performing quite strongly and continues to do quite well. And as we know, though, I mean, Karcher is basically the second biggest Swiss watch brand. And so where we see those strong results, it's in that section of Richemont.