There are several reasons why we write about watches on our financial blog. First, watches measure consumer trust. Very few people need a watch, and for those who do, the Casio F91w is a great choice. So there’s a lot to be gleaned about regional shifts in demand for trickier and flashier stuff.
Second, like Swiss watches, Swatch and Richemont are listed and have market-adjacent content. Third, privately owned watchmakers expect us to recreate their hoopla while respecting secrecy about their business practices, and frankly, we don’t want to do that. is. Fourth, readers are more likely to click on articles about watches.
That’s why we pay attention when new watch microbrands emerge. for example:
The Victory Tourbillon is the limited edition flagship of a series of watches sold by multifaceted leisure and lifestyle brand Trump. Since the ticket price is $100,000, FTAV questioned the price increase.
Tourbillon means there is a rotating cage around the ticking bit. The idea is to minimize the effects of gravity to make the watch mechanism more accurate, and while it probably doesn’t do anything, people appreciate the additional engineering required.
But in recent years, tourbillons have become less special, with Chinese factories churning out decent replicas and imitations of Swiss craftsmanship, and the Swatch-owned ETA movement maker making the most of the hassle. Parts are now available in kit form. Only a few manufacturers design their own movements from scratch, and there’s an arms race in the ultra-luxury world to make everything as thin as possible.
Or to paraphrase it as an old meme:
The Trump Victory Tourbillon isn’t particularly thin, but the dial says “Swiss Made”, so it can’t possibly be powered by a Chinese movement. (There are many rules governing Swiss-origin advertising, such as that watch movements must be assembled in Switzerland.) ETA actually only makes Swatch-branded movements these days, so the focus is even narrower. It is.
The website says:
The Trump Victory Tourbillon is powered by the Swiss-made TX07 tourbillon. Each watch is made up of over 200 individual parts, all of which work in perfect harmony to deliver superior performance.
. . . It doesn’t mean anything. However, this page also includes a close-up video of the movement using the distinctive symmetrical plate above the balance wheel.
This is one of the telltale signs of BCP T02. Designed by Olivier Maury, the T02 is a movement sold to smaller watchmakers such as Yema, Aventi, and Louis Erard. According to Time & Tide, Morey has discovered a “cheat code” that will allow you to purchase a Swiss tourbillon at an affordable price.
Morey confirmed in an email that he supplies Trump Victory Tourbillon movements to third-party watch assemblies, adding:
We use a standard price list for the Tourbillon series, which is around USD 4,700 per movement for batches of sizes 100-200. Typically, this batch size is very competitive when it comes to 100% Swiss made movements.
(Molly also sent us a schematic diagram of the movement listing all the gear, spring, and pin suppliers. This information adds nothing to this post, but it’s an industry addicted to secrecy and bullshit.) Transparency like this is like a breath of fresh air.
Anyway, off we go. Movement: $4,700.
Another Swiss watchmaker that avoids the woo-woo is Code41, which is like the BrewDog of watches. Members of the online community will vote on designs and receive detailed spec sheets for each build, including the tourbillon developed in 2022/23 in partnership with Olivier Maury’s BCP Tourbillon.
The Code41 website has a pretty detailed breakdown of wholesale costs for watch parts. Dials vary greatly in quality and complexity, but for basic builds, watch faces start at around $10, and cases can be as low as $25. With better quality, a face could cost $50 and a body $80, according to Code41.
The retail price of a watch is typically six to eight times the assembled price, but Code41 applies a 3.5 times markup because it only sells directly. Its tourbillon retails for approximately 12,500 pounds ($16,700), meaning the wholesale unit price is approximately $4,800. So it’s reasonable to assume that even if it’s a high-end item, the cost of non-movement components probably won’t exceed $200.
This is not the case with the Trump Victory Tourbillon. According to the website, the tourbillon is made from “approximately 200 grams” of 18-karat gold “throughout the band, case and buckle” and is “decorated with 122 VS1 diamonds.” The only things that need to increase cost are the acrylic backplate, face, and some fixtures. We erred on the side of caution and added $200 to these items, but judging by the photos, that’s very likely an overstatement.
Nevertheless, 200 grams of gold is a lot of gold. That’s about the same weight as a hamster, putting the Trump Victory Tourbillon in the same weight category as larger models like the Rolex Deepsea, which has a US list price of $52,100 (gold).
Spot gold costs $2,648 per ounce in pixel hours, so 200 grams of 18 carat is equivalent to approximately $19,000 in gold.
Then there are diamonds. VS1 refers to a slightly imperfect diamond. It’s five notches below perfect, so if you value diamonds the same way you would bonds, you’d get roughly BBB+.
However, there is not much information available in this area of the diamond market. It is a waste of money to certify the quality of stones that weigh less than a quarter carat (meaning approximately 4 mm in diameter). The stones on Trump Victory are believed to be no more than 2mm in size, so even with a VS1 clarity rating, estimating its value is a matter of guesswork.
One pinhead-sized diamond retails for $15 (or a fraction of that if produced in a lab). Again, tread carefully. It’s not unreasonable to think that 122 Pinhead VS1 Clarity Stones would cost around $2000, but it could be much less.
Here are the scores so far:
Movement: $4,800
Gold: $19,000
Diamond: $2,000
Face, fitting, etc.: $200
A cost estimate of $25,000, which takes into account timing of purchase, assembly, bulk third-party discounts, etc., is probably a good estimate. As Dolly Parton said, it costs a lot of money to look this cheap.
A major feature of current Swiss watchmaking is its ultra-premium design. Last year, the bottom of the watch resale market fell, causing some pain among speculators and waiting lists became less of an issue, but big brands were able to counter the decline in volumes with higher average selling prices. Ta.
According to Swiss watch export statistics for August, sales of precious metals rose by 21% in value terms, while sales of steel watches fell by 10%. Watches with a wholesale price of more than CHF3,000 (approximately 3,500 Yen) are the only category that is growing, perhaps due to gold and platinum watches costing 25 times the average price of a steel watch. .
However, this still means around 30,000 precious metal Swiss watches are sold a month, with most of those sales going to Asia or Asian consumers. Morgan Stanley estimates that Bling only accounts for 2.6% of the market by volume.
The top class of Swiss watches (meaning Rolex, followed by Vacheron Constantin, Patek Philippe, Audemars Piguet and Richard Mille) accounts for three-quarters of switch exports by value. That’s the market the Trump Victory Tourbillon competes in.
And the profit pool is even more unevenly distributed than these numbers suggest. Privately held companies such as Rolex, Patek, and AP have entered the market, and operating profit margins are estimated to be around 40%. However, the listed watchmaker reports an operating margin of around 20% for its watch division, which partly reflects its portfolio, which includes the Haro brand. Lange & Söhne, owned by Richemont, for example, routinely charges more than $50,000 per car and is unlikely to make a profit.
Morgan Stanley estimates that beyond major sellers such as Omega (Swatch) and Cartier (Richemont), “many other brands in listed groups’ portfolios are unable to cover their cost of capital.”
But of course, the Trump Victory Tourbillon is a made-to-order watch sold directly to consumers from a single website with zero marketing budget. Because articles like this are all the publicity you need.
Since there are very few operating costs added to the $25,000 material cost, the operating margin is probably no worse than about 75% gross profit margin. If Trump sold all 147 tourbillons, his operating profit would be an estimated $11 million. That’s decent.
A 75% profit margin is not exceptional either. Morgan Stanley estimates gross profit margins for Moonswatch, a fashion disposable product co-branded with Swatch that has sold more than 3 million pieces in the past two years, are about 80%.
The difference is that the market segment President Trump oversees is dominated by the Big Five, plus hundreds of loss-making companies and vanity projects. These manufacturers are mostly vertically integrated and have very high inventory levels, resulting in large fixed costs. They are increasingly exposed to a small segment of Asia-dependent markets that are highly sensitive to exchange rates, policy stimulus and capital controls. This makes them more vulnerable to continued economic downturns and makes operational degearing more demanding.
So is President Trump’s asset-light, demographic-targeted approach to ultra-luxury a potential path forward for the Swiss watch industry and the broader luxury goods sector? ? No, of course not.
Read more:
–Is it the sound of bubbles bursting from a luxury watch? (FTAV)
— What Swiss Watch Warnings Say About Rolex Demand (FTAV)
— The Clock Has Stopped (FTAV)
