Transparency vs. Legitimacy: Demystifying the Luxury Watch Industry Pt 1.

Given its importance in our perma-growth model of global economics, conspicuous consumption makes the world go round. In general, the luxury industry stands as a world unto itself, it defies traditional business models in that it supplies a desire for goods that people arguably need, at super-premium prices (thus enjoying exceptional profit margins). Thus, it’s a sector so sets its own rules and paradigms; yet, it remains an empire of cards, style, elegance and history projected through dexterous communication sometimes even at the cost of absolute transparency. If the luxury industry as a whole is opaque vis-à-vis “Tom Ford suits are actually made by Zegna and sold for 5x as much”; the waters of watchmaking can be even muddier. Thus, Deployant bravely ventures into the quagmire of transparency vs. legitimacy in an attempt to demystify the luxury watch industry; and perhaps find some illumination in the process.

Derived from the Latin Lux, the literal definition of luxury means “light”. Lux is meant to enlighten, it’s meant to shine and define beauty. In terms of consumer psychology, they can become needs (as opposed to wants) when a great number of people tend to distinguish social standing by pursuing tools of extravagance and since luxury goods and to an extent, well made mechanical watches have become symbols of good taste and conspicuous wealth, the trappings of brand perception become even more magnified.

On the business side of things, there are two key factors relating to luxury: the monetary capacity of their target audience to pay a price for quality and a propensity for their market to appreciate the object’s artistic, historical, and creative aspects, to wit an example: mechanical watches are hardly necessary when quartz watches are more reliable, affordable and practical.

In terms of consumer psychology, luxury brands are a modern set of symbols that are of particular importance in Southeast Asia, they have become signifiers of identity and social position. Though examples are more conspicuous in this part of the world, a recent survey on Rolex owners in England have shown that everyone from your plumber to the Chief Executive all own Rolex or aspire to one.

Thus, we deal with our first set of contradictions or paradox of the industry – luxury is supposed to cater to only a small group of individuals but the democratisation of luxury brands has opened the doors to the masses, it’s not only the super rich who can afford luxury goods, the number of aspiring consumers with incomes to spend have boomed and brands, sensing ripe commercial waters, have to serve the growing numbers of consumers with limited spending, yet when pooled together, consist of a very important “masstige” market.

Why some Opacity is necessary in the Luxury Industry

“There are two things you don’t want to see get made: sausages and legislation.” – John Godfrey Saxe, University Chronicle

 

If you’re a meat loving omnivore like many of us, foods like sausage, steak and hamburgers are probably some of the more enjoyable dishes in our menus but as much as we enjoy them, we probably don’t like to see how they’re made or delve into the many lives which are taken to make them. This is an important psychological aspect we call – cognitive dissonance: because to to convince ourselves that despite the critter murder we effectively endorse every time we tuck into a pork chop or a chicken salad, we are still somehow decent, somehow good, takes some fancy ethical footwork.

Analogously, how consumers buy luxury depends on their belief systems as well – what they think, feel and how they perceive impacts their buying behaviour and shifts motivation to acquire from one brand to another.

In a 2009 paper by social psychologists Kapferer and Bastien, itself an update on the excellent research by Vigneron and Johnson in 2004, they posited that luxury goods are not perfect, but an affecting goods. It is the price, not the product that is sold to the customer and this price is valued according to what Vigneron termed “luxury value perception”.

Luxury value perception

When it comes to watches and watchmaking, these are the dimensional interrelations among the primary considerations which underlie the decision making process (depending on where you are on the watch collecting spectrum – some of these values will be weighted higher than others, but they are stated here in no specific order):

1. Conspicuous Value – The consumption of specific brands that serve as a  symbol of status and wealth.
2. Uniqueness Value – The consumption of specific brands that symbolize exclusivity and rareness, which in turn enhances consumers’ desire.
3. Social Value – The consumption of specific brands based on propensity of peer acknowledgment.
4. Hedonic Value – The consumption of luxury brands that look at the product’s subjective intangible benefits that fulfill emotional value and provide intrinsic enjoyment.
5. Quality Value – The consumption of specific brands which espouse technical superiority and provenance.

As you might have noticed, the first 3 values are potentially manipulated with smart marketing campaigns and effective association with other cultural influences like pop or movie icons and the like. And then with watchmaking, the quality value, again depending on where you are on the watch collecting spectrum becomes of paramount importance because the provenance and technical superiority of your watch also affects the social value of your acquisition and this is where brands are most likely encouraged to engage in some opacity.

 

Discussing Legitimacy: Is Opacity a Form of Hypocrisy?

Legitimacy and provenance for watchmaking brands in particular are a very delicate matter. It involves a combination of information which consists of a brand message, for example “we make everything in-house” and how it is communicated, “come visit our manufacture and see how everything is made in-house” – thus, this develops the nature of the relationship between brand and the market it seeks to communicate these values to.

However, sometimes, these two concepts don’t necessarily work together, at times, it may even pose a conundrum where the brand and the media develop a slightly adversarial relationship, as in the case of ABlogToRead when Editor Ariel Adams visited the Dubois Depraz factory and disclosed how certain brands were using their services to much ire across the industry.

That said, opacity isn’t always intentional nor hypocritical. For instance, did you know that when Jaeger-LeCoultre was in the same parent company which owned Favre Leuba, Favre Leuba Reversos existed? Did you know that under the guidance of Gunter Blumlein, companies like IWC and Jaeger LeCoultre nurtured and nursed the newly revived A. Lange & Sohne back to health? Thus, at times, the opacity serves to provide a clearer picture to the uninitiated because too much information can become unhelpful overload.

That said, communication strives to maintain a precisely manicured image in the minds of its audience but sometimes, information generated by the brand or even the surfacing of uncomfortable historical (Hugo Boss making Nazi uniforms) or corporate facts (certain acquisitions early in a brand’s history which allowed it to leap-frog competition) may contrast not only with the image it is meant to maintain.

Thus, the job of brand communicators and ambassadors becomes intimately interwoven with perspective of its loyal following and needs of the uninitiated. Thus, it becomes a complex art rather than a science – luxury must remain luxurious but it must address everyone even though the goods it offers is only available to a small group of collectors.

Thus, the challenge remains for a brand to tailor its message so that it can run complementary to its corporate image. As it stands the watch industry is littered with many misfires where a brand has tried too hard at brand messaging and accidentally fallen into self-promotion, justification (and even exaggeration).

Is it hypocritical for a brand which has legitimacy coming out its ears to use a little opacity to manage its image or message a little better? It really depends on where your definition of truth and fact lie. To wit: The difference between truth and fact is that fact is something that cannot be combated with reasoning, for it is logic itself. But truth is something which depends on a person’s perspective and experience.

Mythical versus Mystical values

According to Luca Sola, head of luxury goods at Exane BNP Paribas, a brand’s strength persists on mystical values derived from their rich history and provenance. Conversely, where no history exists, then mythical values come brand values derived from their authenticity to the craft and a higher calling to integrity and honesty to the traditions they espouse.

Ultimately, desire, aspiration and mystery becomes qualities which a brand must nourish and often, in compliance to what the market yearns for as well, in the mind of their fans (and statistically, the customer most likely to repurchase), they believe an item was made for him and meant for him by virtue of its exclusivity. When it comes down to it, it all boils down to ego, both of the brand and the customer it serves. A high end watch is Swiss by perception (rather than definition) much in the same way that an Aston Martin is undeniably British (even though an Italian consortium owns a whoppping 37% stake). Thus, it stands to reason that the perpetuation of that identity is vital, transcending the economic and corporate necessities of the market.

Luxury, specifically watchmaking persists in a timeless dimension; for the consumer to feel valued, luxury brands have an obligation to remain the exception and tied to the identity of the land in which they originated, thus if there’s opacity and obfuscation to be found, as consumers and watch owners, we are accomplices to the fact.

Stay tuned for the coming weeks where we speak to brand owners, watchmakers and collectors and gather their thoughts on whether the watch industry could enjoy more transparency.