Watchbox invests in De Bethune – so what?

The luxury watch platform WatchBox announced an investment in independent watch manufacturer De Bethune (DB) today.

According to Watchpro: The details of the deal have not been disclosed but Swiss newspaper Le Temps, says WatchBox has secured a controlling interest in the watchmaker. DB currently makes around 150 watches per year, and plan to use the investment to scale up production to around 250 pieces per year.

The key questions of course: 1) is this good for the brand, or not? 2) is this good for collectors, or not?

Context

For those who don’t already know, Watchbox is largely credited with ‘creating’ the meteoric price rise in F.P. Journe watches by buying a large portion of the available supply globally and then drip feeding the watches into the market at increasingly higher prices each time. Since Journe only makes ~800 watches a year, this wasn’t particularly difficult, although their bankroll definitely helped. That being said, it wasn’t a risk-free move either. Sure, as they started building inventory, there were signs that Journe was getting more attention… the likes of A Collected Man had also been selling them at increasingly higher prices, and they also published an in-depth series of articles about F.P. Journe – this coincided with the whole world being locked down and watch collectors having nothing better to do that to dig deeper into things they previously never had time to dive into. By this time of course, Journe had taken off, and the rise was just going to continue.

The thing about Journe was, Watchbox didn’t own a stake in the brand – there was perhaps some perceived conflict of interest with Govberg Jewellers & Sincere Fine Watches being authorised retailers and Watchbox being co-owned by the same folks who owned those retailers… but anyway, nothing necessarily wrong there, nor has anything been proved otherwise. Watchbox was free to buy whatever inventory they wanted to, and as the controllers of supply, were able to set the prices according to demand… this demand was then fuelled by the collector frenzy as Journe was hyped up, and prices continued to rise. Then came the auctions after lockdown, and Journe’s price levels were somewhat locked in at this insane level we see today – particularly the earlier models with brass movements.

Why does this matter – aren’t we talking about De Bethune? Well, Journe being the ‘poster story’ for Watchbox being price leaders (of sorts) for the Journe brand – begs the question about how things will pan out for De Bethune. First, let’s talk about price leadership.

Price Leadership

Price leadership occurs when a leading firm in a given industry is able to exert enough influence in the sector that it can effectively determine the price of goods or services for the entire market. This type of firm is sometimes referred to as the price leader.

Investopedia

The above definition can be adapted to apply to a brand within an industry too – the bottom line is, one of the conditions for price leadership to occur, is when there is a high level of consumer demand for a specific product. Note, the ‘extreme’ high demand isn’t necessarily present yet, but as supply is throttled and would-be clients are turned away or told they need to join a waitlist of two years… the hype begins as people who DO own one, are celebrated and congratulated and everyone who DOES NOT own one, wants to!

There are various forms of price leadership which you can read about here, but the one at play in this case would be “Dominant” – i.e. Watchbox will control the vast majority of supply.

A dominant price leadership model is sometimes referred to as a partial monopoly. In this type of model, the price leader might engage in predatory pricing, which refers to the practice of lowering prices to levels that make it impossible for smaller, competing firms to remain in business. 

Investopedia

Applying the above to a ‘brand’ perspective, it is exactly what we saw with Journe… the watches came to be priced at insane, prohibitive levels for all but the wealthiest collectors – and yes, other ‘less affluent’ (relatively) collectors who happened to buy one before the rise, enjoyed the rising tide all the same.

This begs the question – what are the watches worth? Is it simply “whatever someone is willing to pay for it”? Perhaps it is indeed that simple.

Conclusion

I will continue to contrast with Journe because that is an example of supply dominance which was independent of the brand, and this deal with De Bethune is seemingly the opposite. Turning to the questions posed above, let’s talk about the brand, and the collectors.

With this investment, the brand can scale up production, and arguably, more collectors can access these watches – this seems like a win-win. This might lead to increased sightings of DB watches on Instagram and among collectors – this will likely drive demand as well, because let’s be honest, DB do make some beautiful watches. This cycle continues, and the hype for DB reaches fever pitch. At this point Watchbox’s track record begins to raise alarm bells.

This is the point at which this hype brings the super-wealthy to the party, who have no price sensitivity and who simply want the soup of the day, at whatever cost. Watchbox of course will be able to supply them… but at what cost?

In a meeting with De Bethune at Geneva Watch Days yesterday, WATCHPRO was told that every watch in production for 2021 has already been sold.

watchpro.com

The brand, some might say, will arguably be better off because demand will far exceed supply – but that was seemingly already the case, since prior to the deal being announced, they had already pre sold all remaining 2021 production, and likely had orders which spilled into 2022 – though this is speculation on my part.

Now if we follow the logic described above – popularity leads to demand, demand leads to price rises, and existing DB owners make a fortune on paper – at least, going by the Journe example from earlier. As the price goes up – what was once a 30k watch will go into 6 figures, and forever price out the majority of remaining watch collectors. Sure, with 250 pieces a year, DB won’t really care – just like Journe doesn’t care at 800 pieces a year.

Ultimately, the average collector suffers, but I would suggest, the brand indirectly suffers too – in the sense that they never really get to reach the true enthusiasts for whom the watches were created. Instead, it reaches hype mongers and speculators, who are buying it to store and to profit from it, not to wear it. The brand is selling to people who don’t care about the horology or the heritage – but simply about the hottest watch on the market – essentially the brand becomes solely a commodity whose value is determined by supply and demand on the open market, lacking what many brands aspire to: collectibility.

Granted this is a bit of hyperbole – but the true purpose of this piece is to speak to all the people who are thinking about buying a DB now. If you didn’t like it a few months ago, the odds are you don’t actually like it now. Don’t get sucked into this hype train.

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