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Independent services centers squeezed when watch warranties are extended to over five years

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An article on WatchPro last week shone a light on the growing trend for major Swiss watchmakers to turn service and support into a profit center.

It was based on a comment by James Dowling, one of Britain’s best known watch collectors and author or books about the industry, who said: “The thing that irritates me most right now is the way brands are tying service into a profit centre. Brands are pulling parts accounts from independent service centers and that is irritating customers that want choice,” he stated.

The article attracted a flurry of comments from industry insiders and collectors talking about the issues, and also a call from an executive at an independent watch repair firm who wanted to write about his experience and give an insiders viewpoint on another strand to the story as long as his name was not mentioned.

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WatchPro is happy to publish his article here …

Analysis of extended warranty coverage for luxury timepieces

For many years in the past it has been standard practice for different luxury watch manufacturers to cover and provide warranty repair service free of charge for not more than two years.

However, all that changed when, since 2015, Rolex began offering a five-year warranty on all its watches. Breitling followed suit the next year offering a five-year warranty on their watches. In 2018, Omega jumped on the bandwagon with a five-year warranty as did watch manufacturer Ulysse Nardin.

Then, in May 2019, Jaeger LeCoultre (JLC) announced they were extending their warranty coverage to 8-years. Next in line, in November 2019, Panerai and IWC (both from the same Richemont stable as JLC)  announced their 8-year warranty programs.

The publicly traded Watches of Switzerland Group made even greater waves with news that any Rolex purchased through them will carry extended coverage to ten years.

Some companies seem to follow a now common strategy which requires a new customer to register his/her timepiece online and apply for an extended six years on their two-year warranty card.

This allows watch manufacturers to monitor more carefully the purchases resulting in direct future communication with the client regarding new watches introduced as well as service.

WHAT DOES THIS MEAN TO CONSUMERS AND WATCH REPAIRERS?

For those consumers who are not yet aware, the large luxury watch groups are desperately trying to increase their revenues by all means possible. Long time exclusive partnerships with solid and trusted retailers have been abruptly abandoned in hot pursuit of more promising markets and stronger sales.

First came the opening of flagship boutiques where, of course, the retailer – as a middleman – has been eliminated.

The theory was, that the full list selling price would be pure profit minus operating expenses.

Second came a full-fledged embrace of direct online sales to consumers; something that many years ago would have been frowned upon and considered illegitimate.

Then, to further enhance their bottom line, companies began to push and promote direct online watch repair services even offering “free shipping”.

CURRENT TRENDS WITH SHORTSIGHTEDNESS

While the above strategies may improve their bottom lines in the short term the companies fail to see the larger picture for the long term.

As consumers turn increasingly to in-house repair platforms of the watch companies they will face longer waiting times and may be in phone contact with faceless clerks who have no technical knowledge to explain specific service issues that come up.

The costs to maintain their extended infrastructure, be it boutiques or repair platforms, come at an increasingly very high price with operational expenses which ultimately will chip away and erode company bottom line profits.

In the meantime, their restrictions of providing spare parts to most independent watch repairers may cause, in my humble opinion, a two-fold boomerang reaction. With more and more warranty work coming the way of the companies for the next ten years and beyond, post warranty watch repairs will have to wait their turn as in-warranty watches are given priority attention.

Watch companies will thus become overloaded with more repairs which they might not be able to handle adequately on their own. They will need to come on to an existing shortage of finding and hiring additional skilled watchmakers.

This predictable scenario of watch companies trying their utmost to increase their revenues by all means possible might just end like the story of  “The Goose That Laid the Golden Eggs”, which goes as follows:

There once was a man who owned a wonderful goose. Every morning, the goose laid for him a big, beautiful egg — an egg made of pure, shiny, solid gold. Every morning, the man collected golden eggs. And little by little, egg by egg, he began to grow rich. But the man wanted more. “My goose has all those golden eggs inside her,” he kept thinking. “Why not get them all at once?” One day he couldn’t wait any longer. He grabbed the goose and killed her. But there were no eggs inside her! “Why did I do that?” the man cried! “Now there will be no more golden eggs.”

 

1 Comment

  1. Short term profits and share price…No long term vision. Got to love modern business management. 5 year warranties are nice, but like high end cars, once it expires let the true cost hit and hit hard.

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Rob Corder

The author Rob Corder