
How to Sell a $35,000 Watch in a Recession - alaskamiller
http://online.wsj.com/article/SB10001424052970203517304574304322707126380.html#project%3DSLIDESHOW08%26s%3DSB10001424052970204261704574273873845674870%26articleTabs%3Darticle
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mynameishere
Have any serious economists looked into the matter of hugely mis-priced luxury
items? There are the mostly-comedic treatments (as by Veblen) but it would
interesting to read a serious study. When you have something that costs
(maybe) a few hundred to produce, and sell it for $35,000, what is the actual
effect on the economy?

My guess: Very little. It's basically an idiotic millionaire writing out a
check to an intelligent millionaire, with a little token for remembrance.

...

Fun fact: The results in Amazon's "Sort by Price: High to Low" are
algorithmically identical to its "Sort by appearance: Shitty to Attractive":

[http://www.amazon.com/s/qid=1248405570/ref=sr_st?keywords=wa...](http://www.amazon.com/s/qid=1248405570/ref=sr_st?keywords=watch&rs=377110011&page=1&bbn=377110011&rh=n%3A377110011%2Cn%3A%21378516011%2Ck%3Awatch&sort=-price)

~~~
lionhearted
I'll comment on this. I came from basically nothing, and now I do pretty well.
I've seen a lot of luxury, that people from my background don't usually see. I
used to think it was just capricious and wasteful.

A few years ago, one of my mentors took me on a ski trip with him and friends
- I was the only person there under 30 and who wasn't a millionaire. The guys
are wearing Rolexes, Cartier, Patek Philippe, nice clothing, etc. One owns a
helicopter, many own boats, most own multiple cars and properties. Money made
in different fields - construction, commodities, finance. There was a risk
assessor/professional handicapper, my mentor was running one of the most
profitable architectural firms in Dubai. Stupid money at the table I was
dining at.

Another: One of my closest friends was a self made millionaire at 24. He's 29
or 30 this year. Lives in a 3 million dollar beautiful modern house with all
the nicest conveniences.

When his earned income dipped from $800k/year to $200k/year a few years ago,
he had to _scramble_ to replace it. He got into a couple not-glamorous
businesses, undercosted competitors, paid suppliers huge signing bonuses ahead
of time to get great rates and some exclusive locations, and so on. His gym
membership is over $200/month for a luxury place that's not much nicer than my
$40/month gym. He spends over $1000 a year on orange juice.

But I had a realization one day - first, these fellas are spending a smaller
percentage of their money on luxury goods, consumption, etc, that then average
person does. Someone who makes $4k/month and eats out a $20 meal now and then
is spending a heck of a lot more than someone who makes $200k/month (as my
mentor was) and eats out at $200 meals every other night. The extra
consumption for many of these gents fuels extra production.

When my work started to fall apart during the banking crash, I had a year of
savings in the bank, and I'm quite frugal. I didn't hurry to get into anything
- but if I'd had super high expenses, I would've, and I'm capable. My lower
consumption meant I wasn't forced to produce right away.

Beyond that - nicer things actually are much higher quality. I try to buy
clothes that are meant to retail for a lot. I look to go to Saks Fifth Avenue
during Summer Sale or Winter Sale for the 80% off, or go to fashion sample
sales. I tell you, $300 jeans look better, fit better, and hold up better than
any $40 jeans. (And I buy my $300 jeans for $60-$120 on sale anyways). Well
made watches last forever. Good scuba gear and skis last forever.

You get diminishing returns after a while, big time, but a 2010 Skyline or a
Cayenne does drive a lot nicer than my 1995 J30. I'm Captain Frugal over here.
I only spend a lot on quality tools, experiences, and gifts for other people.
But I understand why wealthy people do. You get better quality, it pushes you
to produce more. It's also a signaling thing. I have an Andrew Marc leather
jacket I got for $300 that normally retails at like $1200. I remember going in
to talk to a VP of Citizen's Bank, the head of that particular branch. I
wanted to get a loan, and he said, "Hey, that's an Andrew Marc jacket." I
said, "That's right, yeah." I look more successful. I always wear that jacket
when I go to a bank.

Finally, some expensive things mean you know everyone in the room will be of
fairly high caliber. I don't like haughty places so much, but actually, the
really exclusive nightclubs have much friendlier people in them to strangers
than run of the mill less restricted places. People know that by virtue of
being in, you're probably alright.

Eh, I'm rambling. Long story short, I used to think the way you did. But
there's some legit reasons to spend lavishly on certain things, and you might
actually wind up closer to your goals if you do. Certainly if you produce at a
high level, intelligently increasing your consumption can at times make you
wealthier than being ultra-frugal and hoarding. I'm only recently learning
this lesson.

~~~
vaksel
The problem is that the early rich, tend to spend the same way as the ultra
rich, in order to fit in.

Why? Conditioning. Anywhere you look, you see lavish lifestyles being
advertised. And after you hit a few mil, you start thinking "hey I'm rich, I
should spend that money, like those rich guys spend".

Just because you hit a jackpot, doesn't mean you need to spend 10% of your
newly found wealth, buying a Ferrari

~~~
delano
That's a self-correcting problem.

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profquail
I laughed when I saw the title...anyone remember this scene from "Trading
Places"?

Fifty bucks? No, no, no. This is a Rouchefoucauld. The thinnest water-
resistant watch in the world. Singularly unique, sculptured in design, hand-
crafted in Switzerland, and water resistant to three atmospheres. This is
_the_ sports watch of the '80s. Six thousand, nine hundred and fifty five
dollars retail! _You got a receipt?_ Look, it tells time simultaneously in
Monte Carlo, Beverly Hills, London, Paris, Rome, and Gstaad. _In Philadelphia,
it's worth 50 bucks._

~~~
mattculbreth
Looking good Louis!

------
JacobAldridge
I think the most important lesson here is buried deep into the article - "
_Mr. Brücker was never disdainful of customers - in fact, he championed the
need for better, more thoughtful service that makes the customer sense caring
and quality - the stuff of luxury.

"You’re selling pure emotion," he said._"

The rest is tips and tricks - interesting and useful perhaps, but by focusing
on them the article comes across as scummy sales instead of the ongoing
relationship that is essential (and very profitable!) in the $35,000 Watch
market.

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lionhearted
Very interesting piece - learned a lot. This part was the most insightful to
me:

\--

Mr. Brücker looked the part of a luxury customer, wearing Car Shoe moccasins
and an IWC Big Pilot watch, which has shock absorbers to help it keep time
under rough flying conditions. He used PowerPoint to impart what he calls the
“macaroon technique,” referring to the sandwich-like French macaron pastry.
This can be applied to most any product (including, presumably, a Xerox
machine) and goes something like this:

“Madam, this timepiece (or diamond or handbag) comes from our finest workshop
and it has a value of $10,000. If you buy it, your children are sure to enjoy
it for generations to come.”

That pesky number is sandwiched between the product’s more romantic benefits.
“We sell luxury—it’s an emotion,” Mr. Brücker instructed.

~~~
mahmud
This is the line that stuck with me as well. Mention of children is a very
clever technique; it removes the guilt of spending the kids' college money or
inheritance; it makes shopping feel like an investment.

~~~
jimboyoungblood
A friend of mine has been shopping for a nice watch with the expressed purpose
of being able to pass it to his son one day as a family heirloom. So what
seems a "clever technique" to you might actually be "being aware of your
customer's needs". Of course if you're determined to stay cynical, one could
argue that my friend just fell prey to their ingenious marketing message.

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patio11
I know I'm supposed to feel class envy when reading about watches which are
more expensive than salaries I have recently worked for, but I've got to admit
fascination with the linen glove treatment. The psychology of putting the old
watch between two new ones and having a wingman distract the wife is very
amusing.

Now if I could just figure out a way to do that for software which costs a
thousandth as much.

This sort of makes me want to put on my best business suit, walk to the luxury
jewelry store I pass on the way home from work, and take some notes on their
tactics.

~~~
shard
I think part of the point is that the products are high margin enough to
promote that level of individual attention. If guys selling $5 watches spend
that much effort per watch, it'd never pay off.

Carrying that over to software, these techniques would be most useful for the
$100k per seat packages rather than the $5.99 packages. Although software is
rarely sold on the notion of romance, so I don't know how sustainable these
methods would be.

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cturner
How do you go about finding someone good to fix an obscure Swiss watch when
you are living in a city that is not in your country? The issue is - once you
hand it over for service there's no particular reason for you to get it back
except for the honesty of the repairer. How do you guage this? Or is it better
to freight it back to manufacturer?

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jj8586
Here I thought the real news of the article was how high-end jewelery sellers'
skills had atrophied over the boom years.

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smithjchris
I think the issue is why is there a watch worth $35000?

I have a cheap Casio $10 which is functional. I don't even use that half the
time (I have a clock on my phone).

I want the time, nothing else.

~~~
jyu
The same can be said about laptops. Why buy a $2,000+ Macbook Pro when you can
get similar functionality in a $400 Acer?

Simple answer: It's nicer.

~~~
smithjchris
Personally I prefer the Acer. It allows me to:

a) Not require the work to gain the remaining $1600 meaning more time with my
family.

b) Alternatively if it is from money surplus, it allows me to do more
activities with my family.

Plus does it help you get from problem A to solution B any better or is that
down to your abilities?

The MacBook is an Acer in a pretty box. If you're interested in the box, you
lack any real meaning in your life. Real beauty is in the mind.

~~~
jimboyoungblood
I'm sure the Acer serves your needs perfectly well. Have you ever considered
that other people's needs are different from yours?

 _If you're interested in the box, you lack any real meaning in your life.
Real beauty is in the mind._

Let me rephrase what you just said: to have any real meaning in your life, you
have to be completely uninterested in physical appearance. So if I have a
passing interest in design, architecture, or art, my life lacks meaning?

~~~
smithjchris
It's a functional device. Not a piece of art.

~~~
jimboyoungblood
You're absolutely right, the Acer is not a piece of art.

~~~
smithjchris
Thank you. My point entirely. Whilst working, my mind dissolves into the
concepts being represented on the screen, not what is around it.

------
Raphael
very carefully.

