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Watch Ponder by Watch Ponder Opinion & Editoria.. - 4M ago

Swatch Group is suffering from decreased sales and profits while accruing massive inventory levels over the past few years. The company has recently identified non-specific opportunities for growth in 2017 that seem to have little chance of loosening the quickly tightening belt. While Swatch Group’s self-projected sales growth would be nice, growing inventory levels are something that cannot be ignored. This should leave all of us wondering Is Swatch Group being realistic? Here is my op-ed analysis.

Swatch Group recently released its 2016 annual summary of key financial figures which gives a peek into its performance and includes a few comments and general forecasts from the company. The Swatch Group report is very optimistic about 2017 (which is typical for most companies).  Despite this optimism, there are reasons for concern from an investor’s standpoint. I will not make buy/sell/hold recommendations as there are already plenty of people who are engaged in doing so. Instead, the purpose of this article is to analyze Swatch Group’s recently released key financial figures and explain why its forecasts for growth are misguided and why growing inventories is the real problem that needs to be addressed in order for Swatch Group to attain long-term sustainability.

(Source: By Torsten Bolten – Own work, Public Domain)

Here are some of the key figures reported by Swatch Group for 2016:

Net Sales: -10.6% compared to 2015 and -13.3% compared to 2014

Net profit margin: 7.9%, an almost 50% smaller profit margin than a year ago

“The months of November, December and January showed, particularly in Mainland China, very good growth in the Watches & Jewelry segment, with a substantial improvement in operating margin.”

“Based on the positive development of the last three months, healthy growth is expected for the year 2017.”

View report here

“Healthy Growth” Opportunities in 2017?

Swatch Group wrote in their just-released  2016 report:

Consumer interest and the potential for Swiss watches remains strong. Particularly Asia and the Middle East are showing again increasing sales in recent months, including brands in the luxury segment, so that healthy growth in local currency can again be expected for the year 2017, even more this expectation also applies to the USA and Europe…Based on the positive sales figures in all segments in recent months, including January, Swatch Group anticipates healthy growth in 2017.

While Swatch Group cites specific countries and regions to be optimistic about in 2017, the recent Swiss watch market export data released by the Federation of the Swiss Watch Industry (FH) leaves little room for optimism. Because Asia, the Middle East, Europe, and the United States are critical areas for future watch sales, I wanted to know how realistic it was to count on these regions for growth in 2017?

I cross-referenced these regions against the country-specific results released by FH just a few days ago (Swatch Group has not released country-specific sales figures, so FH’s report is the best data available). The FH is an independent body that represents and reports on the Swiss watch industry. It is important to note that the FH encompasses the whole watch industry, so its statistics do not represent only Swatch Group. However, Swatch Group is the largest global producer of watches by value. Its sales represent about 19% of the total global value of watch sales and about 35% of the Swiss watch industry sales. It is possible that Swatch Group’s sales figures are dramatically different from the rest of the Swiss market. However, given that Swatch Group represents such a significant portion of the Swiss watch market, it is an approximation that the FH statistics are representative of Swatch Group’s figures.

Important terminology note: The FH reports Swiss watch export statistics. Therefore, this metric doesn’t include watches sold in Switzerland, so sales figures could vary depending on how much a brand sells within Switzerland. These sales figures also don’t exactly mirror retail sales. However, since retail sales drive exports and demand, exports are a natural proxy for sales. When I refer to the FH’s statistics, I use the term “sales” for ease of understanding, but they are actually export numbers.

By Transparent 6lue [Public domain], via Wikimedia Commons

Comparing the FH Watch Export Data

Swatch Group says the following regions have shown growth in sales in the recent months and will offer healthy growth opportunities in 2017. I compared this claim against the FH sales statistics for these regions, including all countries that individually represent 5% or more of Swiss watch exports. Here’s what the FH says OVERALL SWISS watch sales have been in 2016 (compared to their corresponding period in 2015):

Asian Segment (about 40% of all Swiss watch sales): -5% in December and -5% in November. Overall, sales declined by -11% for 2016.

Hong Kong (about 12.3% of all Swiss watch sales): -15% in December, -1% in November, and -21% in October

China (about 6.6% of all Swiss watch sales): +28% in December, +8% in November, and +3% in October

Japan (about 6.5% of all Swiss watch sales): +4 in December, -15% in November, and -14% in October.

Singapore (about 5% of all Swiss watch sales): -10% in December and -5% in November.

Middle East Sub-Segment (about 10% of all Swiss watch sales) — reported as part of the Asian segment: -4% in December and -7% in November. Overall, sales declined by -4% for 2016.

USA (about 11% of all Swiss watch sales): +11% in December, -18% in November, -17% in October. Overall sales declined by -9% for 2016.

European Segment (about 34% of all Swiss watch sales): -9% in December and -4% in November. Overall sales declined by -9% for 2016.

Germany (about 5.5% of all Swiss watch sales): -3% in December and -9% in November.

Italy (about 6% of all Swiss watch sales): -19% in December, -12% in November, and -12% in October.

United Kingdom (about 6% of all Swiss watch sales): -8% in December, +7% in November, and +9% in October.

France (about 5% of all Swiss watch sales): -12% in December and -19% for November.

Of all the regions mentioned (and the major country markets within those regions), the only countries showing ANY signs of recent increasing sales in the last quarter are (in green): the US, Japan, China, and the United Kingdom. How significant are these countries? They represent about 30% of total Swiss watch exports (again, Swatch Group’s sales likely differ somewhat as these are total Swiss watch export figures). These markets represent 1/3 of the Swiss watch exports, meaning that more than 2/3 of markets had declining sales. With only a few major markets showing recent signs of increasing sales, the remaining markets would have to slow their declines significantly to stem losses in 2017, much less achieve positive “healthy growth.” Growth implies non-negative numbers and given current trends,  this seems unlikely unless Swatch Group’s sales figures vary widely from the rest of the Swiss watch market.

Is Swatch Being Too Optimistic?

Perhaps these forecasts are in line with previous years? In a recent Bloomberg article covering an interview with Nick Hayek, the Swatch Group CEO, the Bloomberg piece states:

“Revenue will rise 7 percent to 10 percent in local currencies, Hayek said in an interview, adding that growth depends heavily on exchange rates. The CEO’s forecast was off in the past two years: he had predicted increases and then sales declined.”

Although, the article continues to offer optimism in Swatch’s forecasts as well:

“2016 was negative, and people have to consider it as over and done with,” said Patrik Schwendimann, an analyst at Zuercher Kantonalbank. “What’s the deciding factor is whether 2017 trends are indeed turning better, and while Mr. Hayek is usually optimistic at the beginning of the year, there are positive signs that give his optimism some ground.”

With Mr. Hayek reporting a 50% growth in Chinese sales in January, perhaps the winds are truly shifting.

Licensed under Creative Commons

Growing Inventories are the Bigger Problem

Swatch Group had significantly higher“Days of Sales Inventory” than its peer companies at of the end of 2015 (and this grew longer by mid-2016).

The Swatch Group inventories have continued to grow over recent years and this should be a source of concern. Below is a chart that shows Swatch Group’s inventory levels compared to similar companies as of the last published full reporting year (2015). (You can read more about my analysis of this in an article published with aBlogToWatch).

Another important metric to consider is how much of the inventory is in raw materials versus finished or in-progress goods. By the end of 2015, 89% of Swatch Group’s inventory was either in-progress or finished goods. This is important because it is an indicator of how Swatch Group is handling its operations. In the face of declining sales, an obvious response would be “produce at the rate you’re selling”.  However, decreasing production becomes difficult for accounting purposes. As a result, inventories have continued to grow over the last few years. Though Swatch Group has claimed the inventory growth is due to forecasted future growth in demand, I propose they likely continue to grow because they have to grow.

Here’s why (using a fictional example):

Variable Costs: a company only incurs a variable cost if they produce a unit. Examples of VC are the metal that goes into the watch, the wear on the machine, the gas to operate the machine, etc.

Fixed Costs: a company incurs fixed costs regardless of whether they produce anything. Examples of FC are the building mortgage, the salary of the CEO, property taxes, insurance, the pension of retired workers, etc.

Let’s pretend Swatch Group stopped producing for a little while and just sold off what it had in its inventory in order to decrease its inventories by 25%. (These numbers are not Swatch Group’s cost structure nor representative. I’m using simple numbers for ease of understanding — skip to the diagram below if you are a picture person like me).

Pretend that Swatch Group has 100 watches in inventory.

It decides to adjust production so it only produces 75 watches next year.

Meanwhile, Swatch Group has $1,000 in fixed costs to run the company (the factory, power bill, salaries, etc).

Before, it used to spread the fixed costs across 100 watches, which works out to $10/watch and resulted in $1 profit on each watch it sells.

Now, it spreads the same fixed costs across 75 watches, which works out to $13.33/watch.

Assuming that Swatch doesn’t raise the cost of its watches, it now will have to take a $2.33 loss on each watch sold.

This is over-simplification of accounting, but the general principles apply.

These numbers are only example numbers to explain how fixed cost distribution works. These numbers are not representative of Swatch Group or their cost structure.

Applying this scenario to Swatch Group’s actual financials, if Swatch Group decreased its production of inventory by only 10%, it would result in an 11% increase in fixed costs applied to each watch, meaning less profit on each watch. Depending on how much Swatch Group’s variable production costs are, it could drastically reduce profit margins further. With Swatch Group only reporting an 8% profit margin, there is little room to spare.  Therefore, continuing to produce inventory allows it to spread fixed costs over more units, increasing profit margins for each watch sale.  Meanwhile, the remaining inventory gets logged as an asset on the balance sheet, which is a standard accounting procedure. While Swatch Group sites forecasts for growth in demand, fixed cost factors should also be considered. This large volume production practice is not unique — it is also very common in the auto industry.

How Inventories are Affecting the Balance Sheet

Keeping an eye on inventories is critical because they can make a company’s profitability look good while sales stagnate or decline and inventories pile up in the company’s warehouse. As inventories stack up, the company’s profit margins on watch sales look acceptable, but it is actually pushing itself into a corner that is very difficult to escape. By looking at Swatch Group’s historical reports, we can see that inventory as a % of its total assets has increased from 33% in 2010 to over 47% by mid-2016. As inventories continue to grow, more and more of the company’s assets are tied up in inventories instead of being spent on marketing, sales, or other efforts to increase sales.

Note: Depending on method of calculation, investment banks estimate the Days of Inventory at over 300, meanwhile Morningstar puts them at over 1,000. Regardless of method, Swatch inventories are large and are larger than their peer..

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I have had the privilege of speaking with many micro brand founders in all price ranges and varying degrees of success. They are inspiring and many of them I look to for their thoughts and analyses on the micro brand industry. One question I like to ask founders is “who buys your watch?” or “who is your target customer?” I have heard very detailed responses all the way down to “I, for one, would definitely buy my watch” . . .”people that like watches” . . .”we won’t know until we start selling them!”…..

While these are a range of possible answers, they can also signal some pitfalls that can come with launching a watch brand. There are many types of watch buyers out there and every brand should be targeting one type and designing their watch in look, feel, and price to appeal to that customer. Some micro brands know their customer very well and do a great job, while others miss the mark. Below is my summary of the types of watch customers out there. Which type of watch buyer are you? 

Why Micro Brands?

I have always been inspired by micro brand watches mostly because they are made by entrepreneurs willing to go out and try. They put their career, their money, and their time on the line to turn a passion into a job. I’ve sampled and reviewed many micro brand watches sold by some of the best watchmakers in the micro brand business. This winter, Watch Ponder even awarded the Most Inspiring Micro Brand Watches of 2016. However, for every brand that does it exactly right, there are many other brands that design a watch without identifying who their target customer is. When they do identify the customer, sometimes there is a mismatch between what the micro brand watch company is selling and what that kind of customer actually buys.

A Niche vs. an Atypical Customer

Try to avoid thinking of the one counter example to each of these customer categories. I acknowledge that there are always exceptions. However, selling to exceptions is tough, especially in luxury retail where marketing can be very involved and expensive. There is a huge difference between targeting a niche customer and targeting an atypical customer. A niche customer is a clearly defined group that cares about very specific things. In contrast, an atypical customer is a one-off or a unique example– and there are very few people similar to them. If you are targeting an atypical customer within a segment, finding that customer and selling to them will be very difficult.  You should focus your attention on the “polling averages” of each segment. Which type of customer are you? Which type of customer is your micro brand intended for?

Here are the basic segments of watch buyers. These categories are not exhaustive nor all-inclusive. There are many hybrid combinations of these categories. This is merely intended to summarize the primary large segments from my perspective. There are also specific niches within these segments that I have tried to specify where appropriate:

The Utility “Does it Tell Time?” Customer

This is the customer that buys a watch because it tells time. They very much care about function over form, but more importantly, they care about value. This customer is completely rational and sees a watch for what it is — a way to tell time. Even as a fashion accessory, this customer wants value. After all, there are many things people spend money on and not everyone wants to spend a lot of money on a wrist-size hunk of metal, plastic, and glass.

Accordingly, this could care less where the watch is made. This person cares strictly about the utility of a watch and is much more likely to buy a Timex than a Rolex. They might buy a Citizen or a Seiko, but only because they like the solar-charging features. 99% of watches look fashionable to them because a black rubber sports watch or a leather strapped dress watch all do the job. This person will only respond to advertising that shows more utility and value; they won’t respond to messages highlighting parts sourcing or complications. In fact, parts sourcing or complications are likely to turn this customer away because they tend to signal price markups.  All this customer cares about is utility and value. The smart watch is a very appealing watch alternative to this customer.

By Dr.K. (talk) 20:38, 18 July 2008 (UTC) (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

Fashion Accessory Customer

This person wants a watch that looks good. Mostly, they care about the watch as a fashion accessory and are not too concerned with the mechanics or parts sourcing. This customer really likes the idea of minimalist design (such as Daniel Wellington) as well as fashionable color combinations (e.g. the blue and green mix). The watch has to be eye catching, but remain an accessory and therefore cannot be the main show. This customer doesn’t care about brand names (unless it’s something trendy that their friends also own such as Daniel Wellington). Most importantly, this customer isn’t willing to splurge. They are generally young and aspirational but may have limited disposable income. They are interested in buying a watch as long as it doesn’t cost more than  $300. They typically won’t  ask where it’s made and if you tell them it’s an automatic movement, they may be indifferent or even prefer a quartz battery instead. Therefore, worrying about parts sourcing or type of movement for this watch will only cut into your margins and will be a selling point that the customer doesn’t care about. On the flip side, the buyers who do care about movements or sourcing will know that anything in this price range is not of premium origin. That’s why 95% of watches in this category are very nice looking, nondescript quartz watches. To try anything else is a product-market mismatch.

Photo by Freedom II Andres under CC license

The “Likes Watches” Customer

This person will clearly identify themselves as a “watch person.” This is the customer that stops in the watch store in the mall every time they see one. They also like to cruise watch forums online and check out the latest watches. They’ve recently discovered Kickstarter and are not afraid to back a project. This customer doesn’t care as much about brand as much as they care that the watch looks cool, maybe has a story, and has some amount of heft to it (i.e. they can wear it daily without worrying about breaking it). They have a slight preference for mechanical movements, but it’s not enough of a selling point to break the bank. They own a variety of Seiko, Citizen, Casio, Invicta, and a few micro brand offerings and could have 20-30+ watches in their arsenal. However, they rarely spend more than $500 on a watch and have never spent more than $1,000. They would rather save that money to buy two or three good watches in the future than one over-priced offering today. These customers care about the story, the inspiration, the design, and the uniqueness — they are not afraid to try something new.

Victorinox is a very popular watch in this $500-1000 price range (author’s photo)

First Time Swiss Buyer

This customer started off as one of the previously mentioned customers but has decided it’s time to upgrade. They are now willing to spend a little more, but they are not willing to spend above $2,000 and that is likely a stretch. They aren’t as up to speed on the Swiss brands as a professional watch snob, but they are interested in learning more so they do a fair amount of research before buying. They care that a watch is “Swiss Made” and that it comes from a brand they’ve heard of. No value offering from a startup micro brand will sway this person from buying the Swiss offerings from Swatch Group, Richemont Group, or the other independent but well-known brands. This customer cares that a watch is an automatic, but could really care less that it has a movement made by ETA or someone else. They care mostly that it is reputably “Swiss Made”. This customer is willing to read about a micro brand and become more educated, but when it comes time to actually buying the watch, they always go with a brand they know.

Epos is a good value in the introductory Swiss price range (author’s photo)

The Identity Customer

This is another key customer group for micro-brand companies. This customer wears a watch because it is an identity statement. They either work in a profession where the watch-as-identity is prominent (such as aviation or diving) or they aspire to identify with those hobbies or professions. (While a harder identity to foster, it could even be that the customer likes the founder’s story and identifies with it — this has led me to become an admirer of many micro brands). This customer deeply cares about the heritage or the development behind the watch and the story that goes with it.

The watch must have some key physical characteristics that make it a “pilot watch” or a “dive watch” or a “racing watch”, but outside of those key features, they want something that will stand out as a conversation piece. On the flip side, if a watch has those physical characteristics but there is no correlating story or identity association, the customer is not interested. This customer really enjoys the watches put out by Breitling or Bremont and might also strongly identify with the Omega Speedmaster or Seamaster. To some of these customers, the brand is very important, to others, the brand is secondary (or tertiary) and they are open to trying something new and unique. However, micro brands have to have a clear and correlating identity for this customer to be interested. They will not even notice a brand if the identity is not a clear message. (For example, many Swiss companies make pilot watches that no pilot ever buys because that is not the identity of the brand).

A pilot watch by IWC for the customer clearly seeking a pilot watch

“It’s a Gift” Customer

This customer is buying a gift for someone else whether it be a spouse, partner, significant friend, or their son/daughter. This customer segment diverges in two directions.

There is the prestige gift buyer who is going to buy a well-known Swiss brand no matter what. They will start with Baume & Mercier and might shop their way up through an introductory Rolex. This customer cares solely about brand reputation and wants something safe they know the recipient will like and be proud of. They are risk-averse buyers and not willing to take any chances. If they have any concerns that the recipient is a watch snob, they might even let the recipient choose the watch they want instead.

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Watch Ponder by Watch Ponder History Perspective - 5M ago

139 years ago at the 1876 World’s Fair…If you don’t like history, this article is not for you. However, if you like watches and their history at all, or even if you care about how things were made 140 years ago, then you should read this article. To fully understand how dire these times were for the Swiss industry, their representative wrote “It is obvious to all that at this moment the American factories have the advantage. Their products are wanted everywhere, they manufacture and they sell, while the Swiss factory is idle and its agents are without business, many with unsold goods.” This is the story of intrigue, secrets, strategy, and serves as the launching pad for the eventual Swiss dominance of the watch industry. This is the story of 1876.

First, thank you to horology historian Richard Watkins for translating the 1876 report, making it available to all.

An American Waltham Watch Company movement

The Significance of 1876

In 1876, the Swiss sent a delegation over to America to figure out why Swiss watch imports to the United States decreased from $18M in 1872 to less than $5M by 1875. The Swiss were completely alarmed at this drop in U.S. purchasing of Swiss watches. However, what alarmed them more was the fully mechanized production of watches that allowed the U.S. companies such as Waltham or Elgin or Springfield to produce hundreds of thousands of watches a year with just a few thousand employees. The Swiss delegation attended the 1876 Philadelphia World’s Fair and found the Waltham exhibit where the company had set up an assembly line to demonstrate watchmaking. The Swiss delegation documented everything they saw. This report was viewed as damaging to the Swiss industry and was ordered to be kept secret. It disappeared for a century until a copy was found at Longines in 1992.

Jacques David of Longines, the author of the secret 1876 report (from the Longines History translated by Richard Watkins)

The original author of the report is Jacques David, a high-level Longines employee. He was a visionary. He understood the problems facing the Swiss watch industry with the invention of mechanized production in America. His report was initially met with resistance by the Swiss, yet David persisted until he convinced Swiss watchmakers to adapt to the disruptive mechanized technology.

The Swiss watch industry is perhaps the only industry incumbent in history to effectively respond, adapt, and overcome the challenge of a successful disruptive challenge (I use the word “disruptive, though it is debatable whether it actually meets HBS’s Clay Christian’s definition). This was only possible because of David’s candor, persistence, and vision.

When applied to today’s environment, the question is: “who is the Jacques David of today’s industry?”

“It is a very significant consideration for countries who, like ours, live by the manufacture of watches. They must take the necessary steps as fast as possible to transform their manufacture in ways which cannot be avoided.” – Jacques David, from the 1876 Report

The Most Salient Points of the 1876 Report

Obviously, we all know how the story turned out with the Swiss eventually rising to prominence and the American industry fading to oblivion. You have to at least be asking yourself “how and why?” Here is a summary of some of the most fascinating aspects of the report as well as some of the notes of translator Richard Watkins:

-The Swiss watch industry was on the verge of extinction when the Swiss delegation published the report. As Richard Watkins says, “the general feeling was that, because of American competition the Swiss watch industry was facing the most critical crisis it had ever experienced.” This is simply amazing when you consider that the Swiss are now the dominant force in the watch industry with American companies only operating as micro brands.  Edouard Favre-Perret of the Swiss delegation summed up the Swiss “enemy at the gates moment” in his speech:

“It is thus a matter of not wasting time and getting to work to radically change our manufacturing methods if we want to preserve the watchmaking industry in our country. We must adopt American manufacturing processes, follow their system of uniformity and benefit from their experiments; then we will achieve victory, especially as the American customer favors us.”

Early Breguet repeater movement

-By 1876, the only watch companies that were a going concern as far as competition were Waltham, Elgin, and Illinois watch companies (Hamilton was not yet on the scene). The rest of the companies were viewed as minor considerations.

-To give you an idea of the massive scale of the American watch production system by 1876, consider these numbers:

-With 40,000 workers, the Swiss were producing about 1.6M watches per year.

-With about 1,600 workers, Elgin and Waltham were producing almost 200,000 watches a year, or about 125 watches/worker. In other words, the major mechanized American producers were operating significantly more efficiently per worker than their Swiss counterparts.

-Automated production is frequently associated with cheaper products. While American pocket watches were cheaper, wages for workers were significantly higher than in Switzerland. David notes that making watches in America with a factory system allowed higher wages in America, not necessarily cheaper production. He says “These factories must employ more expensive workers, all wages are higher than in Europe, which compensates over and beyond the difference of the tariffs. The American firms without their machines, which reduce labor, would be totally prevented from competing because of the daily rates of workers and the high cost of employee salaries.”

-Prior to 1876, only the Americans used standardized parts and watch sizes. This allowed movement makers such as Waltham or Elgin to be preferred by vendors because vendors could order standardized watch cases (made by third-party watch case makers). This is significant because it made vendors prefer to sell American movements over Swiss movements because they could stock standard sizes and didn’t have to special order cases for Swiss movements. This led to cheaper cases for American watches as producers could mass-produce cases, while Swiss cases were made-to-order due to unique sizes. This is the modern equivalent of a product getting better placement on the shelf or the website today simply because it’s sized better. It sounds simple but is really quite genius.

-The Americans also pioneered the “factory warranty service”. Waltham simply told vendors they would accept defective products back and they repaired watches in the factory without penalizing the vendor. Meanwhile, Swiss watches required special watchmakers to repair. This was a liability for the vendors, so selling Waltham watches simply became easier. While we take this for granted now, it was relatively novel in 1876.

-Arguably, movements produced in the late-1800’s are actually BETTER than many modern movements, or at least equivalent. We know from the report that many of the quality (luxury level) mass-produced watches by Waltham kept time within 1-4 seconds per day, which means watch movements haven’t improved much in functionality since 1876. The cheapest movements made by Waltham would be similar to cheap automatic watches today. However, the nicest American grade movements would be on par with a modern entry-level Patek Philippe or Audemars Piguet. However, movements back then (and well into the 1930’s) had significantly better finishing than many movements today. For a culture of today that appreciates art and buys watches as “art for the wrist”, the older movements tend to be more beautiful and have a finishing that is not even seen in $20,000 watches today. In fact, some bespoke watchmakers today including Vortic Watch Co and RPaige still use these 100+ years-old movements in their modern creations (I have purchased many of my own and they are equally as good in their function to modern-produced watches).

Vortic Watch Co using a Waltham Watch Co movement and original porcelain dial

An Illinois movement placed inside a modern watch by Richard Paige

-From a trade perspective, the American industry had already figured out how to supply domestic customers as well as export these mass-produced watches as far as India and Japan. We often associate wide-spread international sales with the modern era. However, the Swiss watch industry recognized how significant the American reach was, and the threat it presented to future growth. The mass-production reach of the American industry threatened the Swiss’ survivability as an industry.

-Waltham Watch Company published their watch prices publicly including the margins on watches. They did this to force vendors to adhere to pricing requirements. Any vendor who undercut these prices was swiftly released as a vendor. Waltham viewed price transparency as a critical component of controlling the supply train and to avoid undercutting vendors.

-The Swiss did not have a patent system in 1876 and the author of the report viewed this as a competitive advantage for the American industry. The patent system and intellectual property are frequently cited as one of the key reasons for the rise of the European economies, but more specifically the English and American economies. It allowed Americans to profit from their ingenuity while also preventing the sale of Swiss watches that infringed on American innovations. David recognized the motivation this protection provided to American inventors. The Swiss did not adopt these laws until much later.

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Watch Ponder by Watch Ponder News Update - 7M ago

This is article 1 of 2 parts and features 6 brands. Check part 2 for the other 5 brands. The micro brand watch has become increasingly popular among novices and enthusiasts alike. In December, I noted the Most Inspiring Micro Brand Watches of 2016 in the Micro Brand Watch Awards. This article is a continuation of that spirit by introducing and continuing to provide updates on micro brand watch companies. 

(author’s photo)

These are NOT endorsements, rather the purpose is to introduce and inform consumers so they can wade into the micro brand watch world with an idea of some of the companies out there — I always leave the buy/sell/hold recommendations to stock analysts and consumers. Which micro brand watch you buy depends a lot on which type of customer you are. Regardless of what a founder claims about their brand, your perception of their brand and what you are looking for in a watch will ultimately dictate your preference. Therefore, I try to offer a wide array sampling of the micro brand watches out there. Happy reading!

RPaige (with Mark Carson)

These two watch designers are have been at the drawing board and recently prototyped a new model. I wrote about their Skyscraper model back in January in the series on watch design. Their latest prototype is the Speakeasy. This watch was designed by Mark Carson, who has an industrial design background. Richard Paige, who’s RPaige hallmark is carried on the face, is a fourth generation watchmaker who now makes watches that coalesce around Art Deco design principles and integrate vintage American made watch movements.

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Many people associate “vintage” with not as good, but with watches, this is usually the opposite. In fact, some of the movements Richard uses rival the quality and finish of even the most luxurious non-complicated modern watches despite their 100+ years of service. I have tested many of these and they are well within the accuracy of modern mechanical watches (in fact, in 1876, a time trial of American made watches noted their accuracy with 1.5 seconds/day). The other feature of RPaige watches is the integration of unique vintage dials (which are sometimes porcelain or silver, sometimes even with gold accents) as well as vintage hands, which are genuinely blued. The Speakeasy will be available for purchase from the RPaige website in 2-3 months.

RPaige Speakeasy Watch Review - YouTube

Montana Watch Co.

As the name would suggest, this company is located in Livingston, Montana, USA. They were the 2016 winners of the “Totally Custom Award”, which is because of their inspiring ability to create beautiful custom watches for some pretty amazing people. Arnold Schwarzenegger has been spotted on his Instagram with a Montana watch, and a recent news story reported that a former U.S. President has been a customer (as was reported recently by a local news station). Owner and watchmaker Jeff Nashan has been running the company since 1996 where he makes watches in the $4,000+ range. The company recently introduced the Granite 46 model which is a pretty unique take on a watch. It is 46mm in diameter (so a bit on the larger side). Its unique feature is the ability to change out the bezel and the lugs so you can change the look of the watch. I had a chance to try it out for a week. My video review is below.

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(author’s photo)

(author’s photo)

I also had a chance to try out two of their other models recently. The first is the Officer’s watch, which is Jeff’s interpretation of the World War 1 watches used by soldiers fighting on the front. I compared the watch to some original watches I came across recently at a watch show and Jeff’s design is very true to the originals. The watch comes in a variety of case materials and has unique lugs with a yellow gold finish that gives the watch a unique look. The watch is 41mm and also has a very unique curved case back to give it a low profile.

(author’s photo)

(author’s photo)

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