Richard Mille

Pretty much across all watch brands, people are selling their 2nd hand
watches for increasingly lower prices. Even the most elite brands, like
Patek, have seen their grail watch, the 5970, drop from approaching the
$200K mark in 2008 to now approaching $100K. It makes sense then that with
used Pateks selling so low, Patek is having trouble selling new Pateks.
Now, I'm sure Patek can weather this downturn, but I wonder about
Richard Mille. I recently heard about RM004 selling at auction in Hong
Kong for the equivalent of around $80K, and I'm aware of 2 cases where
private collectors have been trying to sell theirs for similar prices
(one at $80K and the other at around $90K) and neither has had any success.
So, if watches in excellent condition (such as the 3 I mention here)
aren't even selling for 40% of the new price, is anyone out there buying
higher end Richard Milles new? Or is Richard Mille now only selling an
occasional RM010? My main reason for concern is that I have a RM010, and
I worry that if Richard Mille is no longer in business, there may be
nowhere to service it years later when it needs service.

So, how dire is the situation? Does Richard Mille have a plan, perhaps for
cutting prices, to stay viable? Or, am I just imagining problems, and
actually new Richard Milles are still selling well, while used ones aren't?
Eric von Schonberg

Eric,

Personally I think most brands are ignoring this issue with the hope that it will go away i.e. economy recovers.  Recent price rises have been totally unjustified and most watches are in my view at least 20% too expensive. Most don't like to admit it but I believe that inventories are building up. Next year will be very interesting. I hope RM weathers the storm as I love the watches and the innovation the brand brings to the industry.

At the moment I just refuse to buy a new watch but rather wait for it to appear in the 2nd hand market. I suspect I'm not the only one. Smart consumers seek value.

 

Just my 2 cents

Regards

Rene

I agree that RM's watches are innovative and I also hope they
survive. But, I haven't yet seen them responding to the
crisis.

Right now, they must be experiencing lots of competition
with the 2nd hand market. Under normal situations, a RM retailer
may discount 20% off list, and a 2nd hand RM may be selling for 60% of
list. So, 80% of list (20% discount) is close enough to
60% of list that there is some incentive to pay a little
more to get something new. Basically, when a new watch is
about 33% more than a 2nd hand watch (60%/40%=1.33), the
new watch is competitively priced.

But, when 2nd hand watches are selling for 40% of list or even less,
there must be a lot fewer people willing to pay much more to buy a
new watch which will be 2nd hand as soon as they decide to sell it.

To stay competitive, it seems to me like RM needs to cut prices
by 35%. Then, if dealers still offer 20% discount, people
would be paying 65% * 80%=52% of current list price which would
be competitive with the 40% of list that 2nd hand RMs are
selling for (52%/40%=1.30 and 80%/60%=1.33).
Eric von Schonberg

Hello Eric,

Discussion of discounting and pricing is not allowed on any of the forums.  Please keep our Guidelines in mind while posting.  Thank you for understanding.

-MW

and not just high-end watches.  Think of the car industry at the current time - the luxury higher end are actually weathering the storm a little better than the everyday examples.  Here is my conjecture (and that is all it is) on Richard Mille watches.

As far as I know, because of the way the firm is structured, RM watches are in a very good position to weather the current crisis.  Cash flow for the past 8 years has been good and above expections or predictions, RM watches are still selling (despite the few data points you are aware of), and while demand may not be at the level it was, cutting back production does not represent a problem in the short term; or the longer term (if necessary).

The bottom line: production will be cut back, but because of the nature of the sub-contracting arrangements, the economic loss to Richard MIlle will contract profits as an absolute amount, but relatively, will not diminish too far.  I would expect Richard Mille watches to be around for the foreseeable future.

Andrew H

You won't find me selling my RM004 for 40% of list. I'm sure there are people who have to sell. But, their need to sell may be more a need for cash in this downturn, rather than a reflection of Richard Mille watches. I'm sure there are lots of others like me who own RM004 and would not sell for anything near 40%. In fact, I have no desire right now to sell it at any price, since I love the watch, and it's working great.

The idea of dropping prices by 35% does sound good though.
Greg

The Economic downturn is global.............as much as selling prices of RM has dropped , so has Patek , Lange and AP etc etc

One must also understand that tens of millions know of Patek , Rolex etc ........only a fraction of that know of RM..........it is a watchlovers watch and appeals to a much smaller segment of the market , especially at its price point and limited distribution.

Dont be too concerned about the future of RM , AP owns 10% of RM and all RMs complications are done at AP R&P......in fact....RM collaborates with AP in alot of their high complications..........do you not see some familiarity in complications with the AP Concept ?

The much coveted Patek 5970p and 5960p are now easily available from ADs....you just need to ask for one. I was helping a friend with a Patek purchase last year...........he hessitated....good for him.......he got a BNIB one a month ago for 30% lessthan the lowest price available last year !

As people settle back in , i do believe that RMs prices will stabilize at fair values .....similar to Patek............the 004....i have a feeling will become a VERY sought after watch in time to come..........this model deserves its place up with the BIG boys........... the timing cannot be more perfect to acquire one...... you wont be sorry. This opinion on the 004 was recently shared to me by some incredible watchmakers in Geneva and is regarded as the finest chronograph EVER !

Different strokes for different folks ! ......................Choose what makes you happy..... we are all dying........some sooner than others ..............................................

my 5c.

 

Since I have a RM004, it's good to hear such positive evaluation of it.  I'm interested in hearing what were the reasons why it is considered the finest chrono ever.  I like it, but I've also heard other chronos, such as the Datograph, called the finest chrono ever.  These are of course matters of opinion, and I'm sure there are lots of opinions out there on which chronos are the finest. That's why knowing the reason is so important.
Greg

While it's a good question, it's a bit off topic.
Maybe you should post it in a separate thread.
I'm not sure why RM004 would be considered the
finest chrono ever. I suspect that if you post
this as a question, you will not get many good
reasons. Most likely it's all just circular
reasoning:

1. The RM004 is the finest chrono because it is the
most expensive chrono.
2. The RM004 is very expensive, because it is the
finest chrono.

If you post the question, and nobody is able to give
any good reasons, the circular reasoning above is
the most likely reasoning. I hate to burst your
bubble, because I'm sure you love the RM004, but
if there were any other reasoning besides the above
circular reasoning, I would have already heard it.
Eric von Schonberg

I feel foolish trying to tell anything to someone who obviously knows everything, but hope springs eternal.

www.network54.com

richardmille.watchprosite.com

And a quick search of Revolution/Horomundi (try "Giulio Papi RM004") will find some further details about the technical innovations in this masterpiece.

_john

When you do the search on Google you're suggesting, you will
find this article discussing what is innovative about the
RM004 rattrapante mechanism:

www.revolution-press.com

Note in particular the sketch which is labeled with the following
text:

"A quick sketch made by Giulio Papi of his new rattrapante mechanism.
This replaces the return lever, return spring, roller jewel and heart
shaped reset piece of the traditional split second chronograph"

Not many people have noticed this, but the RM004 rattrapante mechanism
as thus envisioned didn't quite work out. If you look at the photo
of the display back just posted, you can clearly see the heart shaped
reset piece that the above description says was replaced (look for it
pointing up and to the left from the center of the movement):

mob.watchprosite.com

Furthermore, the strange simple reset ratchet mechanism shown in the
hand drawing mentioned in the first link above has never shown up in
any photo of the RM004, further demonstrating that the idea simply
didn't work. Did you ever wonder why that reset mechanism only shows
up in that one drawing and never any photo?

So, it sure appears to me that the RM004 ended up with a traditional
rattrapante mechanism after all. If so, what really is so special
about the RM004 except for its price tag?

I'm not going to say I have an "all-seeing eye" as you say, but this
is clearly something you and many other have missed.
Eric von Schonberg

Hello Eric,

The reset portion of the chronograph mechanism is basically traditional, and uses a heart cam which you can see in the pictures. It is only the rattrapante reset portion that has been redesigned with the rack and pinion coupled with the helical extension spring. If you dig up some early pictures of the RM004, you can clearly see that many of the components have been redesigned, including the rattrapante system.

I can honestly say that I don't understand how this rattrapante system works. It appears to do away with the (more) common isolator mechanism that is found in some high end split seconds chronographs while reportedly achieving the same gains in some regard, but even as vague as that sounds I can't say that it is 100% correct. Nor do I understand the flexible or pivoting finger design for the chronograph lever or even if it has been implemented in this movement (I think it has). I don't however believe that these are somehow NOT innovations or that there is any reason to believe they are marketing driven as opposed to engineering driven.

The modicum of faith I have in this regard is related to the fact that I do have a pretty good understanding of the progressive recoil click, the torque limiting crown, the dynamograph, the (innovative) power reserve and the push button winding and setting selection system and these are all genuine innovations. My understanding of these mechanisms and my exposure to Mr. Papi and his work make me cut him a bit of slack when I don't understand what's going on and assume that he does understand what's going on and that it's working more or less as well as he thinks/says it is. It is not always easy to suss out what is truly innovative and what is a bit of marketing hype in RM's press releases and technical descriptions (they're no worse than most brands in that regard IMHO, and at least they TRY to explain/highlight their engineering decisions), and perhaps it is immodest of me to think that if I can't do it all that well, that you probably can't either, but it is not all fluff, of that I am sure.

The RM004 is not the greatest chronograph movement ever made in my humble opinion and certainly not decisively (for my tastes). It is definitely up there on my list with regards to innovation, engineering and execution and I think the argument could be made that it is #1 (I'm sure the argument could be made about a number of others as well, depending on one's perspective). Does it need to be said that such a distinction is unavoidably subjective?

My point is simply that intelligent people who know what they're talking about can come to this conclusion NOT based solely on the sort of circular-fanboy logic you're assuming is the primary driver in this discussion. Yes, that type of thing does happen all too often in the watch world (Brand X is the best because Brand X is the best!), but there's a lot more to this particular chronograph than most of us will ever properly understand. How this translates to actual performance is something that even less of us will ever understand, since the watchmakers and engineers that design and work on them almost certainly can't afford to own/wear them, so the gap between real world performance on the wrist (for extended periods at least) and real world ramifications in the workshop is basically insurmountable outside of probably Giulio Papi himself. And it's safe to say that he is NOT an impartial observer.

_john

member of this community, a trained professional in watchmaking, and I think you really on a losing argument.  While I do not take ei8htohms advice or argument as gospel, I do pay close attention to what he writes as I know he knows what he is looking at when it comes to watch movements.  You can learn a lot from his comments - I certainly have over the past few years and I am thankful for his continued interest in this forum.

Andrew H

I have looked carefully on my RM004 and the simplified rattrapante mechanism illustrated in that figure really does exist.  It may not be obvious on photos, but if you look carefully through the display back you can see the small spring illustrated in the drawing.
Greg

You seem very confident,  but I think you're underestimating the RM004.  I'm going to accept your challenge!
Greg

You're right about even Patek not selling and even 5970P being
turned down (some say the hands have poor contrast against the
black dial), but one thing to remember is that the big boys like
Patek have the reserves to last through the downturn. In fact,
it's actually downturns that help firms like Patek in the long run,
bacause its smaller competitors die off. It's hard to say how
RM will do. For sure they are in a more precarious position
relative Patek. But, since AP owns 10%, it's not hard to imagine
AP potentially owning 100% if things get really tough. Since AP
is one of the big three of Switzerland (Patek, Vacheron, and AP),
AP will likely be one of the survivors of the downturn.
Eric von Schonberg

intimate knowledge of the various firms cash flows, sales and cost data, and profits?  In which case, you might want to check your statements a little.  I know a fair number of watch brands, their chief executives, and brand owners.  This is not what I am told - but then, I do not have the contacts you obviously do?

Andrew H

First I must say I do not have the contacts in these watch companys as eric obviously does knowing all of the inside financial information which company can handle this ecominic downturn compared  to another one.

I have spoken to three dealers regarding Richard mille lowering prices and they all stated no way it's not going to happen .

As far as Richard Mille watches or any other brand in the secondary market they are all taking a beating just like trying to sell A used $100k range rover or a $230 ferrari in this enviorement anyone buying has all the power if you have to sell these items now the buyer  knows that  there is a very good chance you are in real need of cash.

Maybe the seller  would of been better off with a $50,000 watch opposed to $200,000 and a $40,000 car and not a $130,000 one when things are going well people seem to buy more then what they can afford and soon as things turn they need to sell.simple really.

Thats why we are in this posistion,I would only sell my RM14 in this market if i was in real deep trouble not sell to finance another watch purchase.

Richard Mille has tremendous passion for what he does he is having a great time and from what I understand has very very deep pockets.I feel very comfatable having $200,000 on my wrist with the name Richard Mille  I could list numerous brands that would have me a little more nervous so sleep well my friends we are in good hands.

 

sorry....couldnt resist that

Just got of the phone with RM himself , i will post something in the next 2 weeks as i will be travelling.................something that will be of GREAT interest to RM004 owners or potential owners.....

Enjoy your RM.

Is there going to be a price drop, of say 35%?
Eric von Schonberg

My point is that RMs on the secondary market sell for
40% of list. That's so low that it's got to be costing
RM lots of sales. If the $200,000 RM on your wrist can
be bought on the secondary market for $80,000 lots of
people will opt to buy on the secondary market.

There's no need to know intimate knowledge of the
finances of watch brands to reach the conclusion that
RM has two choices:

1. Lower prices dramatically and generate some cash
flow.

2. Suck it up, keep prices high, and lose money while
the economy sucks and few are buying.

I do not believe small brands like RM can do #2 and
remain in business.
Eric von Schonberg

I very much doubt that i will ever see a RM14 for sale in the secondary market for $80,000 if I do i will repost and say you are a  genius untill then I believe your way off.

That has a list price of 200K would net you $80K.
Take a look for yourself at the Richard Milles sold
on collector's market on this web site. They go for
40% of list. There has not been a RM014 sold yet,
but when the first one sells it will either sell for
40% of list or the seller will withdraw it. In general,
unless a watch is especially sought after by collectors
it will sell for between 40% and 60% of list on the
secondary market. The brands that get near 60% are
the ones that you see often fetching top price at
auctions.
Eric von Schonberg

drop the price of the new watches, ripping the support out of the secondary market at the price point it is now, and lose the customer base he has?????  Your whole analysis is based on the proposition that everyone no longer has the income, nor desire, to own a Richard Mille watch at the current price point.  Time will tell on this one, but I rather suspect you might find that your predictions are as sound as the assumptions behind CDO's.

Andrew H

I don't have any of those contacts or any of the
information you mention, but I don't need it
either. I've provided all the reasoning and
intuitions above that I used to decide that RM
needs to drop prices to keep his business viable.
Eric von Schonberg

of Richard Mille watches out there....  okay then!

Andrew H

There may be thousands of customers who have bought
Richard Mille watches. But, only a very small fraction
of such customers post on this forum. If all customers
of Richard Milles posted their experiences on this forum
you'd have a point.
Eric von Schonberg