Wealthyist E19: | Luxury Watches: An Interview with Charlie Dixon, President of Schwanke-Kasten Jewelers (PT 2)

Wealthyist

In this episode of Wealthyist, host Brandon Lehman, director of Annex Private Client, interviews Charlie Dixon, president of Schwanke-Kasten Jewelers in Milwaukee, to discuss the luxury watch industry, its evolution, and trends. The conversation covers the following key points:

1. Introduction to Watches:
   • Lehman shares his personal connection to watches, mentioning his Garmin Tactics Delta, a military-inspired fitness tracker gifted by his wife. He uses it to monitor sleep, heart rate, and fitness, reflecting the growing popularity of smartwatches.
   • Dixon explains the historical shift of wristwatches from women’s jewelry (early 1900s “wristlets”) to masculine accessories during World War I, when soldiers strapped pocket watches to their wrists for practicality. This military connection persists in brands like Tudor (Pelagos Marine National) and IWC (Royal Air Force-inspired watches).
2. Impact of Smartwatches and Military Inspiration:
   • Lehman asks how fitness-focused smartwatches like his Garmin affect the luxury watch market. Dixon notes that smartwatches have boosted interest in watches overall, with many luxury brands drawing on military heritage to appeal to consumers.
3. Defining Luxury Watches:
   • Dixon defines luxury watches by their craftsmanship and repairability, citing a Hermes CEO quote that luxury items are worth repairing. A watch’s sentimental value—tied to milestones like promotions, births, or anniversaries—can make it luxurious, regardless of price (e.g., $500 or $200,000).
   • Luxury watches are emotional purchases, often commemorating significant life events, similar to jewelry like anniversary bands.
4. Post-COVID Market Trends:
   • During COVID, demand for luxury watches surged as people, unable to spend on travel or events, invested in watches. The market peaked around 2022 but has since normalized, though demand remains strong.
   • Social media (e.g., Instagram) and shows like Emily in Paris have increased interest, especially among younger generations. The Middle East, particularly the UAE, is noted for vibrant watch collector communities.
   • Trends include a shift toward smaller, more discreet watches for men, moving away from oversized, flashy designs.
5. Service and Maintenance:
   • Luxury watches, described as “300-piece puzzles the size of a quarter,” require periodic servicing due to their intricate mechanical components. Unlike Lehman’s simple Bulova, which needed only a battery, high-end watches are like high-performance engines, with some achieving accuracy of ±2 seconds per day.
   • Servicing ensures longevity, especially for watches with sentimental value, and even quartz watches may need circuit replacements.
6. Brand Dynamics and Social Media:
   • Rolex remains a dominant brand due to exceptional quality, marketing, and controlled supply, which fuels demand. Cartier is the second-largest exporter of luxury watches, with a 13% market share (per Morgan Stanley’s annual watch report found here: https://monochrome-watches.com/morgan-stanleys-top-50-watch-brands-for-2024-rolex-still-by-far-the-leader-overall-market-suffered/).
   • Social media amplifies brand visibility, with collectors showcasing watches online. Emotional connections, like inheriting a grandfather’s watch, also drive brand loyalty.
7. Secondary Market Growth:
   • The certified pre-owned market is expanding due to high demand and limited supply of new watches. Consumers often face waitlists for popular models, similar to ordering a Porsche or Mercedes G-Wagon.
   • Watch production is meticulous, with processes like COSC certification and bracelet testing (e.g., robots simulating years of clasp use) taking over a year, justifying high costs and durability.
8. Advice for Buying a Luxury Watch:
   • Dixon advises first-time buyers to choose a versatile, utilitarian watch that suits their lifestyle, then explore specialized options (e.g., chronographs for car enthusiasts).
   • He recommends visiting a store to try on watches and prioritizing personal taste over trends or influencer opinions. Buyers should follow their “gut and heart” to ensure the watch resonates emotionally.

Conclusion:
The episode highlights the emotional and cultural significance of luxury watches, their evolution from military tools to status symbols, and the impact of smartwatches and social media on the industry. Dixon emphasizes craftsmanship, repairability, and personal connection as hallmarks of luxury, offering practical advice for aspiring buyers. The conversation underscores the enduring appeal of watches as both functional items and sentimental heirlooms.