Retrospective II: The Difference Between $600 and $5000

My previous blog post raised a topic that I was always curious about as a collector. Diving headfirst into the world of manufacturing and brand ownership has given me great insight into how luxury brands and microbrands differ in manufacturing, marketing, and customer relationship management, among other things. 

The question of value always comes up with watches. We must start the conversation by acknowledging that there are not many other industries that exist like the microbrand watch industry. A quick Google search for “microbrands” makes it fairly obvious that despite the fact that “microbrand” is a generic term for any small-scale brand in any given niche, the association is definitely strongest with watches, despite the fact that microbrands exist with musical instruments, beer and spirits, fashion, and other artisanal products. 

Microbrand watches are a unique niche because of a few things. Not only does it “own” the term “microbrand,” but it also has the possible makings of a cultural movement, with the potential to break out of a niche. Look at how Dogfish Head went from a small-scale microbrewery to a globally-recognized craft brewery despite heavy pushback from Delaware State Senate, or how PRS Guitars went from a one-man operation in a college dorm to the brand that all guitar players want to play.

 
 Beachwood Brewing brews and bottles all their beers in-house. They are hard to obtain but worth the effort and is a must-try for any porter-lover. Mocha Machine is ranked as the 22nd best American Porter on Beer Advocate, the beer-lovers equivalent of WatchUSeek.

Beachwood Brewing brews and bottles all their beers in-house. They are hard to obtain but worth the effort and is a must-try for any porter-lover. Mocha Machine is ranked as the 22nd best American Porter on Beer Advocate, the beer-lovers equivalent of WatchUSeek.

 PRS Guitars, started by Paul Reed Smith in his college dorm room, has recently partnered with John Mayer. They surpassed "microbrand" status a long time ago by catching the attention of some of the most popular guitar players in the world at NAMM and other road shows.

PRS Guitars, started by Paul Reed Smith in his college dorm room, has recently partnered with John Mayer. They surpassed "microbrand" status a long time ago by catching the attention of some of the most popular guitar players in the world at NAMM and other road shows.

 

Because of how...well...micro the microbrand market is, not much information has been disseminated to the public by microbrands. Larger corporations are likewise very private, but for widely different reasons, which will hopefully become clearer by the end of this post. 

 Boeing's 787-Dreamliner is an amalgamation of internationally sourced parts: the wing-tips are manufactured in South Korea; the rest of the wing is manufactured in Japan; the landing gear is manufactured in France; the engines are manufactured in the UK, and they all come together in Seattle, WA.

Boeing's 787-Dreamliner is an amalgamation of internationally sourced parts: the wing-tips are manufactured in South Korea; the rest of the wing is manufactured in Japan; the landing gear is manufactured in France; the engines are manufactured in the UK, and they all come together in Seattle, WA.

Aside from in-house movement manufacturing (although even many big brands use hairsprings made by a single company), you might be surprised at how little separates the large brands from microbrands in terms of a manufacturing point of view. For instance, a certain microbrand with an upcoming dive watch that is priced similarly to brands such as Oris, Longines, and Sinn uses the same factory that Omega does to source some (if not all) of their crystals. It is also worth noting that many “manufacturers” are actually middlemen with a large network of factories throughout the world, which leads me to believe that many microbrands actually use the same crystal factory. 

A simple study in unit economics would reveal that it is highly inefficient to bring the manufacturing of all constituent components under one roof (and many times, even under one brand makes little to no sense), as all components require different machinery, skill sets, and quality assurance procedures.

Apple gets components from Intel and Samsung; Boeing from GE and Rolls Royce; Microsoft and Sony from AMD. The list goes on. It simply makes more business sense to outsource to companies that specialize in these components, and the same principle can be applied to the watch industry.

 
 
  Tim Cook has said that China is no longer the low-cost manufacturing hub of the world , but rather a high-skill manufacturing hub. While we, like Apple, wish to start bringing manufacturing back to the US, American manufacturing is simply not up to standard yet. The  iPhone sources parts  from China, South Korea, Singapore, Taiwan, and are ultimately assembled by two companies called Foxconn and Pegatron in Shen Zhen, China.

Tim Cook has said that China is no longer the low-cost manufacturing hub of the world, but rather a high-skill manufacturing hub. While we, like Apple, wish to start bringing manufacturing back to the US, American manufacturing is simply not up to standard yet. The iPhone sources parts from China, South Korea, Singapore, Taiwan, and are ultimately assembled by two companies called Foxconn and Pegatron in Shen Zhen, China.

 

For a big company at the top that has something to lose, the only thing more important than making a kick-ass watch is having a sustainable business.

That being said, not all watches are created equal. Even watches that are the same model from the same brand may differ from one another. For that reason, extensive QC processes must be put in place to ensure that all the watches that end up in customers’ hands are of a certain standard, set by the brand, and are more or less equal to each other.

The first and most important level of that quality-assurance procedure starts with the grading of a watch. It isn’t something many brands talk about, and to be quite frank, even manufacturers rarely discuss it, because it is hard to quantify, and humans naturally tend to react negatively to things that cannot be quantified. 

So, let’s get into it:

Omega's Planet Ocean is what we consider a grade A watch. Some microbrands are grade B, but many are grade C. These grades can apply to the case finishing, dial texture, lume application, watch assembly, and quality control checkpoints. Even in the watch manufacturing industry, there are discrepancies in opinion on what constitutes these different grades.

 
 Omega's case-finishing is superb. The transitions between surfaces are sharp and clean, the brushing is fine and even, and the contrasting polished and sandblasted finish on the crown is an extremely nice touch. 

Omega's case-finishing is superb. The transitions between surfaces are sharp and clean, the brushing is fine and even, and the contrasting polished and sandblasted finish on the crown is an extremely nice touch. 

 

For instance, one of the manufacturers we spoke to, who is one of the main manufacturers for microbrands and some Swiss brands, thought that 90% of the grading was actually in the assembly process. Another is of the opinion that it comes down to tighter tolerances and manufacturing capabilities. A third manufacturer claims that its mostly in the QC process. I can empathize with all three points of view, but I believe that it has to do with all three steps of the process and not just one, simply because grading should be based on a holistic view of the final product. No one cares about AR application on a crystal if the dial, hands, and case are scratched or poorly finished. The overall product fails as a whole.

It makes our job at Nodus a little tougher because we are forced to do things like procure multiple prototypes of the same model, just to gauge the quality of manufacturing on each component. For instance, some manufacturers have top-notch case finishing but poor lume application. Some have great dial-lume application, but poor hand-lume application. On top of that, we are always changing and improving our QC/assembly process in an attempt to quantify each step and set a concrete standard, which is also very difficult to do.

 We can't claim that the Trieste's brushing is grade A as we never put it through a grade A inspection process. However, the case finishing is one of the things we especially prioritized when seeking out a case manufacturer.

We can't claim that the Trieste's brushing is grade A as we never put it through a grade A inspection process. However, the case finishing is one of the things we especially prioritized when seeking out a case manufacturer.

Cases

How hard is it to differentiate between grade A and grade B brushing? What would be the first thing you look for? From interviewing factories (including some that manufacture for large Swiss brands), we’ve learned that the difference is actually negligible. Contrary to popular belief, differentiating between grade A and B finishing is not determined at the actual brushing stage but rather at the QA stage, during which the watch is superimposed against a projected grid to ensure that the lines of the brushing, chamfers, and other cuts/lines are consistent. It is all about tighter tolerances, down to the nanometer. It is nearly impossible to tell the difference between a well-done grade B and grade A case.

The difference between grade C and B is much easier to tell just by looking at it with the naked eye, or through a camera’s macro lens. The brushing must be even, consistent and flat throughout the case, the brush wheel must be of a certain grit, and the transitions must be sharp. Telling the difference between grades on polished cases/surfaces is virtually impossible, except for when it comes to Grand Seiko’s infamous proprietary “zaratsu” polishing, which can be identified relatively easily. To my knowledge, no other watch company in the world uses this polishing method. But that topic deserves a blog post all on its own.

Dial and Hands

Second to cases, dials are among the most important of the components of a watch to hold to a high standard. Unlike cases, the difference between dial grades are easier to decipher with just the naked eye. It simply comes down to blemishes, scratches, misalignments, and lume application. Some of these issues can arise during the assembly stage, which is why there is a QA step before and after assembly.

It is worth noting here that the dials on microbrands are almost never manufactured under Grade A conditions, but many of them can actually pass as Grade A, sometimes even more so than dials from large Swiss brands. 

When it comes to grading dials at the manufacturing level, the differences between a grade A and a grade B are fairly straightforward, as mentioned above. The real differentiation, in my opinion, is in the assembly. Again, it is hard to tell without equipment or a trained eye, but the most common issue I find with watches that range from $300 all the way up to $5000 is dust on the dial or underside of the crystal. Other than dust, as long as the dial is clear of blemishes or scratches from handling/assembly, lume is applied evenly, and the indices are aligned, then it should be able to easily pass as a grade A dial.

6P3A0866.jpg

Assembly

Anyone who knows us would know that we are sticklers for dust on dials. It may sound strange, but I am more accepting of weakly-applied lume than I am of dust on the dial. My reasoning is that lume application can actually be a fairly tricky process, from determining ratios to keeping them consistent, to the actual printing/application process. On the other hand, assembly is fairly straightforward, and it only requires a bit of time, effort, and care to make sure the dial is free of dust particles. Granted, experience and practice is also necessary to assemble well, but it is very possible and fairly easy to obtain. I also feel like the personal touch element from assembly is extremely under-appreciated. 

Good assembly can take place anywhere in the world, it just so happens that sometimes, it doesn’t. As explained in a previous blog post, this is part of the reason why we decided to move 100% of our assembly to the US despite the costs associated with such a decision. 


So why buy luxury?

How much tangible difference there is between the quality of a luxury grade A watch and any typical microbrand watch is up for debate. The unfortunate truth is that most of the time, even to a trained eye, the differences are minute and extremely difficult to decipher without the aid of special equipment.

It is no secret that a large part of the price tag of a luxury watch (especially those with brick-and-mortar stores) goes towards retail locations and inflated marketing budgets. Some of the money you put towards a luxury watch most likely goes straight into the pockets of the celebrities/brand ambassadors that endorse these brands. However, it is just as easy to be convinced that it is a worthwhile investment as it is to be dissuaded from buying from these brands; all it takes is a shift in perspective.

For instance, another part of a luxury watch’s price tag also goes towards R&D. This is the R&D that goes into making movements more durable, extending their power reserve, making them thinner, etc. Nomos is a brand I think very highly of because of this. Their movements are razor thin and their watches are fairly priced and beautifully designed. A strong R&D department also enables companies to bring other aspects of the production process in-house, such as case finishing, assembly, regulation, and fulfillment. These are all things that are worth paying for and I am happy to see more microbrands start do these things in-house.

One of the things that larger companies generally have is consistency, although even then, I am hesitant in making such a broad statement. But for the most part, large Swiss brands have consistency, which many microbrands (including us) still struggle with, simply because of the well-established network of factories and/or multi-step quality assurance procedures that are overseen by a highly-experienced team in addition to decades of data and improvements to their processes. 

Microbrands all have their own baseline for what is passable. Anything above that baseline may have varying degrees of inconsistency. But again, it is difficult enough to differentiate between the quality of a high-quality microbrand watch and a luxury brand watch, let alone the same model from the same brand. The best that we can do as a microbrand is to continue to re-invest in our quality control and assembly procedure, rather than just design and marketing, even though the latter is what sells.

Do I think a higher-end watch is worth the money? Absolutely! Do I think they are $3000-4000 better in quality and design? Absolutely not. Provided my budget allows for it, would I still purchase a $3000+ watch? You can bet on it.

Like I mentioned in my previous post, there are intangible aspects that come with a watch that no amount of money can buy. There are no rules or guidelines to follow either, except for just one: buy a watch for the right reasons. As for what those reasons are, exactly, is up to you.

-----

Wesley Kwok is the co-founder of Nodus Watches. He is an entrepreneur by day, watch-geek by night, and a musician in the spaces in between. When he is not working or playing guitar, he can be found seeking out the best craft beer in California, perfecting his brioche bun recipe, or keeping up to date on the latest tech trends.

Follow him on Instagram @wes_kwok and Nodus Watches @noduswatches