The True Value of Swiss Made and Branding

It is no secret that our watches, like many of our competitors (yes, including some “Swiss Made” ones), are manufactured in Asia. We are proud to have partnered with some of the best engineers and manufacturers, not only in Asia, but in the entire world. After going through the process more than a couple of times, as well as meeting and speaking with other brand owners and manufacturers, Cullen and I started to discuss the possibility of doing a higher-end Swiss or German Made piece, and perhaps even moving all of our manufacturing to Switzerland. It wasn’t that we saw any issues with our current supply chain and manufacturing capabilities, but more so because we wanted to know how much better it could be. Would there really be a discernable difference between moving manufacturing to Switzerland as opposed to keeping it in Asia?

Well, the past week, I’ve been in Hong Kong and Shenzhen on a factory/manufacturing trip. In addition to meeting our existing suppliers, factories, and agents, we also met with new ones to develop our relationships with them as well as to learn a little more about how things actually work within the manufacturing world. So rather than beat the dead horse that is the Swiss Made debate, I’m going to try to parse through the huge amount of information and thoughts that went through my head and distill it down into what I hope becomes an informative blog post that can help guide you through how you think about quality and value.

However, if you do want to know the math behind the Swiss Made label and learn more about the technical legal requirements, here is a post by a veteran of our industry. For the purposes of this post, however, I aim to show you the truth behind the watch industry by explaining where the costs actually come from so that when you make your next purchase, you’ll know exactly what you’re paying for.

 
 

Disintermediation of a Supply Chain

Those close to me know about my obsession with technology and behavioral economics. One of the latest emerging technologies that has really captured my attention is blockchain (this is the part most of you will get bored and close this window, but I felt like it was important to start here). The technical side of blockchain is not relevant in this conversation, but the principles, concepts and ideologies of it could help explain the reasons for the broken market that is the Swiss Made watch industry. Perhaps understanding blockchain a bit better could ease the resistance points that watch brands face.

Let me explain how watch manufacturing works for most brands:

  Alibaba.com  is one of the most common starting points, not only for watch startups, but all hardware startups.

Alibaba.com is one of the most common starting points, not only for watch startups, but all hardware startups.

It starts with a design. The brand goes to Asia (or alibaba.com) and finds an entity called an OEM and they begin the process of manufacturing. These OEMs usually handle things like bracelets, packaging, movements, and straps, but rarely do they actually do any manufacturing.

They merely source suppliers of all these components, and in many ways are no more than a project manager. The OEM is usually about as far as the brand has to go to get a product out in the market as they are usually one-stop-shops that help companies put together a finished package.

However, the actual manufacturing process and network goes much deeper than that. Let’s take cases for example. One might think that it is as simple as finding a case factory to mold, stamp, finish, and assemble the cases, but in reality, the OEM actually finds subcontractors, who then find sub-subcontractors.

Case factories are usually agents that serve as an intermediary between 4-5 different companies that in turn fulfill the actual task of manufacturing the case.

This multi-layered supply chain leads to a huge amount of wasted time as well as unnecessary costs, which get passed onto consumers. Yet, it is a necessary step due to language and cultural barriers. This issue is compounded by the fact that most brands don’t necessarily need to come to China to build a sustainable business, as these middlemen between middlemen have done all the work to create a supply chain that, despite all its flaws, still works.

The only reason it works is because as convoluted as the supply chain is for microbrands is, the larger brands (usually "Swiss Made") have it ten times worse.

The idea of blockchain is to disintermediate: to get rid of the language, cultural, and time barriers so that the only thing left that matters is getting the product made. Its common knowledge that the watch is a product from the old world, and unfortunately, its associated manufacturing and supply chain has likewise stayed in the old-world way of thinking.

 
 Disintermediation is the fundamental idea of blockchain. Taking out intermediaries saves time and money and increases efficiency. Photo Credit: seats2meet.com

Disintermediation is the fundamental idea of blockchain. Taking out intermediaries saves time and money and increases efficiency.
Photo Credit: seats2meet.com

 

Nodus was founded with the mission to hold the market and industry to a higher standard, to not let inefficiencies and misleading ad campaigns drive the cost up for the end customer. This is why we moved our assembly to the US and still try our hardest to keep our pricing fair. We can do it because of the steps we have taken to disintermediate certain parts of our supply chain

“Cutting out the middlemen” doesn’t sound like overused Kickstarter language to me anymore; we just need to stop focusing on the wrong middlemen.

The Illusion of Quality and Value

 When it comes to quality, we pay special attention to case finishing.

When it comes to quality, we pay special attention to case finishing.

When you hear brand owners talk about finishing, most of the time we are referring to the case finishing. I am not sure what other owners look for in their cases, but at Nodus, we look for even and fine brushing, clean lines between contrasting finishes, and no sharp edges. Surprisingly, case brushing is one of the harder things to get right, yet it tends to be the most consistently passable.

However, when I tell other brand owners that we have rejected cases during our QC stage, they are always taken aback, despite the fact that more often than not, we actually all share the same case factories. The difference could be any number of things, especially considering there are no less than 15 different parties involved in putting a watch together.

To be frank, the naked human eye won’t be able to differentiate between a rejected case and a passable case. I don’t know enough about the QC procedure at other brands, large or small, so I won’t claim to know why there is such a huge difference in rejection rates.

But what I can say is that there is an illusion of value that has allowed larger established brands to get away with things that a microbrand could never get away with. The first and foremost veil that many larger brands hide behind is the “Swiss Made” label.

In order for a watch to be considered “Swiss Made”, at the very least it must be assembled in Switzerland and have a “Swiss Made” movement. It is that simple. I won’t go into the math and legal aspects of it because, as I said before, that has been beaten to death and there are people way smarter than I am who explain it better.

What I will say is that I watched the process of a “Swiss Made” watch and followed it along closely with one of our middlemen (yes we still have a couple of those left). Going “Swiss Made” is also a discussion I’ve had with Cullen before. Unfortunately, when our project manager went to Switzerland to take the initial steps to build out a network, the quality was simply not good enough. Dust on the dial, misaligned hands, misaligned dials, and movement failures were far more common among the Swiss assembly houses than the Asian assembly teams that we have seen, yet the cost was about 10x higher.

The Swiss intermediaries have been riding the wave that started a hundred years ago, and we as consumers let it happen.

On that same trip, product from our factories were also taken to the QC teams in Switzerland; the guys who approve the official “Swiss Made” stamp. It is worth noting that the product in question was not our actual product, as the only thing we are interested in is gauging objective quality standards, not subjective design tastes or brand strength.

Without naming any specific brands (I've heard that the watch-mafia is a dangerous group to tango with), our factory’s capabilities are about neck-and-neck with luxury brands in the $5000-7000 range. It pains my heart to say it, but the only objective quality difference ended up being the cash that went into getting the “Swiss Made” approval.

 
 The FHS has painted broad brush strokes across the whole industry, both in their website copy as well as in their official legal documentation. Despite what it says on their site, out of the dozens of factories I've been to, I've never seen anyone under the age of 30 on the factory floor. Photo credit: fhs.swiss

The FHS has painted broad brush strokes across the whole industry, both in their website copy as well as in their official legal documentation. Despite what it says on their site, out of the dozens of factories I've been to, I've never seen anyone under the age of 30 on the factory floor.
Photo credit: fhs.swiss

 

In fact, in this article by Dan Henry, a fellow microbrand owner and esteemed vintage-collector, he explains how months before Baselworld, he saw some new product that was to be unveiled at Basel on the very floor that manufactures his own Asian-made product.

It would be severely naïve to think that a watch, no matter the cost, has absolutely no parts that were either sourced from or originated in Asia. That is simply not how the world has worked for many decades. If honesty and authenticity were important to the large brands, then I think the new indicator for quality should be "Swiss Made in China," but unfortunately, it just doesn't have the same ring to it. 

I want to make clear that no amount of poking and prodding will get me to publicize what the brands in question are. The point of this post is to illustrate the fact there is no reason why a 100 year old technology should cost what it does. Past a certain price point, you are very rarely paying for engineering or technological advancement, but rather inefficiencies and ad spend.

I don’t claim that Nodus watches are just as good as or better than brands that came before us. After all, many of them have had 100+ years to build their brand and processes. However, it takes a new and disruptive mindset to see things for what they are, and strive to turn it into what we would like it to be. In a perfect world, Swiss Made would mean exactly that: made in Switzerland; and I would be okay paying the cost that comes with it, provided the quality follows suit.

Unfortunately, the veil has been pulled so far over the markets eyes that even highly experienced industry professionals still believe the lies and deception perpetuated by large corporations who have only one goal: to make money.

For a while, even after Nodus was formed, I was disillusioned by the watch industry, as I felt it was too much “business” and not enough “passion”. However, as I’ve matured as an entrepreneur and more importantly, a watch enthusiast, it took me a while, but I finally figured out that buying watches are not logical purchases but rather, emotional. I learned that it was inappropriate to look at these illogical purchases through a logical perspective, and in actuality, I should have held on tightly to what this is all about in the first place: passion. I buy watches I like, regardless of what it says or doesn't say on the dial around the 6 o'clock position. I can only hope and pray that the market does too. So, for now, here at Nodus, there won't be any "Swiss Made" printed on our dials, because that is all that it is: ink. At least for the time being, we do what we do.

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Wesley Kwok is the co-founder/operator at 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 or Nodus Watches @noduswatches