Starting a Watch Company: Sourcing Parts (Part 2)

Updated: Apr 4, 2020

Last time I left off by denoting the abundantly clear void in the watch market, which is arguably still waiting to be filled. When we looked at the pricing of both fashion and luxury watches, we realized that we needed a better understanding of the costs associated with individual parts before we could outline any potential competitive advantages. In Part 2 of this series, I am going to set the groundwork on which parts of the watch we had to source and which processes that involved. Due to the sheer volume of intricate parts, we'll focus on just the case, dial and hands for this piece. It is important to note that we looked all over the globe for the parts we were sourcing. The reasoning for this was twofold: 1) The brand is named Wayfarer, which means someone who travels. All of the models we came up with represented different cities around the world, and pay homage to the cultural influences of these places.

2) With globalized supply chains and ever-decreasing transport costs, it is far more cost-efficient to source items from locations that specialize in the production of specific items. Finding out the bulk order prices of different watch parts has forever changed the way I look at watches. The case, dial, and hands are some of the cheapest parts of a watch to source. The prices can go up for very high-quality materials such as the 18kt white gold hands and 904L Oystersteel that Rolex uses for their watches. However, it is possible to still attain high-quality materials at a reasonable price.

The important characteristic of steel in a watch is corrosion resistance. One will find that many cheaper watches, especially fashion watches will have basic stainless steel. While all surgical steel is stainless steel, not all stainless steel is surgical grade steel. Surgical grade steel has the highest corrosion resistance. The surgical steel that we opted for was 316L steel, and while this is far superior to what is conventionally used in fashion watches, it can be sourced for a mere 10 to 15 dollars. The same surgical grade steel can be used for the hands without pushing up the price substantially.

Dials can prove to be more complicated due to the varying complexities of treatments needed to attain different finishes as shown in the image to the left. This is where it was important to fund a supplier with specializing in dials as the equipment needed to do this is not cheap. Nevertheless, when ordering hundreds and thousands of units the price of dials can be as little as a couple of dollars per unit. Dials are mostly made of plated brass, and this is also the case for higher-end watches such as Rolex unless you purchase one of their specialized dials such as the mother-of-pearls or meteorite.

The cases, hands, and dials were sourced from China. While "Made in China" is often looked down upon, Chinese manufacturers such as those in Guangzhou are particularly well connected in the watch business and are very skilled at what they do. There is also an abundance of firms localized near each other whereby competition is very high, and consequentially prices are fairly low. Interestingly, the source material and catalogs provided by these companies show how many fashion watch companies (common household names you are likely to know) are probably receiving their parts from the same suppliers, as they look almost identical. While the prices denoted here may seem quite low, it is important to realize that purchasing samples for any of these costs astronomically more and is an important component of the development phase.

In part 3 of this series, I’m going to delve deeper into the world of relatively inexpensive ‘value-efficient’ mechanical movements, which proved to be the most decisive and expensive choice in this journey.

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