After I tell people that I write about watches, the question inevitably arises: why do some watches cost so much? (This after the incredulity that one can actually make a living doing what I do.) There is always the guy in the group who says he’d never spend $5,000 on a watch; never mind that he has a $40,000 SUV that costs $100 a week to fill up with gas.

The easy way out of this discussion is to shrug and mumble something about brand prestige and high margins, at which point said guy flashes his $50 Ironman watch and says it keeps better time than his buddy’s Rolex. By then, it’s time to change the subject. After all, if you don’t “get” watches, the price question is largely a rhetorical one, anyway.

But in fact, the question of watch pricing is worth exploring. We’re not snobs. There are great watches to be had at nearly all price points, from sub-$1,000 dive watches to $30,000 or $100,000+ dress watches, and we try to celebrate all the good ones out there. But there is clearly a point at which the price curve goes more vertical in relation to a watch’s features. Here the value question comes into focus.

First of all, let’s get the obvious out of the way: there is a considerable markup on wristwatches. Since Swiss brands are notoriously tight-lipped about things like production numbers and costs, we can’t say for certain what the markup is, but we’re pretty confident it’s well north of 100%. Mind you, we’re talking merely about cost of producing the watch itself, not the overall overhead of R&D, marketing, etc. We’ll get to that in a moment. Established brands can tout their reputations and the cachet of the “Swiss Made” (however watered-down that may be these days) emblazoned on dials to charge a premium for their watches.

The corollary to this is that people are still willing to pay top dollar for watches. The luxury timepiece industry is booming and shows no sign of letting up; those of us “consuming” watches are partially to blame for the high prices. After all, companies will price their products for what the market will bear. If none of us forked over $6,000 for an IWC Aquatimer, they wouldn’t sell for that price. Period.

The second reason watches are so expensive is the overhead incurred to produce them. We’re not just talking about the raw materials here, though those can sometimes be more considerable in price for watches with precious metal cases. Overhead for a watch company, like any other industry, includes materials, production, custom machinery, prototyping, design, and research and development.

A brand that outsources many of these functions, having cases made in Asia and sourcing off-the-shelf movements from third-party providers like ETA or Miyota, can avoid these costs and typically can sell watches for far less than companies that devise in-house movements, make cases and push the boundaries of what is possible in watchmaking. If you think it’s easy to make a split-second mechanical chronograph starting with a blank sheet of paper, think again.

It takes a team of watchmakers years to design complicated movements, create working prototypes and even build custom machinery to make specific parts before ramping up into production. And at the higher end, there’s the hands-on, time-consuming finishing of movements, dials and cases that is nothing less than art — and something you don’t see on more affordable timepieces. All of this doesn’t come cheap.

An extreme example here is a company like Rolex, who for years has operated its own foundry to alloy its own gold and forge its own cases. The Big R is an example of a vertically integrated company that covers all aspects of watchmaking from soup to nuts, or rather from bezel to hairspring. This complete control of its products is what helps Rolex maintain a sterling reputation for quality, but it also helps keep prices high.

When many people think of luxury watches, Rolex is the first name that comes to mind — though in the overall spectrum of brands, it is decidedly middle of the pack, price-wise. Given its reputation for high prices, Rolex created its “affordable” line (brand), Tudor, which at one time seemed to offer Rolex alternatives with sourced movements, but has in recent years developed its own personality — and in-house movements. So while the iconic Rolex Submariner (No-Date) costs over $8,000, the Tudor Black Bay Fifty-Eight can be had for just under $4,000, both possessing similar features.

The third reason watches cost so much is because watch companies are largely marketing machines. It’s not enough these days to just say your watch tells time accurately. We’ve got smartphones for that. Now brands have to compete with each other to peddle lifestyle stories that make one watch more appealing than the next, regardless of its objective merits.

Ad budgets are astronomical, while press launches and annual watch fairs costs millions. We’d all like to think that we’re immune to marketing, able to cut through the hype to discern a quality timepiece from a lot of glossy photos and breathless ad copy. But what red-blooded male can resist lingering in IWC’s Manhattan boutique, with its flight simulator, dive locker and leather sofas, intermingled with vitrines of shiny chronographs?

Finally, the watches people typically think of as “expensive” are, after all, luxury products. By definition, they are completely unnecessary and have countless more affordable alternatives. Those of us working stiffs who save and scrimp to afford that nice Omega are merely playing in a realm that is really occupied by an upper class who buy watches like we might splurge on a new pair of shoes or a nice dinner out. Watches used to be more necessary, and mechanical watches were what everyone wore. Nowadays, they are emblems of quality, of tradition, of craftsmanship, and yes, sometimes of wealth, taste and prestige.

None of these reasons are justifications or excuses. We’d love it if watch prices were lower and we could afford that Jaeger-LeCoultre on an editor’s salary. At the same time, if luxury timepieces were affordable, they might not hold the same allure, and there is something to be said for holding those aspirational pieces, those “grails” that we covet and scheme to one day own. That said, hopefully now you can have a better answer for that guy who asks why your watch costs so much. Or you can take the easy path. Just smile and ask him why his watch costs so little.

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