Czapek

[uniqueMR]

Increase of 300 watches to 5000 is a huge step.
I prefer keeping it close to 1000-1500 per year.

[RolexBHR]

Originally Posted by Noahgraph

I don't like it. I rather see Czapek stay a little smaller, more exlusivity and an icreased finishing quality. There are still rather big improvements to be made to the bracelet of the Antarctique in my opinion. Why bother scaling up this insane pace? Dollar signs every freaking where.

I agree, not sure about this move. This is what happens when you have a group of investors behind the thing, its always the bottom line $ that matters.

[watchucallit]

I am still waiting on my Rattrapante Silver... Does anyone know how many of these have been delivered

[ChetBaker]

This news story makes me wonder if Czapek understands their collectors expect them to do their utmost to protect secondary market value of their watches. Increasing production like this is not helping.

[Gebbeth]

I'm not sure I agree that just because Czapek is increasing production to 5,000 watches per year that quality will go down or that exclusivity will suffer. 5,000 watches is still a drop in the bucket compared to other manufacturers. I think Patek manufactures 62,000 watches per year. Something tells me that Patek and its customers don't worry so much about production numbers reducing exclusivity.

Don't even get me started on Rolex.

5,000 is about where ALS production numbers are currently. Don't tell me the Odysseus isn't a great investment still.

I also do not think that a watch company's obligations to its collectors is to protect the purchaser's investment. To the extent the company has shareholders or outside investors, its legal and commercial obligations are to maximize profits.

That being said, I'm sure Czapek is going to implement production increases across certain lines, creating more readily available models, while keeping exclusive lines exclusive.

I also do not see any specifics about if the increases are going to be implemented on existing models, or only future models that Czapek may introduce. If the latter, I don't think anyone currently "invested" (and I use that in quote intentionally) should worry.

Look, in this very thread, I've read a lot of hang wringing about when people will be getting their watches...when will I get my watch....how soon.....how late.....whatever.

At the same time, I'm hearing "Oh woe is me that Czapek is increasing production....my investment....my precious investment...."

You can't have it both ways. Please choose an issue and stick with it.

I would be very happy as a Czapek buyer to have Czapek become a successful company with broader appeal. Greater demand doesn't always mean an investment hit....in fact, most of the time it's the opposite. I would love to be able to purchase a lower priced Czapek that is sportier, more rugged, and purposeful, while also holding on to my Antarctique, and lusting over a Place Vendome or Rattrapante or something else in the pipeline.

What's there to hate about this?

[dchang81]

Timing to increase the output nearly 20 fold doenst seem like a great idea. But then again I'm a terrible business person

[Pdg]

Originally Posted by ChetBaker

This news story makes me wonder if Czapek understands their collectors expect them to do their utmost to protect secondary market value of their watches. Increasing production like this is not helping.

I don’t agree with this. As a collector I expect them to make excellent watches. While secondary value has many second and third order consequences (can lead fewer people to buy, brands lower prices, etc), I think if you focus on the first thing (making excellent, unique, watches) the rest follows.

[londonpilgrim]

Originally Posted by ChetBaker

This news story makes me wonder if Czapek understands their collectors expect them to do their utmost to protect secondary market value of their watches. Increasing production like this is not helping.

Collectors? How about people who want to get, wear and enjoy their watches?

[BrunoMalik]

Originally Posted by ChetBaker

This news story makes me wonder if Czapek understands their collectors expect them to do their utmost to protect secondary market value of their watches. Increasing production like this is not helping.

This line of thinking really puzzles me and i find it quite short sighted. Czapek’s main goal is to secure its future and be around in 20 and 50 years, and not to protect the short term secondary market value of a few pieces.

As a Czapek collector, it gives me great confidence that they are bringing manufacturing in house and expanding their production capabilities, in order to become a household name. It only makes the company stronger long term.


Sent from my iPad using Tapatalk

[enjoythemusic]

Originally Posted by BrunoMalik

...it gives me great confidence that they are bringing manufacturing in-house and expanding their production capabilities, in order to become a household name. It only makes the company stronger long term.

Well said

A decade or two from now we'll all look back at these early Czapek moments and smile... because we knew their timepieces are very special.

[GB-man]

Originally Posted by BrunoMalik

This line of thinking really puzzles me and i find it quite short sighted. Czapek’s main goal is to secure its future and be around in 20 and 50 years, and not to protect the short term secondary market value of a few pieces.

As a Czapek collector, it gives me great confidence that they are bringing manufacturing in house and expanding their production capabilities, in order to become a household name. It only makes the company stronger long term.


Sent from my iPad using Tapatalk

Sounds to me like Xavier shares the sentiment and believes their watches will remain coveted at 15-20x volume.

From watch pro article 9/6/22

“Steel Antartique watches retail for $22,000, but Mr de Roquemaurel believes the wealthy customers this price demands will keep spending.

“It is a risk free pleasure investment, there are not many of them,” he smiles.

“Distribution of wealth is creating millions of new millionaires, and 5% of them are getting interested in watches,” he suggests.”

[mikemargolis]

Xavier and I had a long chat on a hike last week, just the two of us.

He said 3000, I never heard 5000 until I saw the watchpro article.

Last year was 300, hoping for 600 in 2022, 1200 in 2023, 2000 ish in 2024 and 3000 in 2025.

This is an aggressive growth plan, but priority number 1 will be that the growth will only happen if the market demands it.

I once worked for a brand that, if they could sell 100, they'd make 125. That philosophy did not help the secondary market at all.

Then I worked for a brand who talked about "N minus 1," so if the demand was 100, they'd make 99. That worked a lot better.

Xavier and his management board are not going to overproduce and dump goods onto the grey market. At this point, we are actively building a "flipper list" and those people will not get another Czapek.

[PBJ1925]

Originally Posted by mikemargolis

Xavier and I had a long chat on a hike last week, just the two of us.

He said 3000, I never heard 5000 until I saw the watchpro article.

Last year was 300, hoping for 600 in 2022, 1200 in 2023, 2000 ish in 2024 and 3000 in 2025.

This is an aggressive growth plan, but priority number 1 will be that the growth will only happen if the market demands it.

I once worked for a brand that, if they could sell 100, they'd make 125. That philosophy did not help the secondary market at all.

Then I worked for a brand who talked about "N minus 1," so if the demand was 100, they'd make 99. That worked a lot better.

Xavier and his management board are not going to overproduce and dump goods onto the grey market. At this point, we are actively building a "flipper list" and those people will not get another Czapek.

Bravo!

[Gebbeth]

Originally Posted by mikemargolis

Xavier and I had a long chat on a hike last week, just the two of us.

He said 3000, I never heard 5000 until I saw the watchpro article.

Last year was 300, hoping for 600 in 2022, 1200 in 2023, 2000 ish in 2024 and 3000 in 2025.

This is an aggressive growth plan, but priority number 1 will be that the growth will only happen if the market demands it.

I once worked for a brand that, if they could sell 100, they'd make 125. That philosophy did not help the secondary market at all.

Then I worked for a brand who talked about "N minus 1," so if the demand was 100, they'd make 99. That worked a lot better.

Xavier and his management board are not going to overproduce and dump goods onto the grey market. At this point, we are actively building a "flipper list" and those people will not get another Czapek.

Now THIS is what I like to hear. The flipper list is brilliant and something all self-respecting high-end watchmakers should have done.

[sgrossma]

The real question is - how do you determine demand during early stages with doubling yearly production? I would think that there would certainly be a lag and it would be too easy to find out too late what that magical N number is.

[ChetBaker]

Yes. I like and appreciate Mike’s response. One concern i’d have if I were in Czapek’s shoes is that a large part of their business is built on cancellable pre-orders. What happens if secondary market prices plummet and purchasers en masse cancel pre-orders? It’s difficult to scale back and to do so timely. This is why I said that it’s so important for Czapek to protect the secondary market.

[ap1]

Originally Posted by sgrossma

The real question is - how do you determine demand during early stages with doubling yearly production? I would think that there would certainly be a lag and it would be too easy to find out too late what that magical N number is.

For sure. All these watch manus do this. They are planning to up capacity based on Covid era. Yikes.

[EEpro]

Originally Posted by ap1

For sure. All these watch manus do this. They are planning to up capacity based on Covid era. Yikes.

Even Target fell for the head fake. Profit down 90% with too much inventory. I'd be inclined to keep production flat but this is where investors push for more profit.

[Gebbeth]

Target is a retailer that, in effect, resells fully manufactured products to customers.

When Target orders goods, they need to predict customer demand for each finished product, and issue PO's to the manufacturers to make and sell that quantity to them.

When they get it wrong, they are stuck with unsold inventory that they need to then sell at a huge discount, thus suffering locked-in losses.

The products Target resells also have limited shelf life in that one year's fashion or model will not sell next year. Customers want the next big thing as soon as possible the next year.

Target and other retailers also suffer greatly from seasonal demand. I thought I read somewhere that retailers like Target make the vast majority of their revenue and profits in the Christmas buying season here in the US. This means if they have a bad Christmas, they are doomed for that year. Target's 1st quarter reporting was bad because of bad Christmas sales in the prior calendar year, which means that year's profit when down the tubes.

When you are a manufacturer of goods, like watchmakers, the calculus is slightly different.

Your outlook is longer because you need to source the materials and components and then put the finished product together. It's not so much a matter of completed products lying unsold in warehouses. It's more wondering if you will have excess components lying around with no watches to put them in.

If you are not selling watches, you are holding component inventory. In some cases, depending on your commercial agreements with your suppliers, you may not even be the party holding the inventory of components. They may be held by your movement manufacturer or case manufacturer. This is the advantage of a dispersed manufacturing operation as opposed to a fully integrated in-house production house like a Rolex. You have less individual control over each component, but you are not left holding the full bag in case of downturns either.

Also, when it comes to watch components, they don't really have short shelf lives. Crystals don't age and go out of fashion. Gear and springs, if stored properly, can be stored for very long periods of time. It's not an all or nothing by Christmas type operation.

This is not to say it's "easy". It's not, and companies that get this wrong suffer financial consequences. But I think the planning can be done and fine tuned. We are still talking 5,000 watches, maybe less, not 1.0M watches per year.

With careful production planning, Czapek will be fine, even in economically uncertain times.

The offshoot of the ability to make more watches is also that you have built in capability to build more variety of watches if you choose to do so. To the extent that certain components can be reused for other watches, this greatly simplifies the ability implement new case designs, movement revisions, etc. The volume also allows you to scale up the sourcing of components. Greater volume can also mean better resource allocations to you and lower per unit costs of each component.

Anyway, as you can tell, I'm in the business of supply chain for a very large, very complicated, business, so I am aware of positives and challenges of scaling up an operation. But I see no great alarm in what Czapek is planning. This was never going to be a bespoke watch company, and those who were expecting this, should probably have known better.

Also, the watches I own have never, ever, been "investments", so my viewpoint has always been from that direction.

Just my 2 cents.

[sgrossma]

If they are only trying to produce as many watches as they could sell (no excess inventory), it would definitely not be too difficult for reasons you mention, especially with a large starting backlog.

But I think it is much more complicated than that. Secondary market inventory and values should to be considered as well if you want to stay premium and desired, and that is a complete unknown at this point. The company has made so few watches to date and most of the orders came through at the absolutely peak of the watch market, with things having changed substantially from just 5-6 months ago.

How many watches are on the market?
What prices are they selling for?
How fast do they sell?
How is the overall watch market doing?
How is the economy doing?
How are things expecting to change?

Flippers or no flippers, having comfort that your $20k purchase will not be worth $10k after it hits your wrist is a large factor in driving and sustaining sales at this level.

[szabo_martin]

Some solid points made. Xavier did a fantastic job of utilizing some of the industries top component manufacturers and crafts people to enter the market with a watch exhibiting the quality expected at the top level. Very few people have been able to pull this off... FPJ, Laurent Ferrier etc... I'm fairly certain he wont jeopardize the reputation of Czapek to make a few extra pieces a year. The growth strategy seems very organic, and conservative

[Gebbeth]

Originally Posted by sgrossma

If they are only trying to produce as many watches as they could sell (no excess inventory), it would definitely not be too difficult for reasons you mention, especially with a large starting backlog.

But I think it is much more complicated than that. Secondary market inventory and values should to be considered as well if you want to stay premium and desired, and that is a complete unknown at this point. The company has made so few watches to date and most of the orders came through at the absolutely peak of the watch market, with things having changed substantially from just 5-6 months ago.

How many watches are on the market?
What prices are they selling for?
How fast do they sell?
How is the overall watch market doing?
How is the economy doing?
How are things expecting to change?

Flippers or no flippers, having comfort that your $20k purchase will not be worth $10k after it hits your wrist is a large factor in driving and sustaining sales at this level.

I respectfully disagree. In most manufacturing businesses, you can't look at secondary market prices. You are trying to sell the most product, at the highest prices, to your first customer. What happens after that has, at best, only a distant, secondary, affect on your bottom line. You need to take into account your input costs and output price, nothing more, nothing less.

In an AD model, that's even more important because your first customer is actually the AD, not you, the retail customer. As long as the AD sees demand, they will continue to order watches, and the manufacturer will be happy to oblige if they can. A seller can come in and buy a watch from an AD, and fiip it the next day for 2x retail price, but the manufacturer sees none of that, so it shouldn't matter.

And if Rolex, AP, and Patek were truly concerned by secondary market prices, then their output would currently be close to 0 or at least significantly less than it is now. That would maximize secondary market pricing for sure.

[sgrossma]

You are the expert it sounds like, but here they are trying to build an ultra luxury brand. AP Patek and Rolex have a lot more brand equity and are household names. They can do almost anything they want at this point and sell watches. I couldn’t even pronounce Czapek correctly for the longest time. Czapek can use your model short term but long term if there is an oversupply in the secondary market, I think it will spell disaster and effect their ability to sell more watches in the long game.

[Gebbeth]

Originally Posted by sgrossma

You are the expert it sounds like, but here they are trying to build an ultra luxury brand. AP Patek and Rolex have a lot more brand equity and are household names. They can do almost anything they want at this point and sell watches. I couldn’t even pronounce Czapek correctly for the longest time. Czapek can use your model short term but long term if there is an oversupply in the secondary market, I think it will spell disaster and effect their ability to sell more watches in the long game.

AP, Patek, and especially Rolex, didn't get to where they are now, i.e., household names that everybody wants, by selling just 500 watches per year. AP makes around 40,000 watches per year. Patek, 62,000. Vacheron is 25,000 per year. Rolex 1.0M per year. Their name brand and equity didn't come by hyper reduced production numbers.

Yes, they all have history, where Czapek has none, but hiding in the darkness of "watch afficionado alley" isn't going to do anything to Czapek's desireability or exclusivity.

We're talking 5,000 AT MOST. It may not even be that much if there is not the requisite demand. But having the facilities and ability to scale to 5,000 is a great step in my opinion. This would bring their production numbers closer ALS, which I don't think anyone can say has lost it's exclusivity or desireability.

[charger_vital]

To me, it's a matter of post-scale quality. If they can match or even approach the quality of say an ALS (5000 watches per year as cited above), Czapek should have no problems with customers or second-hand prices. If, on the other hand, Czapek only matches the quality of GP for example, (i.e. a well-made watch that is not particularly exceptional) Czapek will suffer.

[enjoythemusic]

Originally Posted by mikemargolis

This is an aggressive growth plan, but priority number 1 will be that the growth will only happen if the market demands it..

Smart plan.

Then I worked for a brand who talked about "N minus 1," so if the demand was 100, they'd make 99. That worked a lot better.

Ahh yes, the 'Enzo Ferrari' plan.

Xavier and his management board are not going to overproduce and dump goods onto the grey market.

Excellent

At this point, we are actively building a "flipper list" and those people will not get another Czapek.

Most excellent!

Now pretty please get those backorders filled and more wrist shots / impressions from others posted online.

[kunlun]

Originally Posted by mikemargolis

Xavier and I had a long chat on a hike last week, just the two of us.

He said 3000, I never heard 5000 until I saw the watchpro article.

Last year was 300, hoping for 600 in 2022, 1200 in 2023, 2000 ish in 2024 and 3000 in 2025.

Hi Mike, please let Xavier know that as production goes up after sales servicing goes down. He'll need a lot more watchmakers or he'll end up with 12 months average time to service a watch that comes back with new scratches and the watch still doesn't work (e.g. Swatchgroup and Patek).

[Chiboy]

Originally Posted by Gebbeth

We're talking 5,000 AT MOST. It may not even be that much if there is not the requisite demand. But having the facilities and ability to scale to 5,000 is a great step in my opinion. This would bring their production numbers closer ALS, which I don't think anyone can say has lost it's exclusivity or desireability.

This is a very interesting discussion. But I think raising Czapek production levels to those of ALS would not end well. It wasn't long ago that ALS saw watch values plummeting as buyers left the boutique. And ALS has built up its quality and desirability reputation over a significantly longer period than the more recently resurrected Czapek name. I don't really see how one can point to ALS and say if they can support 5k annual watch production than so can Czapek. Not at this stage or from what we've seen of the brand at this stage.

[Finly]

I was watching an interview that the CEO did. He said he'll scale to meet the demand so that someone is able to order a watch and receive it in 6 months. So these numbers of 3000 won't materialize if they don't receive 4500 orders a year. And I do hope the 3000 watches per year are spread out throughout their entire collection somewhat equally and not 2500 Antarctique.

Furthermore, he said he only has ~3 watchmakers at the moment so they're not going to hire 100s of people to meet the make of 3000 watches a year, a lot of the stress would be on their suppliers. Czapek just needs to build up their servicing network globally certifying independent watch repair stores to be official Czapek servicing partners.

[Ichiran]

Originally Posted by kunlun

He'll need a lot more watchmakers or he'll end up with 12 months average time to service a watch that comes back with new scratches and the watch still doesn't work (e.g. Swatchgroup and Patek).

I don't know about Swatch but I recently sent in a 5146 and 5712 to PSC and both came back within 1 month with no new scratches. Service was exemplary and service fees were transparent and reasonable.