[Go Bears!]

Hi,

I will pose the question many have pondered when purchasing a new watch:

Are AD discounts really discounts?

Say, for example, you plan on purchasing a watch for 1K and have received a 10 percent discount. With local taxes at 8.5 percent, the final purchase price reflects a 2.35 percent net discount off the MSRP.

So, when the AD offers the 10 percent discount, you are only getting the 2.35 percent even though the AD doesn't make any profit off taxes.

Any thoughts? Is this the primary lure for making net/non-AD/gray market purchases? Is the AD warranty stamp/in-person experience really worth the price?

Feel free to vote on the poll.

Thanks!

 

[publandlord]

Hi,

I will pose the question many have pondered when purchasing a new watch:

Are AD discounts really discounts?

Say, for example, you plan on purchasing a watch for 1K and have received a 10 percent discount. With local taxes at 8.5 percent, the final purchase price reflects a 2.35 percent net discount off the MSRP.

So, when the AD offers the 10 percent discount, you are only getting the 2.35 percent even though the AD doesn't make any profit off taxes.

Apples to oranges. A 0% discount is exactly that - $1,000 to the supplier in exchange for the watch, and you pay anywhere from 0 to 10% to the State government. Tax is out of the equation. Your numbers wouldn't apply to someone from New Hampshire or Florida, for example; also your inc-tax final payout is benchmarked incorrectly against the tax-free MSRP, which you'd have to apply taxes to anyway if you wanted to walk out the store with it.

It *might* apply if you are buying a watch from another state and that supplier doesn't have a business in your home state. Then you can compared the next, zero-tax price with what you could pay in your home state. After you've figured out shipping, insurance etc.

But from a what-discount-can-I-get point of view, a discount is a discount and the tax is inevitable. You would apply the tax to a 0% discounted price just as you would to a 10% discount.

BTW I am not an American and I don't live there

 

[mwr]

I agree with the above post. Also, if you do not buy many watches and do not have a lot of trusted contacts, having a legitimate dealer to help out when something goes wrong is well worth the premium.

But, if you can avoid tax and can buy long distance and you can handle being on your own when repairs are needed, there is money to be saved.

 

[scottjal]

I think it is unfair to penalize your local guy and figure in taxes to negate a discount, he isn't charging you the taxes but he did just offer 10% off. There are states that have no sales tax as well... Oh and that internet wide sales tax is coming, they just can't keep their hands out of that money pit.

That said I think a B&M store will obviously try and keep their prices up to maintain the store that internet retailers don't have to. Did you know that a lot of malls TRIPLE their rent in the several months leading up to Christmas? I had no idea but recently found that the Simon malls around here do so I wouldn't doubt others do as well.

AD's also have pressure on them from the suppliers to keep the prices up as well for brand "image"

[rant]
This is all part of the downward price war spiral that winds up in a super cheap product that is just crap but they sell scads of them because its cheaper than the other one. Price wars are only good to a point, eventually they kill off the decent products and leave us with irreparable, disposable trash. Picked up a DVD or VCR player in a store lately? I did and nearly threw it over my head, seriously I thought the box was empty. The same thing in a rack mount studio grade is almost a two person lift and has heads that can be REPLACED when they wear out, imagine that?
[/rant]

 

[Tragic]

I'm all for "downward price war spirals" !

 

[Simon]

Interesting question.

here's my reflections on the question of discounting for what they are worth. In the Uk we have no local taxes. Recomended Retail Price is what most expect to pay - though good returning customers generally get 10% off & if its an expensive item & you are equivocating on the purchase the retailer may offer 10% as a sweetener. If you can deduct anything off RRP, it is a real terms discount. RRP may well be inflated to take into account possible discounting. The Watch houses discourage discounting - and they set the RRP @ what they think is the right price for the item.

The actual profit margin on watches is modest compared to other jewellery say gold & diamond rings; on mid end watches the jewellers' profit margin against RRP is I believe about 50% & yet his mark up on jewellery is 100-200%! So, one can haggle harder for the engagement ring & dont think the jeweller is a chump if he gives just 10% off RRP on watches! Of course, the more expensive the watch, the bigger the overall profit in the watch, so a jeweller may give 20% discount off a $4000 watch whilst he might only give 10% off a $2000 one. On stock that has been in the shop for a while, he might want to discount more because he has already paid for it & wants his money back; but if he has to order a watch in especially for you, I would think he wont discount as heavily. Some famous watch houses will close accounts with jewellers who discount - some watches will fly out without discount so the jeweller has no incentive to discount.

Internet companies often carry no stock but buy to order, or keep stock in some back room - they have less overheads, dont have to pay rent/rates on pricey high street properties - of course they can discount more heavily. But I personally think its all about building up a good relationship with your local jeweller - who you return to over the years for various things. Over time discount will be readily given to decent customers.

justm my2cw

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si

 

[publandlord]

Interesting question.

here's my reflections on the question of discounting for what they are worth. In the Uk we have no local taxes.

Ha ha ha - how quickly we forget

Have you perchance forgotten that the Exchequer takes 7/47ths of everything that you pay? (VAT, in other words?)

I used to dislike the idea of having to add taxes at the till, as you do in most states in the US. Now, I like it; you know exactly how much the supplier is getting and how much the government is getting, and are constantly reminded by the fact that you are paying taxes on what you earn and on what you spend, and aren't ever in danger of forgetting that taxes are applied.

 

[Simon]

Ha ha ha - how quickly we forget

Have you perchance forgotten that the Exchequer takes 7/47ths of everything that you pay? (VAT, in other words?) quote]

You're absolutely right - o|

How quick we are to forget our stealth tax when it aint on the label

silly me

si

 

[publandlord]

You're absolutely right - o|

How quick we are to forget our stealth tax when it aint on the label

silly me

si

Strictly speaking VAT is a national, not a local tax, so technically you're right ;-)

I also agree that it's a stealth tax. The number of people who know exactly what attracted 17.5% VAT and what doesn't is vanishingly small, and it is in Mr Brown's interest to ensure that it stays that way.

One benefit of a state-based sales tax, as explained to me by a frazzled New Yorker, is that for goods attracting the tax, having to add 8.25% (or whatever it happens to b) to the price at the till at least keeps your mental arithmetic sharp.

 

[SnapIT]

Chez nous its a straight 10% GST(goods&services tax) on everything that you might purchase at a jeweler or any other retailer for that matter. That's on top of whatever you are favored with in the way of a discount. So its up to the jeweler of decide what portion of his margin he is willing to forgo to win your business then he applies the tax. Normally you will be quoted a gst included price over the counter. The law here states that the price must be explicit about the tax, whether its inc or ex so there is little confusion.

 

[LeifUK]

In the UK we seem to do particularly badly. I recently wanted a posh watch and was quoted £2200 by a London AD. That was MORE than the RRP. The exact same item was available from the US for £1,000 + import duty + VAT, or £1,300 including P&P from Germany. So the price £2,200 from an AD or ~£1,300 by importing from a non-AD.

I suspect the London dealer sells to bankers and other people who do not bother to search around, and just buy an expensive watch while out shopping with the wife/husband. I guess that is the problem with so few dealers stocking the brand. Most UK dealers seem to stock mainly Rolex, Omega, Tag Heuer and Brietling among the expensive brands.

I do wonder where the cheap online watches come from.

I have heard that a dealer might discount heavily if he wants to sell more items to meet the sales targets required by the manufacturer. Alternatively the dealer might sell stock at cost price to a third party, who will then sell the items e.g. online. Some high end watches do not have serial numbers so they cannot be traced back to the original AD.

 

[publandlord]

In the UK we seem to do particularly badly. I recently wanted a posh watch and was quoted £2200 by a London AD. That was MORE than the RRP. The exact same item was available from the US for £1,000 + import duty + VAT, or £1,300 including P&P from Germany. So the price £2,200 from an AD or ~£1,300 by importing from a non-AD.

I suspect the London dealer sells to bankers and other people who do not bother to search around, and just buy an expensive watch while out shopping with the wife/husband. I guess that is the problem with so few dealers stocking the brand. Most UK dealers seem to stock mainly Rolex, Omega, Tag Heuer and Brietling among the expensive brands.

Agreed. The simple answer is to avoid, as I do - particularly London. Then you won't do quite so badly . Dealers outside London have to sell to "normal" customers, and they are more willing to haggle with you.

If a watch is being sold by an AD at more than RRP, then while it's not illegal, it is pretty sharp practice and culturally barely acceptable. If you are feeling particularly un-British one day, you can make a scene if you like. Nothing illegal about that !

 

[Ferrari 312T]

Agreed. The simple answer is to avoid, as I do - particularly London. Then you won't do quite so badly . Dealers outside London have to sell to "normal" customers, and they are more willing to haggle with you.

If a watch is being sold by an AD at more than RRP, then while it's not illegal, it is pretty sharp practice and culturally barely acceptable. If you are feeling particularly un-British one day, you can make a scene if you like. Nothing illegal about that !

I live in London and had the same experience. Knowing what the US offers in discounts I was not prepared to pay the prices quoted in London. The most I could get by way of a discount was 10%. I eventually used a referral to an AD in the US and got a considerably higher discount.

 

[publandlord]

I live in London and had the same experience. Knowing what the US offers in discounts I was not prepared to pay the prices quoted in London. The most I could get by way of a discount was 10%. I eventually used a referral to an AD in the US and got a considerably higher discount.

If you're prepared to travel, have a look at dealers in other parts of the country - and in the South-East, too. Higher discounts than 10% are available, and you can still inspect the watch - which you can't when you order from overseas) and take it back if you don't like (which you probably can if you order from overseas, but it's a hassle and probably quite expensive).

Definitely avoid the full-price, old-stock chains - even in far-flung corners of the country, discounts are rarely available.

I can PM you some suggestions if you like.

 

[lysanderxiii]

It *might* apply if you are buying a watch from another state

You're still supposed to pay sales tax to your home state for out of state purchases if your state has sales tax.

Check your state sales tax laws.