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Benedetto Mauro realized the winds of the watch industry were no longer blowing his way during a sushi dinner last October.
The evening was hosted by Swiss watch manufacturer Patek Philippe to celebrate the unveiling of its latest Nautilus model. Mauro, one of Italy's top dealers, had hoped to order a dozen of the watches, which retail for up to $36,000. However, as scores of dealers and collectors from around the world filed in, Mauro saw what he was up against.
"You can't even ask. They tell you how many watches you'll get," Mauro recalls. Patek Philippe held him to a six Nautilus limit.
With high-end watch prices reaching remarkable levels, knowing what to buy and what to pay is increasingly complicated. Hedge-fund managers, Wall Street bankers and newly minted moguls are stoking demand -- a process furthered as watches become a collecting obsession alongside cars and contemporary art. Devotees spend anywhere from $3,000 to upward of $500,000 on timepieces that in some cases only a watch buff would recognize as more than nice-looking jewelry.
In response, makers say they're working to boost production. They're rolling out new models that try to justify their lavish price tags with jeweled faces and cases made from precious metals.
Traditionalists eschew such external embellishments, preferring esoteric mechanical details. Harry Winston's Opus V, for example, has rotating cubes in place of hour hands; other watches have miniature chimes that can sound off hours and minutes. (For serious collectors, only men's watches qualify -- the dainty casings typical of women's models are too small to hold all of the intricate innards.)
What makes shopping for watches at this level somewhat mystifying is partly that so much of the price tag is at best on the inside and, in some cases, intangible.
Prices can vary dramatically for two watches that look remarkably similar. The A. Lange & Söhne Lange 1 and the Nomos Tangente Date Power Reserve don't look drastically different. But at a starting price of $24,000, the Lange 1 costs nearly 10 times as much as the Tangente. One reason: It's considered one of the most mechanically impressive watches. In addition, some watches hold their value much better than others.
The Wall Street Journal surveyed collectors, dealers and appraisers, poring over auction prices for more than 400 watches. The results underscored the challenge for shoppers trying to judge the value of elite timepieces. For example, while connoisseurs say the $36,000 Martin Braun Eos, which debuted in 2000, has the potential to gain in value, some watches that have already come up at auction haven't done so well. A Corum Bubble watch -- so called for its dome-shape face -- recouped only a small fraction of its original retail price, while the $860,000 Blancpain 1735 Grande Complication, one of only 27 made so far, recovered two-thirds of its value at auction last summer.
More from MSN Money and The Wall Street Journal
Walking a delicate line
Shifts in a brand's history can affect prices. Elite maker Blancpain saw the value of its watches fall in the secondary market after being acquired in 1992 by SMH Swiss for Microelectronics Watchmaking Industries, then the parent group of Swatch. Patek Philippe, on the other hand, has an unbroken history of family ownership dating to 1932. At auction, therefore, Patek Philippe watches consistently fetch record sums, including the more than $4 million paid in 2002 for a 1939 World Time model.As with the wait lists that have become a fixture elsewhere in luxury goods, watch makers are walking a delicate line -- catering to demand while at the same time maintaining the scarcity that gives an aura of exclusivity.
Audemars Piguet rewards longtime clients with first dibs on limited-edition watches sold at their own boutiques. Patek Philippe sets aside a handful of the brand's most highly coveted watches for top clients.
This pecking order is also sometimes used to drive sales of less popular models. Dealers such as Rome's Hausmann commonly bundle their sales of blue-chip watches with less popular models. That practice can force buyers who lack clout to spend tens of thousands of dollars on watches with less complex designs before they can get their hands on a highly coveted watch.
Manufacturers keep a tight grip on distribution. Watches are sold only through authorized dealers or through directly operated boutiques that vet customers to make sure they are not reselling the watches on the secondary, or gray, market. To stay ahead of the curve, seasoned collectors maintain networks of dealers around the world who can give them access to the hottest models and actively lobby manufacturers for preferential treatment or inside scoops on upcoming watches.
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