🚨 Welcome back to SDC Weekly! I finally made it onto one of those industry ‘must follow lists’ thanks to Ming Liu. Given the list also features Goldberger1, I am not sure this is something to celebrate at all… but hey, we’ll take the “W.”
Estimated reading time: ~23 mins
Admin note: Our unofficial editor was last seen boarding a hot air balloon labelled “Definitely Not a Pyramid Scheme.” While we await news, click here to read the corrected post online.
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📊 Inside Parmigiani’s Production Economics
Last week I shared details from a Parmigiani transaction document and asked readers to follow up with questions. If today’s post raises further questions, I’d be happy to do a third post.
PS: Jack Forster - I know you don’t like too much number-chat, so apologies in advance!
Service Revenue
A reader of the previous post raised a question about service revenue, estimating that “maybe 3000 watches coming in (~15% of active installed base of 20k?) at 1500 per service” could generate around CHF 4m annually. The document does confirm that Parmigiani offers comprehensive after-sales service including “spare parts, maintenance, repair, restoration, relooking” and notably that “services are not only offered to own clients and products but also to third-party collectors and timepieces.” Despite these words appearing in the document, none of the financial statements or other pages make explicit reference to service revenue as a separate line item. Trust me, I looked several times, and even tried to guesstimate what other line it could be hidden in; I concluded there was no reliable way to extrapolate it.
Anyway, even if the reader’s CHF 4m estimate proves accurate, this would represent around 6% of Parmigiani’s total revenue. Given the silence on service revenue, it is likely immaterial to their business model and bundled into other revenue categories. What is clear for Parmigiani is that, unlike Lange, their focus is on selling new watches rather than milking customers by servicing existing ones. What’s more, their relatively recent market repositioning (around 2021) means their installed base remains relatively small compared to established players.