The recently announced Swatch x Audemars Piguet collaboration caused chaos this past weekend, with at least 20 Swatch stores, from Chicago and New York to Atlanta and Houston, forced to close due to larger-than-anticipated crowds.

For those who aren’t chronically online, hundreds of thousands of customers swarmed Swatch stores over the weekend to purchase the “Royal Pop” collection — a $400 pocket watch made in collaboration with luxury watchmaker Audemars Piguet. Swatch says the collaboration isn’t a limited release, but that hasn’t stopped resellers. More than 800 pocket watches have already been resold on StockX, with prices ranging from $1,500 to $3,000 (4-8x higher than retail).

For Swatch, the strategy is straightforward. The brand’s net profit collapsed by 88% last year, so it now wants to book a win by replicating the MoonSwatch partnership it did with Omega. By creating a cheaper version (plastic vs. steel) of Omega’s flagship Speedmaster watch, effectively reducing the price from $7,000 to $260, Swatch generated more than $1 billion in additional revenue in two years.

But what about Audemars Piguet? Why would a luxury watchmaker cheapen its brand by partnering with a company most famous for making plastic watches?

Well, there are several theories online. The simplest answer is that Audemars Piguet just wants to make more money. Given that its popular Royal Oak watch retails for more than $40,000, the Royal Pop collaboration can serve as an entry-level product without compromising Audemars Piguet’s core pricing model. And by outsourcing all production, marketing, and sales to Swatch, Audemars Piguet can generate hundreds of millions of dollars in additional revenue without increasing its production of high-end watches or changing its boutique model.

But wait, there’s more! The business strategy gurus on Twitter will tell you that this collaboration isn’t really about money at all. Instead, Audemars Piguet is working with Swatch on a cheaper version of its most famous watch because it recently lost trademark battles in the United States and Japan. So, rather than sit back and wait for cheap fakes to flood the market, Audemars Piguet can protect its brand by moving quickly to introduce an “authorized” affordable Royal Oak.

Admittedly, these theories sound pretty good, especially the second one. If your brand’s intellectual property and trademarks are no longer defensible in two of the world’s largest markets, rushing an entry-level product to market that also happens to make you hundreds of millions of dollars sounds like a 4D chess move.

But there’s just one problem: Neither of these theories is correct. Audemars Piguet isn’t partnering with Swatch because it wants to make more money or beat cheap fakes to market. The real reason is much more interesting (and strategic).

Let me explain…

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