You can now buy a pre-owned Rolex Milgauss for nine grand – less than the price of a new one. Why you’d buy a watch named for 1000 gauss magnetic resistance that’s 15X less resistant than an OMEGA is between you and your Rolex addiction counselor. Although I do love the Rollie’s Reddy Kilowatt seconds hand. Anyway, market stabilized! But don’t get too comfortable – another luxury watch shortage is on its way . . .
To understand the danger/opportunity ahead, we have to first put the blame for the horological tulip mania where it belongs. The American luxury watch market hyperinflation was China’s “gift,” via a worldwide pandemic. The moment Tom Petty [should have sung] LOCKDOWN! the market shifted online – and exploded like never before.
Consumers were all-cashed-up with nowhere to go. Showrooms were empty. Shuttered. Huge numbers of horology-minded homies went online and bought luxury watches. As did many of their global counterparts. At the same time, luxury watch manufacturers went off-line.
Supply down, demand up, prices up. And now that the Pandemic panic seems like a distant fever dream? Supply-up (production on-stream), demand down (lots of other stuff to buy, inflation killing the mood), prices down (flippers flipped out). Ain’t capitalism grand?
If you bought a Rolex Daytona or similar at the top of the market, you may not see it that way. You might think capitalism is not your friend. But it’s true: capitalism is a rising tide that lifts all boats (however unequally).
Say what you will about oppression and corruption, what Winston Churchill called “the worst of all economic systems – except for all the rest” has raised the global living standard. And that a problem for luxury watch aficionados on a budget. To help us read the tea leaves, enter the dragon . . .
Back in the day, TTAW highlighted the danger of the Swiss watch industry’s reliance on China (including Hong Kong). Called it! While America and Europe have emerged from lockdown, China’s zero-tolerance COVID policy has extended their population’s misery. Protests against that policy and the Party’s tightening grip on the economy have killed the whole luxury watch shopping vibe.
Swiss watchmakers dodged that bullet by re-allocating supply to America and Europe – another reason why pre-owned luxury watch prices in The Land of the Free have dropped. The obvious danger to the current relatively quiescent market: Chinese demand returns and grows, supply can’t meet demand, prices go back up.
Actually, it’s could be worse/better than that. Our man Rob Corder at Watchpro raises the red flag on luxury watch demand coming from a new quarter. Actually, the flag’s colored saffron, white, green and blue.
There’s your Joy of Capitalism in action: India. A huge, relatively free market is increasing consumer spending power to the point where tens of thousands of people want to buy a really expensive time-telling device made of tiny little pieces of metal, plastic and crystal working in perfect harmony.
So even if the Chinese luxury watch market doesn’t return to the go-go years, India may take up the slack – and then some. How do we know this isn’t just idle speculation? First, I’m never idle. Second, Rolex is building an enormous new factory.
If conservative old Rolex is spending billions to scale-up production, if they reckon the world market can soak-up way more product than their current million-pieces-a-year pace, they’re not thinking about capturing a larger market share of the existing market. They’re thinking about catering to a larger market.
Something else to consider: Rolex, OMEGA and Grand Seiko have automated a significant proportion of their manufacturing process. These brands can expand production relatively quickly – compared to watch brands reliant on traditional watchmaking skills.
It takes a long time to develop new watchmaking talent. That puts a limit on throughput. (As does the unionization of Swiss watchmakers, but that’s another story.) Unless the top tier watchmakers automate – as if – there will be a disconnect between supply and demand that favors the watchmaker. Just ask A. Lange & Sohne.
TTAW warned readers that the luxury watch bubble would burst. And now we’re warning you that the luxury watch market will sink further, plateau and then start another climb. It will be a slow ramp-up – nothing like the roller coaster ride we saw over the last two years. Unless it is. As we learned during our two weeks to flatten the curve, tempus fugit.