Has the Crypto-crash Really Burst the High-end Watch Bubble?
If the headlines of summer 2022 are anything to go by, the secondary luxury watch market has tanked, dragged down by the crypto-crash.
Not only have prices plunged but the market is suddenly awash with usually impossible-to-find Rolex and Patek Philippe models, sold by “crypto bros” looking to recoup their losses. And the phenomenon is global, spilling over into the Chinese market.
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Is the blow to the secondary watch market fatal? Not quite, according to analysts and industry players. While prices have certainly gone down by double-digit percentages, not all brands are equal and neither are models within product families.
“This is mainly the super iconic models from the super iconic brands,” explained Tim Stracke, founder and co-chief executive officer of luxury watch marketplace Chrono24.
He named the Patek Philippe Nautilus, Audemars Piguet’s Royal Oak and the Rolex Daytona timepieces as “the glorious three” that received maximum hype and whose prices peaked in April before embarking on a steep slide.
And when Austen Chu, founder and CEO of Hong Kong-based watch platform Wristcheck, said it had been “an incredible bull run from March 2020 until April-May 2022” that saw prices skyrocket up to 300 percent for a number of “blue chip watches,” he was referring to the same timepieces — those “glorious three” and a few additional Rolex references.
“It’s a very, very, very small percentage [of watches] that is going through this high volatility,” said Charles Tian, founder of WatchCharts, a comprehensive market research platform for pre-owned timepieces that looks at some 21,000 watch references and bases its findings on end-user transactions alone. “We’re talking about the 0.1 percent of watches here.”
Ultimately, only those who had entered the market near its spring 2022 peak and were hoping to turn a profit short-term might get burned.
WatchCharts’ watch market index, tabulated from 30 popular models with high trade activity, showed a 15.5 percent slump over the past six months, which brought it back to its January 2022 levels. It remains up nearly 14 percent if looking at the one-year picture, and has leapt nearly 90 percent since 2019.
To wit, with the gains of the first half of 2022 wiped out, a Rolex Cosmograph Daytona fell from $47,600 to $35,420. That’s roughly the price it was in late 2021 — and still more than double its $14,550 retail price.
Year-over-year, Vacheron Constantin’s secondary market prices rose 38.5 percent, and Audemars Piguet and Patek Philippe were neck-and-neck, with increases of 27.3 percent and 27.2 percent, respectively, according to WatchCharts.
To pin the recent correction on the collapse of cryptocurrencies alone would be inaccurate.
Though prices were driven by an influx of new consumers seeking to convert their crypto-riches into real world assets, the frenzy around particular models — like watches from Audemars Piguet’s Royal Oak family and the steel version of the Nautilus 5711 — was amplified by their discontinuation, explained Mario Ortelli, managing partner of strategic mergers and acquisitions advisory firm Ortelli & Co.
Continued geopolitical uncertainties, including the war in Ukraine, looming recession and a succession of lockdowns in China, also weighed heavily on secondary market prices.
“Watches are an asset class that is still exposed to the same variables as collectibles like art or collectible cars,” Ortelli said. “Therefore the same triggers in the economic cycle — inflation, weak prospects, high unemployment — will make prices fluctuate.”
The increase in available units may not be solely directly related to the crypto-rich becoming cash-squeezed and looking to sell off their assets, either.
Years of skyrocketing prices attracted plenty of intermediates looking to tap into a lucrative segment, with secondhand luxury merchants often stockpiling coveted models to drive prices up.
“Now the [party] is over, these merchants are scrambling to cash out, but consumers only want to buy when the prices are propped up,” said Ting Zhou, dean of Yaok Institute, a professional research and consulting organization for high-end lifestyles in China.
And as far as watch experts are concerned, the writing had long been on the wall about this secondary market bubble.
“The whole market got out of any reasonable proportion because of those three brands,” explained watch industry veteran Oliver Müller, founder of consulting firm LuxeConsult.
Müller had started to expect what he termed “a strong correction” when it became apparent that would-be watch owners were facing “a premium on a premium on a premium,” due to numerous intermediaries.
Looking at the broader picture of the high-end watch segment, while there was “healthy softening of the market of the glorious three,” there are “a lot of other iconic models that have very healthy and stable prices,” Stracke noted.
If anything, in his opinion it’s “a consolidation of the market” that is seeing prices return to more reasonable, but still high, figures while leaving space for other models to climb.
As an example, Chrono24 pointed out the Omega Speedmaster collection, which got a boost in visibility thanks to the Moonswatch collaboration with Swatch, saw its demand and prices rise. The marketplace has also seen strong demand for watches from Cartier and Breitling.
On China-based watch forum and platform Xbiao, it’s Cartier’s Ballon Bleu model, the Omega Co-Axial Chronometer in the Speedmaster family, the Rolex Oyster Perpetual Datejust or Longines’ Watch Hydroconquest Perpetual that are holding their own.
Wristcheck’s Chu pointed out that “during the same correction period, other subcategories such as vintage watches or independent brands took much less of a hit – with many independent brands still achieving incredible auction results, such as F.P. Journe. Other independent brands such as MB&F, Moser, Urwerk and Akrivia are also steadily rising in secondary pricing.”
If there are more units on the market, there’s no shortage of buyers, either.
Chrono24 saw its trading volume leap by more than 50 percent year-over-year in the first half of 2022, under the combined effect of rising prices and increasing sales.
French luxury resale platform Vestiaire Collective also said the watch category was not showing signs of a slowdown. If more of its members are listing timepieces, it also reported a year-over-year increase in sales.
The decrease in prices at the very top of the segment has already had a positive effect on other models that trade above retail, like the Rolex Submariner model. “Once prices came down, demand [and] purchasing volume increased,” Stracke said.
In fact, this might be just a short breather before further climbs, if he is to be believed. “If I wanted to buy one of these iconic three models, I’d probably wait a little bit. But for other models, I think it’s a good time to get in,” Stracke remarked.
Given the volume of the global secondary market has grown an average of 10 percent every year for the past decade, according to Stracke, he expects it to continue growing, “especially in an inflationary scenario” and with continued limited supply.
The primary market is also likely to stay under pressure, even if the recent dip in prices will have eased the pressure on brands — fractionally.
Take Rolex. Müller estimates that although the watchmaker sold just north of a million units last year, “the real natural demand of the market for Rolexes is probably somewhere between 30 and 60 percent above what the brand supplies today.”
Whether demand will continue to be as sustained in future is anyone’s guess but Müller said he’d “seen the Daytona [be] for 40 years the grail watch for anyone.”
Asked what impact this might have on the primary market, Chrono24’s Stracke had little hesitation.
“What we hear is that the waiting lists are as long as they used to be before this little market correction,” he said.
With contributions from Denni Hu.
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