Forums Latest Members

Luxury goods sales plummet. Luxury watch buyer's market?

  1. scapa May 7, 2020

    Posts
    1,371
    Likes
    2,076
    I feel like there was a previous thread this point might have fit into, but I can't seem to find it, so here goes.

    Just read a Guardian article in their daily biz update about the drop in demand for luxury goods (unsurprising) and there's an interesting note on watch sales at the end of the article:

    https://www.theguardian.com/busines...covid-19-downturn-us-job-losses-business-live

    The gloom in the luxury goods sector is deepening even though some countries have started to relax their coronavirus lockdowns.

    Global sales of luxury handbags, clothes, watches and cosmetics are set to slump by 50% to 60% between April and June, compared with an estimated 25% decline in the first three months of the year, the consultancy Bain says in its spring report.

    For 2020 as a whole, Bain is predicting that luxury sales will fall by 20% to 35%, and it will take two to three years to return to last year’s sales of $303bn. Shops in China have started to reopen and Chinese consumers are expected to account for nearly half the market by 2025.

    Bain partner and report co-author Federico Levato says:

    “As consumers slowly emerge from lockdowns, the way they see the world will have changed and luxury brands will need to adapt.

    Safety in store will be mandatory, paired with the magic of the luxury experience:
    creative ways to attract customers to store, or to get the product to the customer, will make the difference.”

    Luxury accessories such as handbags have fared a bit better while watch sales declined the most, because of a lack of online sales platforms.


    Along with, I suspect, many of you here, I've bought several watches online, some successfully and others that I later flipped for reasons of fit, look, function, redundancy in a collection, visceral loathing, etc. I've had relatively (shockingly?) few in-store purchases that evoke the "magic of the luxury experience" -- and those have been in the UK/Europe or in the US, not in Canada. So my questions are:

    1) Do you prefer to buy a watch online or in person? Can you imagine an enhanced online sales platform that might more closely approach the in-store experience?

    2) Are luxury watches now really a buyer's market, and do recent pricing/offers now accurately reflect this?

    3) What do you see changing about how you approach a watch purchase in light of the pandemic?

    I'm sure there are many other question that might arise but was interested in thoughts on the what's-next in terms of the watch world.
     
  2. M'Bob May 7, 2020

    Posts
    6,344
    Likes
    17,956
    I think this only points to things at present, which I don’t dispute. However...when we all emerge out the other end of this, there will be joy, and a celebration of life including rewards for having made it through. And that will include people treating themselves to nice things, when they can swing it financially.
     
    whippetman01, Wryfox, OmeGez and 4 others like this.
  3. BlackTalon This Space for Rent May 7, 2020

    Posts
    5,160
    Likes
    8,343
    If sales of luxury handbags plummet, there will be a lot more money in many households to fund luxury watch purchases. Win-win.
     
  4. Chaz Goldenrod May 7, 2020

    Posts
    124
    Likes
    173
    1) I prefer online prices but in-person experience and safety. Generally the frugal side wins out and I buy online.
    2) I haven't seen much if any shift in the prices of pieces I am currently tracking on the secondary market. I think this could change soon and I would not be surprised to see the prices of modern pieces on the secondary market start to come down. Due to the limited supply my guess is hot vintage models will hold or continue to rise.
    3) My typical way of buying is to sell something languishing in my rotation to fund a new piece. My concern right now is that market value for used pieces may be going down, which potentially hurts my ability to fund something new. I am always watching for bargains, but it would have to be a really exceptional opportunity for me to pull the trigger on anything right now due to the economic uncertainty we are facing.
     
    JacksonPollock, Noddyman and scapa like this.
  5. jaspers May 7, 2020

    Posts
    372
    Likes
    531
    ad 1: My impression is that ADs either sell to folks who want to burn money on a watch there and then, or to folks on the waiting list for Rolex/Patek/AP/RM. Sales for the first type will fall during a downturn, sales for the second may stay stable. I go to ADs to handle watches that I eventually purchase online. There's this episode of the Fratello podcast in which one of the owners of Chrono24 talks about how basically all big watch brands deliberately have been ignoring online sales, because it would demonstrate how insane their margins are.

    ad 2: at this point, no—if ever. Most luxury watch brands practice resale price maintenance, only grey market sellers can discount based on demand. I don't ever see the market for brands that create artificial scarcity (Rolex, Patek, RM) become a buyers market, but also for other brands I'm hesitant that this market would ever tilt towards a buyer's market. Case in point: I've been getting emails from flagship stores offering stuff like free shipping, courier services and some discounts on last-year's models. That's a far cry from buyer's market characteristics.

    ad 3: well I'm not selling anything any time soon. Waiting out the storm. I do however make a habit to purchase anti-cyclically. I bought a house (for cheap) during the bottom of the last financial crisis. This month, I bought a new car and got a pretty sweet deal because the dealership had seen its sales plummet.
     
    scapa likes this.
  6. MCC May 7, 2020

    Posts
    589
    Likes
    529
    There might be a decline in demand as people struggle with the economics of Covid 19 but there will be a decline in supply too given that most watch manufacturers have ceased operations.

    The other thing to bear in mind is that one persons crisis is often another persons jackpot. There will be quite a few people that will see the pandemic as a route to making money.. I might well be wrong but I don't expect any dip to be long term.
     
    connieseamaster and scapa like this.
  7. Noddyman May 7, 2020

    Posts
    1,116
    Likes
    1,771
    I agree, quality vintage watches are still in high demand and prices are climbing if anything. Stuff I’ve been watching recently has sold higher than expected. Lockdown is providing more time and bringing more eyes to the table. This could all change in the coming months as money gets tighter.
     
    scapa likes this.
  8. jaspers May 7, 2020

    Posts
    372
    Likes
    531
    Fascinating stuff. Every crisis-induced downturn is similar, but also unique in its own way. We've never seen this before: demand surging at the start of a crisis because folks have too much time on their hands.
     
    scapa likes this.
  9. jhross98 May 7, 2020

    Posts
    1,294
    Likes
    2,184
    Stock markets are within spitting distance of highs

    Paper money is being printed at unprecedented rates

    I think good quality vintage will be more than fine

    Not sure about expensive modern watches

    Sotheby's sales online have been blowouts at pre covid prices and then some so online can work
     
  10. kanye_mouse May 7, 2020

    Posts
    60
    Likes
    48
    I agree - all publications seem to be boasting really high view counts. If people aren't buying now, they're definitely researching what they might want to buy when they feel a little less economic trepidation.

    Like in many other areas of the economy, the downturn just exacerbates the discrepancy between quality vintage watches in great condition and average examples. High-quality examples are as in-demand as ever.
     
    scapa likes this.
  11. sonicosa May 7, 2020

    Posts
    922
    Likes
    2,100
    I can't wait to tell my wife her handbag money is transferring to my watch coffers.

    I'll let everyone know how that goes. If you don't hear from me...
     
  12. Evitzee May 7, 2020

    Posts
    6,250
    Likes
    11,558
    Of course luxury goods have slumped, you can't sell luxury if you can't open your stores. And most luxury is still done in bricks and mortar environments. This will pass, there is a lot of pent up demand and much of it will return as soon as customers are able to return to the stores with some semblance of normalcy. That may take a few more months, but I expect very strong luxury sales in the back half of 2020.
     
  13. Martin_J_N May 7, 2020

    Posts
    1,394
    Likes
    2,683
    I would expect sales in virtually all marketplaces to be down due to stores being closed and manufacturing suspended, you cannot buy what isn't being made.

    Looking into the crystal ball I see fashion retailers desperate to clear older stock which will discounted but unless their spring summer range has been delivered they may not have a huge amount of new stock to replace it.

    Luxury goods I think will weather the storm better, here trends are not so seasonal so stock can go across a season or two before a refresh is needed, so there should be time to get new stock into stores for the autumn/winter campaigns

    What will determine how business bounces back will be the consumer, I am looking forward to the day when I can get out and do some retail therapy but I am unsure what I will buy, over the last couple of months my needs seem to have changed, my daily wear has been more relaxed and casual so yes that needs a bit of a refresh but for luxury items I am not sure that I have any great need, I have realised that life is about experiences and not what you own.

    Seeing friends and acquaintances being hit for 6 by this virus, some hospitalised, has focused my mind on a few things and one of those is the realisation that I have a great watch collection and whilst I like watches the need to add another to the collection its not important at this moment.

    So after all the babbling and meandering of this post what am I actually saying, I think that luxury goods will be fine, if anything prices may rise due to the initial shortage then fall back a bit. Our more basic needs, clothes, shoes etc are where any bargains are to be had.

    My 10c of uninformed, totally guessed, opinion.
     
    scapa likes this.
  14. Jonathan40 May 7, 2020

    Posts
    1,022
    Likes
    5,123
    Definitely agree with the above, I’m not a massive salary guy but do ok in the middle ground. Wife still working and no mortgage for the last 4 years so our disposable spend was silly really on a month to month basis. We can’t spend as nothing is open so I think quality spending will return soon and maybe some summer discounts but when the re-supply of 2020 products starts reaching stores people with cash are going to pounce. Vintage is a different arena and top quality will always appreciate and sell.
    Regards
    Jon
     
    scapa likes this.
  15. gemini4 Hoarder Of Speed et alia May 7, 2020

    Posts
    5,855
    Likes
    16,579
    Good news. Which Hermès dealer has a blue 35cm Birkin collecting dust? I need it by Sunday.:D
     
  16. vintage hab May 7, 2020

    Posts
    655
    Likes
    2,237
    I spend a lot of time researching online to find exactly what I want, then I shop online as well to buy it. This is true for watches, cars, TV, and anything else I need. I don't like the small-talk, sales pressure, or snobbism prevalent in most high-end stores. And I really enjoy the online discount.
     
  17. khanmu May 7, 2020

    Posts
    1,359
    Likes
    11,151
    I work at a competitor to Bain, and we see what’s happening in various industries in “Now”, “Next” and “Beyond” stages.

    “Now”— from say March until end of May lockdown, people aren’t buying new luxury watches for obvious reasons: staying at home and the shops are closed, no on-line shopping for the top brands, and uncertainty - you would have to be pretty certain of your financial status to spend that amount of money now. Vintage watches are the exception as they are seen as an asset/investment in the way that not all new luxury watches are.

    “Next” - say from end of lockdown for the next 18 months. Shops may start reopening, but how do you persuade people to go in? Sadly some will go bust. There may be resurgences of the pandemic leading to further mini-lockdowns or scares. Manufacturing and supply chains will take a while to restart. The wealthier socioeconomic groups who in the main are buyers of expensive new watches are likely to stay in and work from home as often they can. So watchmakers who don’t have an on-line presence and can’t ride this period out, will have to either buy, build or partner to get on-line. Only this past month here in the UK, Goldsmiths, a mid tier jewellery chain with a full on line presence, has started stocking JLC, and more surprisingly, Vacheron C watches for sale on-line. They have one for £45k, and I was tempted to click “add to cart”, but didn’t just in case I’d left the one-click PayPal shopping on...

    Beyond - Once we get used to on-line shopping, high end shops will become viewing boutiques with actual purchasing done on-line. Something like this has happened already with clothes, handbags etc. I think luxury watch sales volumes will eventually pick up, possibly even back to previous levels. A watch is still one of the few widely accessible and acceptable items of jewellery for men. Then again I’m also assuming that an almighty economic crash won’t mean we will be fighting in the ruins over the last can of beans...
     
    Nathan1967 and JacksonPollock like this.
  18. Drb477 May 7, 2020

    Posts
    54
    Likes
    82
    1) i would rather have everything just shipped to my front door. take-out, groceries, dog food or luxury watches. i don't care. i just want a watch, the pomp and circumstance of the luxury buying experience is just a hassle to me. Even more so now.

    2) i don't think pricing really reflects this, at least not yet. Been watching a few modern Rolex prices... pepsi, hulk, white daytona all are less than precovid but still well above msrp.

    3) as above, i'd rather just buy online. prices likely will be cheaper preowned or new grey than before but i wouldn't expect a fire sale/total collapse.
     
  19. Evitzee May 7, 2020

    Posts
    6,250
    Likes
    11,558
    Luxury customers like to visit the shop, see/feel/try on the product, and walk out of the store with it. No manufacturer is going to set up expensive boutiques if the eventual sales occur over the internet, what's the point? The boutique concept works especially well when the manufacturers can control production and distribution, like Patek Philippe, Audemars Piguet, and sometimes Rolex. But setting up showrooms so people can come in and see the products and then let them slip away for a possible later sale over the internet makes little sense.
     
  20. khanmu May 8, 2020

    Posts
    1,359
    Likes
    11,151
    I agree with you, it’s not a model that works for me. I prefer to look at it, and if I like it, but and take it with me. But it’s already started happening in the fashion sector, particularly in Asia and with the next generation, and is also not a million miles away from Tesla’s sales model. Net a porter operates like this - to start my wife went into stores looked and then bought on-line. Now she will happily buy a £2k jumper without looking at it first - on the basis that if she doesn’t want it, they’ll come and collect it. Serves me right for marrying a woman younger than me I guess..