"As the rich purchase fewer Swiss watches, producers have been buying back unsold inventory from retailers, and that’s showing up in export data. Almost 1.3 billion francs ($1.3 billion) worth of timepieces were sent back to the country in the first 10 months of the year as the industry slump deepens. That’s more than three times as much as the 398 million francs reimported in 2002, according to customs data."

Source: https://www.bloomberg.com/news/arti...ys-back-record-amount-of-unsold-watches-chart

 

That's a lot of watches. What happens to them?

 

How to increase the purchasing capacity at stockists and resellers in anticipation to Basel and all the new models to come...

Some are disassembled to keep the movements, some are destroyed. The watches from the higher segment are mostly being destroyed.

 

Anyone know what total percentage of consumer spending at the mid-to-high end of the market has moved to pre-owned or vintage? Wondering to what extent the vintage boom has impacted their bottomline, if at all...keeping in mind Rolex has an annual revenue of around 5 Billion USD.

It's clear many millions have been siphoned off into the vintage market over the last decade. But ...hundreds of millions?

 

I wonder how sustainable the buying back will be. If this slump continues I expect to see some drastic shifts in the market with some brands folding and others introducing lower price point pieces to remain competitive

 

And, after all, those companies need to sell and show attractive results. With the pipes full, there's a few chances to see good sales during Basel etc... If you have a better idea to clean up the stocks and increase the purchasing capacity of the retailers I think there is room for making a good money

 

Notice how close the peaks of the buy-backs are to both the Dot-Com Bust and the Great Recession. Makes me wonder what's in store

 

Whatever it is, looks like it's a wave that's about to hit. The question now is when the effects will start being apparent to the general public...

 

Take a look at a chart of stock share buybacks and you'll see an eerie similarity to the cliff the formed prior to the 2008 crisis.

As I've suggested many times, it's not if, but when the bursting of biggest credit/debt bubble in history accelerates, and the warning signs are indeed flashing. Here's another pungent chart to reflect on:

 

Is that a good sign for a buyers market ?

 

Stock share buybacks are usually done to inflate stock prices, so before a crisis happen you'll see these sorts of maneuverings by companies desperate to look good on paper. So yeah agree there.

Art and vintage cars also getting a bit frothy. Rich people seem to have a better sense of these things.

The housing market is still improving though so it may smooth out the crazy that is happening elsewhere, at least for a little while. I just looked at the price for the property in NY that I foolishly bought at the peak - it's still valued at around half of what I bought it for in 2006, but moving upwards slowly now. Good thing the mortgage is no longer underwater.

Its going to be a good buyer's market when everything starts collapsing. The downside is that you need to be liquid when this happens.

 

Tops aren't put in until the retail investor is in heavy.
That retail investor has been selling for 2 years
and just recently started to get their feet wet. A lot of that
selling has been finding a home in the bonds. If anything
we might see a bond tantrum with China and Japan net sellers
of Treasuries for the past year to keep there currency competitive
due to Yuan and Yen flight and US QE over and Fed increasing
interest rates.
Check for yourself.
http://www.yardeni.com/pub/ecoindiciwk.pdf

 

So that's where all the silver Snoopy's went. I do wish this was an actual article rather than cliff notes with a line graph, especially coming from Bloomberg.

 

@WatchVaultNYC Good observation. Spoiler: Good things probably not in store. (See also, Newton's third law.)

@nygiants Sure. A lot of casual collectors who might be in over their heads, seeing their investments and retirement plans in disarray, will move to downsize their collections. And that will happen in a wave that results in a glut of attractive collector grade options. And with buyers also feeling nervous and pressured – and wondering if the prices are finished going down, the prices will continue going down until they find a new floor. In market terms, a correction. The only questions (of course) are when and to what degree.

When it hits the fan, if you're liquid and not staring dumbfounded into a safe full of watches it could be an opportunity to scoop a grail.

 

Forgive my ignorance here, but are these buy-backs a standard practice? I wonder how it works as an independent AD...you buy from Rolex or Omega surely with some risk attached. And you can't decide to, say, only stock and sell silver-dialed Air Kings. And you can't continue selling models from 10 years ago either – at least not also keeping your AD status.

So I imagine there are a lot of rules about what and how much of what you can stock. Just curious how these buy backs take place and at what risk/loss to the AD.

Do we have any AD's here in the OF?

 

No - some watches get dumped to the grey market, and some get bought back if the parent company is concerned about a flood of grey market watches affecting sales further. From what I read a while back initially it seemed only Richemont was buying back watches, but others have probably started to as well.

 

First of all, Rolex is not one of the companies doing the buy backs. Second, this is an unusual of a process as the price reductions were back in 2015, so they're one offs that aren't part of a common business practice.

Most of the buy backs are big ticket, slow rotating merchandise to free up ADs cash so they can buy newer, faster turning merchandise.

Also, some of the buy backs came at a 2 for 1 exchange, I know some of the Richemont brands did this. So for every $2 they bought back $1 of new merch purchase was required.

 

Why not? If we benchmark a vintage Swiss watch at $1000, isn't that just 200,000 (or more) vintage watch transactions per reporting period?

 

Sure..., put it like that and hundreds of millions could over a decade easily be a billion. Also when you consider a collector or buyer at the higher end might be satisfied spending $15000 on a vintage piece (or two) instead of a larger amount on a brand new watch.