For the last 5-7 years, many brands, auction houses, and dealers have painted themselves into the corner of financialized watches. We’ve seen even the highest levels of industry leadership lean into this narrative, tying the value of a watch and brand to its price.
For example, a few years ago, CEO of Audemars Piguet told a room full of collectors in Singapore that the company’s growing number of references trading above retail on the secondary market is connected to the growing value of the brand itself.
This narrative has worked wonders with a red hot, bull market. But now the tides are turning.
Similar to other markets globally, the watch industry is starting on a downward trend. Phillip’s recent auction in Geneva shows that there is a significant drop in hammer prices across the board (except on the most extraordinary timepieces). Mainstream and small independent brands alike are down anywhere from 20-40% compared to auction results earlier in the year and at the end of last year, 2021.
I have no desire to speculate how far prices will continue to drop, nor will I celebrate, as many do, the coming “buyer’s market”. That engages in the same price-focused conversations that I generally find unexciting. Rather, my desire is to examine how the industry may pivot its sales and marketing messaging in a downturn.
How do you sell watches if they don’t appreciate in value?
Redefining value in the watch industry
Buying and selling watches as a financial asset is relatively new in the industry. If we look back, we can find many other tried-and-true ways that brands, dealers, and consumers evaluate and pitch the value of a luxury watch — ways that the industry can focus more on in the fallout of watches becoming less financially lucrative for buyers.
These old sales propositions include:
- Status – buy luxury watches to participate in conspicuous consumption
- Style – buy luxury watches to signal that the consumer has “taste”
- Longevity – buy fine mechanical watches to pass onto the next generation (Patek Philippe’s iconic advertisement)
- Patronage – buy a watch to support a brand or, more often, a small independent artisan
- Craftsmanship – buy a watch to appreciate and own something finely made
- Acceptable jewelry for men – buy fine mechanical watches because it’s the primary acceptable form of jewelry for men
- Ambassadors – buy a watch for the parasocial relationship (I’m a huge Nadal fan, Richard Mille will always do something for me)
We’ve all seen these values and propositions before. They’re used in other luxury markets as well — from fashion to cars and art. To be clear, these values or sales propositions work together; they bleed into one another and can sit side by side with the “financial value” proposition.
But there are also new sales propositions — new reasons to buy a luxury timepiece — that the watch industry can and should consider. These are more self-aware of the role of mechanical watches in the modern world:
- Offline – buy mechanical watches to disconnect from work and modern tech (Timex’s great billboard ad)
- Art – an “elevated” form of craftsmanship, buy a watch to own and participate in aesthetics and conceptual ideas
- Community – buy a watch to become a member of a collector community (often comes in the form of group buys)
This is not an exhaustive list — I am sure that some of you reading this will have others to add.
Moving beyond the financialization of watches is not so simple
Whether it’s with the old or new sales propositions, the luxury watch industry will struggle to rip consumers from the “flipper mentality” that many encouraged or tacitly accepted over the last market cycle. What’s tradition and heritage compared to financial returns? What’s full of status and style that loses money? Financial returns have, themselves, become the ultimate indicator of luxury.
It’s for this reason that a simple return, as wonderful as that may be in theory, is simply off the table for the industry. Watches as an appreciating asset have cannibalized all other value propositions. And maybe the watch industry likes that? It is possible that the luxury watch industry will continue to lean into the financialized messaging, speaking of this downturn as the “normal” rise and fall of pricing in any market. But it’s certainly not a very savory proposition and will halt many buyers in their tracks as they try to time the bottom.
From brands to dealers to auction houses, my hope is that the industry moves away from its direct and indirect promotion of timepieces as financial assets. My hope is that the industry uses this downturn to ask hard questions, the way hard questions were asked during the Quartz Crisis. Then, the existential question was, why buy a mechanical watch when quartz is more accurate and significantly less expensive? Now, the question has become, why buy a luxury watch if it’s primary purpose isn’t to increase in value?
Another day with the beast,