Update: Certified Preowned Vintage

A short post about an emergent service from brands: the certified preowned vintage watch. In a prior article I discussed the plan by Audemar Piguet to purchase preowned watches, refurbish and refresh them, and sell them through their chain of boutiques. When I wrote my prior article the idea was basically "blue sky" in the watch industry and I shared some skepticism that it would succeed.

Well, we now have another data point to consider. Vacheron Constantin has launched a certified preowned service. They chose to do so in Melbourne, Australia and we can tip our hat to the folks at Time and Tide Watches for their outstanding coverage of the launch. Vacheron is calling this service "Les Collectionneurs" or "The Collectors" (I think, I don't really speak French), you can see the official descsription here. And it appears that this first tranche of nine timepieces, refurbished and accompanied by a new two year warranty, has been something of a success. The selling boutique just opened in October. Three of the nine timepieces have already sold in the span of five days, which is very impressive.

It remains to be seen whether this new service will become more widely adopted or thrive in the long run. But I will share my congratulations to Vacheron for standing at the forefront of new offerings to consumers. It is one of many ways they continue to lead the world of horology.

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Scarcity as Strategy in Horology

Watch industry observers have spent a lot of time dissecting the unavailability of steel Rolex sports models this year (submariner, GMT, etc). These timepieces are presently impossible to buy at the manufacturer's suggested retail price (MSRP). You can acquire them outside official channels but only at a multiple of retail. For one summary of this topic check out episode 48 of Hodinkee radio below.

I've listened to a lot of explanations and, frankly, almost all of them miss the point. While I don't know everything I should about perlage I do know something about economics. And economics explains almost everything about this watch industry phenomenon.
Horolonomics 101Rolex is involved in rationing: a shortage which is, for the most part, manufactured and intentional. With this discussion I will explain two things: 1) what rationing does and, 2) why Rolex would do this. The TL;DR on what follows is that the shortage:
is inefficient.Creates profit for watch buyers.Builds …

The Luxury Watch Ban Hammer

Word is beginning to spread that buyers of certain luxury steel sports watches have unwittingly entered into a sacred pact with certain brands. The pact is this: if you are eventually selected off an unimaginably long wait list you may buy a watch that isn't supplied in great enough numbers. But you may not sell it. If you do, you will be prohibited from buying that brand again. The brand will drop the ban hammer.

In an article published Nov 24, 2019 in GQ an anonymous author states that after having quickly sold his Patek Philippe Aquanaut 5167 for a tidy profit, "Patek Philippe knows that it is not [his] anymore. They found out and [he is] not sure how. [His] name could be potentially circulated among other Patek ADs, [he is] told. The AD (who [he] had a great relationship with) will no longer offer [him] 'hard to buy watches'."

And from Watchpro we have: "people that do manage to buy an investment-grade watch and flip it for a profit are being hunted …

Haute Horology: Breaking the Law (of Demand)

In prior articles I have discussed the unorthodox role of prices in luxury watch markets. For example, since watches can serve as a highly convenient source of portable liquidity, when prices go up the liquidity benefit from a watch is greater because you can carry around more value on your wrist. This means that, at least along one dimension, buyers might be more inclined to buy a watch as prices go up.

The watch market, then, serves as an exception to the prevailing notion that as a product gets more expensive people buy less of it, otherwise known as the law of demand (a law which tends to hold for almost any product). In this article I will explore additional reasons why the law of demand doesn't apply to luxury watches and, further, show that many features of the luxury watch market can be explained by nontraditional consumer behavior. Fair warning: I have steered clear of the math which we economists use to investigate markets but that will have to end here. I will re…

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