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New York - GVA: a Special Relationship

The watch industry has seen a fair bit of dynamism in recent years. An ownership share in Breitling has, apparently, changed hands. Richard Mille turned down an offer from Kering and, instead, Mille's children are taking an increasingly prominent role in the business. The publicly listed retailer Watches of Switzerland (WOS) is expanding geographically and diversifying their porfolio to include vintage.

One of the more significant developments, though, is definitely the acquisition of the retailer Tiffany's by the luxury group LVMH. This change in corporate ownership, alongside the departure of a prominent salesperson, created some murmurs about whether a longstanding relationship would continue. The temptation to pull Patek Philippe from display cases and replace the crown jewel of Swiss watchmaking with one of LVMH's own brands may prove simply too tempting for Tiffany's new owners. Would Tiffany's and Patek Philippe find a way to continue their relationship, one which dates to 1851?

Today, we learned the answer, and it is definitely "yes." The two companies announced a Patek Nautilus 5711 sporting Tiffany's trademark blue livery.
The flags of New York City (top) and Geneva (bottom).
The watch is available in a limited run of 170 examples. That production volume is not arbitrary, given that this year is the 170th anniversary of the "special relationship" between Patek and Tiffany's. The words "Tiffany & Co.," once again, adorne the watch face and, in microtype, LVMH is marked on the display caseback.

Predicting the future is not easy. But the long Nautilus wait lists ensconsced in Patek boutiques around the world probably gave Patek CEO Thierry Stern a great deal of confidence that all 170 watches would be spoken for in the blink of an eye, even at the retail price of $52,635. What is particularly interesting to me, though, is that this is the second time this year that one of the "holy trinity" Swiss watchmakers (Patek, Audemars Piguet and Vacheron) has arranged an auction to accompany a product launch. The first took place back in March, when Audemars Piguet released the Black Panther Royal Oak.

Today, we have Phillips auction house offering the new Tiffany X Patek Nautilus as the first lot in their upcoming auction in New York. One data point (the AP Black Panther launch) can be a fluke. But now we have two, and with two, you can draw a trendline. I have previously mentioned that auctions are the natural solution to the ever-hated practice of flipping (wherein someone buys an "unobtainium" watch and then immediately resells it at a profit because the secondary price exceeds the retail price). At auction, prices will naturally rise to the market-clearing level so that the number of watches available is exactly equal to the number bought at the auction-determined price. There will not be wait lists and there will not be flipping (for the most part). There are other alternatives, such as scaling up production to meet demand, but at least one brand has ruled this out.

In DMs, Hodinkee's Cole Pennington made the important point to me that auction distribution might end up excluding those who could pay the retail price but may not be able to muster the higher price realized at auction. He is absolutely right. This might make it even more difficult for new collectors to access sought-after references. There is even a solution for this, though. For example, manufacturer's coupons are often used by pharmaceutical companies to offset some of the high prices charged for medications. This is no doubt an important issue which brands must consider and resolve satisfactorily.

Perhaps due to this issue, and a few others, we have yet to see brands fully adopt auctions as a new distribution model. In all likelihood, we are quite far from that possible end state. However, luxury watch manufacturers have a reputation for caution when it comes to adjusting business practice. It has served them well throughout history. It remains to be seen if 2021's nexus of auction with watch release will morph into something more seismic for the industry. I, for one, look forward to seeing what develops in 2022.


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