In 2015, entrepeneur Elizabeth Holmes had an estimated net worth of $4.5 billion. On January 3, 2022, she was found guilty of fraud. In the interim, her net worth was reestimated as zero. One of the most important lessons from the Holmes saga is that falsified data can open the spigot to great riches. A whistleblower testified that Holmes' company manipulated data in order to pass certain tests. We can't lose track of the fact that a spreadsheet always begins empty, and the process whereby that spreadsheet is filled is just as important as the entries in the cells.
This month, news broke of a LuxeConsult / Morgan Stanley (hereafter LM) report purporting to describe the state of the luxury watchmaking industry in 2021. It generated a lot of attention. I was a bit bothered by the published pie charts and tables, though. I could not find a copy of the report anywhere. Moreover, the authors assert very specific revenue figures for Rolex, whose secrecy is the stuff of legend. I just couldn't figure out how the "spreadsheet" behind this report was built, which gave me great pause.
I'm not a fan of believing numbers when I can not understand the methodology behind them. My own analysis of the report suggests it is inconsistent with a financial statement from a Swiss watch group which was audited by a third party. It also seems inconsistent with numbers reported by both a trade association and the Swiss government. I will explain.
First, the major headline from the LM report was that, in 2021, Rolex had a 28.8% market share with sales of CHF 8,050 million. From this, we can deduce the report's implied claim for the watch industy's total sales. Let's call this total sales number x. The report implicitly states that 8,050 / x = .288. Solving for x, we get CHF 27,951 million. Here is where the data story starts to fall apart.
According to industry group Federation of the Swiss Watch Industry FH, total watch exports from Switzerland were CHF 22,297 million in 2021. If the LM report is believed, buyers in Switzerland must have bought CHF 5,654 million in Swiss watches. This is the total global sales alleged by LM minus the amount of Swiss watch production exported according to FH. Total sales in the top two markets for Swiss watches, the United States and China, was CHF 6,045 million. I find it hard to believe that a small country like Switzerland, with a population of roughly 8.6 million, bought almost the same amount of watches as two countries with a population totaling 1.4 billion.
Let's look at it another way: in 2019 (the last year for which statistics are available), Swiss authorities report that households spent CHF 14.03, on average, on jewelry and watches per month. There are roughly 3.9 million Swiss households. This implies that their annual spending on jewelry and watches was CHF 656 million. That is nowhere near the CHF 5,000+ million of purchasing they would have to carry out if the LM number were accurate. It is very unlikely that Swiss households increased their watch expenditures by more than a factor of ten between 2019 and 2021. This is strike one against the LM report
Let's next turn to the Swatch Group's annual financial report. Their audited financial statement indicates that the group sold CHF 7,014 million of watches in 2021. The published LM report lists market shares for some major brands owned by the Swatch Group: Omega, Longines, Tissot, and Breguet. The market share for these companies, according to the report, is 17.2%. Using the (probably erroneous) total sales number described above, this implies Swatch Group sales of CHF 4,745 million, which is roughly 2/3 of the watch sales reported by the Swatch Group. Granted, there is 20.5% of the market attributed to "Others" in the LM report. I suppose it is possible that Swatch Group's portion of this 20.5% will harmonize the two figures, but I highly doubt it, especially given the "strike one" described above.
In summary, trade statistics, Swiss authorities, and audited financial staements from the Swatch Group contradict a watch industry report that is not publicly available. Without compelling argumentation from LuxeConsult / Morgan Stanley, it is not advisable to accept their claims regarding the watch industry in 2021.
Although there are still some who debate the point, much evidence suggests that the first watch to check the requisite boxes for scuba diving (rotating bezel, luminous material, automatic winding and, obviously, significant water resistance) was the Fifty Fathoms introduced by Blancpain in 1953. This year marks the 70th anniversary for the watch and we’ve already seen “Act I” of a commemorative sequence of watches. In early February, a limited series of 210 watches with special dial marks (reading “70th Anniversary” and the series number of the watch) was introduced, 42mm in size. Panelists at the Blancpain preview event earlier this week. Earlier this week, I joined a number of guests at the Blancpain boutique in Manhattan for a preview of the Fifty Fathoms “Act II.” The event was truly global, with participants “tuning in” to a live stream featuring five hosts. Marc Hayek (Blancpain CEO and President) and Marc Junod (VP and Director of Sales) broadcast from Switzerland while Jas
Rolex's relationship with automotive racing is, at this point, very well-established. A Tudor sponsored car taking the checkered flag in Japan. A clearer photo is later in the post. Formula 1 and Rolex marked a decade of official partnership this year. One of the brand's most successful designs is named after a famous race: the Daytona (500). And, the record-setting Paul Newman Rolex Daytona which sold at auction in 2017 was worn by Newman during his illustrious career on the race track. In this post I will detail a lesser-known relationship between Rolex and automotive racing. In the 1960's through the 1970's, Tudor and Rolex sponsored at least one race car in Japan. I initially learned about this sponsorship through my conversation with Elias, which was also the basis for my prior post on Tudor. While I am not the first to write on the subject of Rolex/Tudor auto racing in Japan (for example, see the posts here and here ), I believe this post will be one of th
Today, I learned a new term from an Instagram post by @ebaywatches. That term is "closet currency." No, this doesn't refer to someone stacking bills in some dark corner of their wardrobe. Instead, closet currency is the value that is stored in items that you put in your closet. At least, that's what I think it means. I arrived at this conclusion since eBay's post featured YouTuber Jose Zeniga describing the monetary value of different luxury watches. Zeniga also described a "luxury exchange" that eBay set up in NYC. In essence, you could take something out of your closet, go to the exchange, get an appraisal value, and then use your item and its appraisal to purchase another item that was available on the exchange. The formal definition of money is anything that is generally accepted as payment. In essense, eBay set up a NYC micro-economy in which almost any closet item could be used as money. Money is actually a pretty complex topic. It took a lo
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