Skip to main content

Has Swatch Encountered Diminishing Returns?

They say a picture is worth a thousand words, but I'm not sure it is worth a thousand points of data.
My Mission to Mars MoonSwatch and Fifty Fathoms homage by Steeldive.
The pictures from the last 10 days or so suggest that Swatch has delivered another blockbuster by way of their most recent "collaboration" with Blancpain, this one officially known as the Bioceramic Scuba Fifty Fathoms (SFF). Social media served up numerous photos of queues outside of Swatch stores ahead of the SFF launch on September 9. Plenty of aspiring owners waited long hours for their chance to buy the newest accessible riff on a design that typically commands a price in the five digit range. I'll admit that the photos convinced me that Swatch has a replicable formula for developing watches that are so in demand they can be flipped for a sizable premium.

As I've done before, though, I prefer to ask the data what, exactly, is going on with the release of this timepiece. And the data definitely tells a different story, particularly when we compare and contrast the Scuba Fifty Fathoms (henceforth SFF) drop with the MoonSwatch drop that preceeded it. One thing we'll see is that the recent Swatch releases are consistent with a principle economists refer to as diminishing returns. But let's start with the beginning.

I used an eBay seller tool to gather the selling price for MoonSwatches and SFFs that were flipped during a period of time spanning the official drop date. I've previously shared that asking price can be very different than actual selling price, so I was careful about using data on the actual price paid when a sale was successful. I crunched the numbers a bit and put together the graph presented below. This graph allows us to compare secondary market outcomes during the two launches.

Horizontal access is days from release, M=MoonSwatch, SFF = Scuba Fifty Fathoms.
Let's beging with the bars, which show the number of each watch sold: grey for MoonSwatch and orange for SFF (for real, Excel chose these colors on its own). The data tells us that flipping behavior was somewhat similar for MoonSwatch and SFF in that both watches were sold on eBay before the official launch date. Also, both watches saw the largest number of preowned sales on the launch date itself.

From there, the sales volume similarities end. Total eBay sales of SFF were much smaller in number than sales of MoonSwatch. There were 702 MoonSwatches sold over the nine days in question and only 208 SFF sold (70% lower than MoonSwatch flipping). Moreover, the trend in preowned sales volume was different for the two releases. For the SFF, sales constantly dropped over the days after the launch wherease for the MoonSwatch, there was an increase in sales in the third day after the release.

Now, it would be one thing if SFF sales volume was smaller because buyers love the watch so much they were not even willing to sell it on eBay. But pricing patterns suggest this is not what happened. The lines in the graph show the flipping premium, that is, the percent by which the sold price on eBay exceeded the retail price of each watch. The MoonSwatch premium peaked at 500% the day after the launch and then gradually decreased to a still-impressive 281% at the end of the sample. In contrast, the highest flipping premium for the SFF, at 229%, was lower than the lowest premium earned by the MoonSwatch. Moreover, the peak SFF flipping premium appeared two days before the watch was released (far earlier than the peak MoonSwatch premium). The lowest SFF premium, at around 80%, occured in the last two days of the sample.

The data is fairly clear: fewer SFFs were flipped on eBay and the return for reselling the newest Swatch "collaboration" was noticeably lower than the return to flipping MoonSwatch (I ran a formal test and the difference in returns is statistically significant). The data here is consistent with the principle of diminishing returns. This principle states that as more of an activity is undertaken, there is a smaller increment of benefit from repeating the activity. In undergraduate economics classes, we sometimes give the example of drinking a beer: the first one is really enjoyable but the tenth in an evening is typically not as fun (and may actually harm you).

In this case, it certainly appears that buyer reaction to the second Swatch collaboration was more muted, notwithstanding all those photos of long lines at boutiques. To be fair, it could be the case that flippers have decided not to use eBay to resell watches this time around, but I have no reason to believe that would be the case.

A natural question would be: why was collector response cooler this time around? I think there are a number of plausible explanations. First, it appears watch prices have continued to slide in recent months, so SFF may just be a victim of circumstances. Second, unlike MoonSwatch, there was a bit of a collision between the SFF offering and some of the "brand values" embraced by Blancpain. The OG Fifty Fathoms is much beloved by the ocean exploration community and Blancpain has responded by partnering with a number of ocean initiatives connected to ecology and sustainability. Right or wrong, the SFF is perceived as a plastic watch (Bloomberg coverage of this issue is absolutely amazing and suggests that Swatch's own patent describes bioceramic as a plastic). We know that the ocean environment has been heavily damaged by plastics. I wouldn't blame any collector who felt that SFF contradicted Blancpain's environmental commitment, thereby diminishing receptiveness to the new design. This type of issue did not crop up in the case of the MoonSwatch (although, to be fair, as I've written with co-authors, pollution is also a problem in outer space, but this problem has less to do with plastics).

At the end of the day, Swatch has managed to pull off another release which did generate a lot of excitement and, yet again, deliver a watch earning a premium on the secondary market. The difficulty of pulling off this kind of product launch should not be underestimated, and Swatch should celebrate their successful sequel. Nevertheless, some careful consideration is owed to the fact that the return to releasing a collaboration with an exclusive luxury brand appears to have diminished. At some point, the return may become low enough that it may not be in the interest of the Swatch Group to continue this strategy, at least in the short run. Only time will tell.
My book on the history of Rolex marketing is now available on Amazon! It debuted as the #1 New Release in its category. You can find it here.

You can subscribe to Horolonomics updates here.

Comments

Popular posts from this blog

Hot Take: Preowned + Vintage are the Greenest

I applaud the effort by watch manufacturers to minimize their contributions to climate change. Globally, we've made some progress towards "bending the curve" of greenhouse gas emissions, which is the good news. This figure from climateactiontracker.org shows that, even under an optimistic scenario, some increase in global temperatures is unavoidable. The bad news is that we clearly need to do a whole lot more to get to a point where we halt the growing cost of environmental degradation. As the graph I've presented here shows, existing policies are not enough to ensure a healthy planet for our children, their children, and all future generations. As Elizabeth Doer's outstanding coverage on Quill and Pad shows, the watch industry is discussing the challenges ahead and developing contributions to the fight against climate change. These include the use of recycled and recovered materials in manufacturing as well as requiring transparency in how raw materials are

Closet Currency: Let's Keep It Real

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

Scabby the Rat Visits His AD

An inflatable rat in front of a Rolex property in New York City, source: Google Maps. While following up on a recent Instagram post, I spent some time reviewing properties owned by Rolex in the New York City metropolitan area. One property, in particular, caught my interest because it seemed to be "off the beaten track." In order to learn more about it, I used street view in Google Maps to access some pictures of the building. As I virtually strolled down the middle of the street, I approached the building's main entrance. Surprise doesn't even begin to describe my reaction when I saw an inflatible rat positioned on the sidewalk facing the door. This thing was big, maybe 12 feet tall. A carnival-esque rodent was the last thing I expected to see near the entrance to a Rolex building. There were three people standing nearby, one wearing something like a construction hat. Having seen a number of labor-related demonstrations in the recent past, my gut told me th