There's a quip in the world of finance: "nobody rings a bell at the top or bottom of the market." AI generated image of someone looking for the bottom of a chasm. If you're on a trading floor, you know it is the start of the day because of the "opening bell." But, if you reach the low point for prices, there is no bell. Everyone just has to do their best to figure out if prices are finally going to start increasing again.
This is certainly true of watches. According to Chrono24's Chronopulse index of watch prices (full disclosure, I've contributed to this index), we've just begun the third year of a "bear market" for preowned watches. Chronopulse overall index of late.The rate of decrease in prices has certainly slowed, but there hasn't been an overall turnaround in prices just yet. It is hard to say if we're at the bottom or if we're just on a gentle downslope that will continue for the near term.
Right or wrong, I sometimes use emails about discounts on preowned watches as a bellweather for market conditions. My thinking goes like this: at some point, a shop or preowned dealer spends time determining a price that will: a) earn an adequate markup while b) also ensuring that a watch doesn't occupy inventory for an intolerable length of time. A subsequent discount suggests that the watch has remained unsold for too long which, in turn, means the market is softer than the seller believed at the time they set the price.
A few days ago, I received a "sale" email from a very well-known preowned shop. I started looking through the sale prices and they seemed far more steeply discounted than I was used to seeing, particularly from this seller. But, I prefer actual calculations (rather than informal impressions) so I scraped the original and sale prices from the seller's web page. The discounts were, in fact, fairly steep.
I pulled the prices and discounts for 33 watches that were still available for purchase when I opened the "sale" email. The distribution of prices from the sale, nonparametric estimate. Each timepiece was from a well-known luxury brand (Patek, Rolex, Panerai, Vacheron, Cartier, Zenith, etc). The minimum undiscounted price was $4,000 and the maximum was $72,500 with an average price of $12,800. The distribution of prices was skewed, though (see graph). In particular, the highest priced watch was far from the rest of the sample and seemed to be an outlier. In the subsequent analysis, I leave out the outlier watch.
The average discount on the remaining watches was 24.9%. The distribution of discounts in the sale, nonparametric estimate. This was, honestly, much higher than I expected. The minimum discount was 6.3% while the maximum discount was a whopping 40%. The discounts were, more or less, symmetrically distributed around the average of 25% (see chart). Dollarwise, the average discount was $2,284 with a minimum discount of $400 and a maximum discount of $4,500. Interestingly, the dollar discounts look bimodal.
I was curious to see if the level of discount varied with the original price. My casual observation has been that, at certain times certain watches at the extreme upper end of the price distribution appear on the grey market with a noticable discount. I even observed this outcome during the height of watch mania when numerous, more modestly priced, timepieces were selling for a premium on the secondary market.
Because the discount percentages fall within a specific range (between zero and one), I couldn't really use standard techniques to estimate how the discount percent varies with price. After figuring out a decent approach (for those stats obsessed out there, I used a generalized linear model with a logit link function and binomial family), the numbers suggest that this particular retailer was actually offering larger discount percentages at lower prices. My estimated relationship between discounts and price level. I graphed the relationship between the discount percent and the price (see figure) and also calculated the predicted discount for prices between $4000 and $12000 in increments of $2000. The discount begins at 28.9% for the lowest priced watched ($4,000) and declines to 23.5% for the highest priced watch ($12,000). In essence, the discount decreased by 1.3% per $2000 of watch value (although it decreased at a decreasing rate).
In summary, based upon the sale I observed, it does not appear that the watch market has reached bottom yet. A 24.9% average discount across a very wide price range suggests that, at least for this retailer, the market is still much softer than the retailer expected when they originally set prices. It is also interesting to note that the empirical estimates suggest the lowest priced watches are most heavily discounted. The longer run trend in watch sales seems to suggest that the more affordable segment of the watch market is "drying up" a bit, particularly as demand is diverted to wearables and smart watches. Perhaps that is part of what is happening here. The good news is that we are heading into the graduation season, which is one of the brighter spots in the annual cycle of watch sales. As a result, there is a possibility that we will see a reprieve from a softer market in the short run.
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.
An insightful and detailed post; thank you. Here in the UK, the pre-owned watch market is heavily fragmented. We have established dealers who have been around the block a few times. Their pieces have been purchased competitively and are priced so they don't end up being inventory fillers. Then we still have a few of what I call the 'hobbyist' dealers who sprung up post COVID looking to jump on the boom bandwagon. They still seem to be desperately clinging to the hype prices, possibly due to the heavy capital investment that would take a significant loss if they were to sell at a more realistic value in the current market. So, when I am researching for an insurance valuation, the data points are all over the place. At least it makes for an interesting day.
Hi Gareth, thank you for reading and thank you for commenting. I think this is really very interesting. I can't help but wonder if "hobbyists" will eventually decide to meet the new prices and bring forth more supply or if they will wait out the dip and make it to the other side. A very interesting time indeed!
loved this article (frankly love just about all your articles) - some points I'd add:
1. I think the JOMASHOP Lady Datejust discount is a useful index for watch prices - this provides an interesting insight into the premiums grey market players are paying to access "hot" models. Pre 2020 pretty much every lady just was available at some discount with precious metals and diamonds routinely in the 35-40% discount range. At the hight of the madness steel ladies datejusts were 10-20% premiums and the precious metals/diamonds were 5-10% discounts. We are returning too, but have not reached 2019 lady datejust discount levels - this tells me we have another 10% or so to drop.
2. I think that variations in prices across the globe are seeing some big retailers engaging in international arbitrage - particularly selling into the USA (where buyers often dont look outside CONUS). For example - the 'standard' breitling, a 43mm, black dialled, navitimer on a bracelet is (full retail price, from the brand website, converted to USD, ex-tax) 9950usd in the US, 8050usd in Australia and 7835 usd in the UK. Thus we have 20+% "discounts" while actually selling at full retail.
Hi Peter - thanks so much for reading and commenting and thank you for your kind words, I really appreciate it. I like the idea of using Lady Datejust as a benchmark, super interesting! It reminds me of The Economist's "Big Mac Index" :) It is really interesting to see the international differences in prices (what we'd call deviation from the law of one price). ADs do have a legacy of trying to take advantage of these price differences, to varying degrees. That is a very wide price distribution that you mentioned (Breitling).
Introducing the epitome of elegance and innovation, the Flora Women Watch - Multicolor 360 Degree Rotating Dial Diamond Studded Rose Gold edition. Designed to transcend time with its exquisite craftsmanship and attention to detail, this timepiece is more than just a watch; it's a statement of style and sophistication. The multicolor 360-degree rotating dial adds a playful yet refined touch, allowing you to express your personality with every flick of the wrist.
What it might look like if Aragon and Argon watches actually went to court over the trademark dispute. My prior post described a disappointing development for those collectors hoping to acquire an Argon Spaceone watch via the brand's Kickstarter campaign. The campaign had reached over $1 million in funding when Kickstarter's management stepped in and froze the whole thing over an "intellectual property dispute." When I posted about this development on Instagram , Hodinkee editor Tony Traina noted in the comments that another brand, Aragon watches, had filed a complaint with the US Patent and Trade Office (USPTO) back in April (thanks Tony!). Argon's account replied and indicated that they had already filed a registration for their brand name and they were retaining counsel in New York City. On Tuesday, June 27 of this week, more details were offered via a lawsuit filed in the US District Court for the Southern District of Florida. The case is filed on behalf
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
Among many avid watch collectors, the term "in house movement" seems to elicit eyerolling disdain. Pieces of an assortment, including balance spring, from a non-Swiss movement. There is a sizeable perception that "in house" is, in fact, nothing more than an unnecessary marketing ploy designed to tease more money out of the wallet of buyers (by way of definition, an "in house" movement means that the mechanism inside a watch was predominently manufactured by a brand itself, kind of like "we make our own bread" at a restaurant). I'll confess that I'd begun to think similarly, that is, until I read a 66 page report posted by the Swiss Competition Commision on May 10, 2023. Yes, this is the kind of thing an economist finds interesting on a weekend, or at least this economist. Before we get into the details of this report, in the interest of full disclosure I should say that the original document was in a different language: lawyerese.
An insightful and detailed post; thank you. Here in the UK, the pre-owned watch market is heavily fragmented. We have established dealers who have been around the block a few times. Their pieces have been purchased competitively and are priced so they don't end up being inventory fillers. Then we still have a few of what I call the 'hobbyist' dealers who sprung up post COVID looking to jump on the boom bandwagon. They still seem to be desperately clinging to the hype prices, possibly due to the heavy capital investment that would take a significant loss if they were to sell at a more realistic value in the current market. So, when I am researching for an insurance valuation, the data points are all over the place. At least it makes for an interesting day.
ReplyDeleteHi Gareth, thank you for reading and thank you for commenting. I think this is really very interesting. I can't help but wonder if "hobbyists" will eventually decide to meet the new prices and bring forth more supply or if they will wait out the dip and make it to the other side. A very interesting time indeed!
Deleteloved this article (frankly love just about all your articles) - some points I'd add:
ReplyDelete1. I think the JOMASHOP Lady Datejust discount is a useful index for watch prices - this provides an interesting insight into the premiums grey market players are paying to access "hot" models. Pre 2020 pretty much every lady just was available at some discount with precious metals and diamonds routinely in the 35-40% discount range. At the hight of the madness steel ladies datejusts were 10-20% premiums and the precious metals/diamonds were 5-10% discounts. We are returning too, but have not reached 2019 lady datejust discount levels - this tells me we have another 10% or so to drop.
2. I think that variations in prices across the globe are seeing some big retailers engaging in international arbitrage - particularly selling into the USA (where buyers often dont look outside CONUS). For example - the 'standard' breitling, a 43mm, black dialled, navitimer on a bracelet is (full retail price, from the brand website, converted to USD, ex-tax) 9950usd in the US, 8050usd in Australia and 7835 usd in the UK. Thus we have 20+% "discounts" while actually selling at full retail.
Hi Peter - thanks so much for reading and commenting and thank you for your kind words, I really appreciate it. I like the idea of using Lady Datejust as a benchmark, super interesting! It reminds me of The Economist's "Big Mac Index" :) It is really interesting to see the international differences in prices (what we'd call deviation from the law of one price). ADs do have a legacy of trying to take advantage of these price differences, to varying degrees. That is a very wide price distribution that you mentioned (Breitling).
DeleteIntroducing the epitome of elegance and innovation, the Flora Women Watch - Multicolor 360 Degree Rotating Dial Diamond Studded Rose Gold edition. Designed to transcend time with its exquisite craftsmanship and attention to detail, this timepiece is more than just a watch; it's a statement of style and sophistication. The multicolor 360-degree rotating dial adds a playful yet refined touch, allowing you to express your personality with every flick of the wrist.
ReplyDelete