It’s largely understood that in times of economic or social crisis, luxury brands, and in particular heritage luxury brands will continue to be in high-demand. Shifts in purchasing habits tend to impact high street brands heavier than the luxury market which whilst still affected, to a much lesser extent. As blue and white collar workers feel the pinch and divert disposable income to meet living costs, those with larger disposable incomes continue to be able to consume the higher end products and services they desire.
COVID-19 impact on luxury watch sales?
As we navigate the impact of the global health crisis, we are seeing the fastest shift in consumer spending habits than we have done in decades. Similarly, businesses all around the world are having to accelerate at pace to ensure that they are able to meet customer demands for their goods and services via digital channels or e-commerce sites.
But how has the pandemic impacted luxury watch sales?
Like many industries, production has had to pause for non-essential services during the health crisis. As a result, we won’t be seeing a new Hublot watch release later this year and both Patek Philippe and Rolex have also pressed pause on plans to launch their new season models.
Yet premier auction house Sotheby’s is reporting a spike in luxury watch sales. Josh Pullan, Sotheby’s Watches Global Managing director said: “in the last month, as the pandemic really took hold, we’ve moved exponentially up the curve. It’s definitely not an entry-level price point on any of those pieces either. The market appetite at the top end seems to be robust.”
Why is the luxury watch business still thriving?
Aside from the pause in production, there’s no denying that the luxury watch market has been impacted by the coronavirus outbreak. Buying sales missions, events and fractured route to market have all driven a need for urgent innovation. Yet it’s absolutely clear that the luxury watch industry is far more prepared for a looming covid-19 driven recession in a digital-first world than it was in 2008 when the western world entered recession.
With Baselworld 2020 and other shows like it around the world postponed until early 2021, it’s bound to have a massive impact on sales and opportunity. Yet direct relationships with consumers, vibrant e-commerce platforms and greater control over stock levels means that the luxury watch direct to consumer market may still thrive. More work however will need to be done to sell to trade customers, third party retailers and resellers.
Luxury watches as an investment
Many luxury watch sellers are reporting a decrease in sales in one demographic but greater opportunity in other, more robust customer markets. Consumers who were saving their hard-earned cash over the years for a one-off investment in a trophy timepiece to treasure – perhaps a Audemars Piguet Royal Oak or a Rolex Day Date – are holding off until there’s more economic stability.
Conversely, the health crisis has delivered lots of new opportunities, with many dealers reporting multiple six-figure sales in recent weeks whilst in the face of the worldwide pandemic. Many high net worth individuals dissatisfied with the volatility of the global stock market are seeking other, more stable places to invest their cash. And a portfolio of luxury watches is just that place, with iconic brands holding their worth year on year. As Burt Tansky, Neiman Marcus’s then President said in 2008, “Remember, when our customer tightens their belt, it’s generally ostrich or alligator.”
Similarly, very high worth individuals who are completely insulated from any instability going on in the economy, continue to spend as normal.
Stability of Luxury Watches
Those who invest in the luxury watch market aren’t new to this game either. So they come with the wisdom, knowledge and experience to hold their nerve and not be phased by any temporary loss of value. Whilst there may be small dips in value over the years, the 2008 stock market crash being one of them, prices rarely stay low.
The attraction of vintage watches
Classic, vintage watches in good condition never fail to hold their value. The scarcity effect and impact on these out of production beauties drive the value up and collectors wild, as they try to get their hands on the most desirable pieces. These types of watches also make incredible assets for watch enthusiasts with money to park during economic downturns.
The retail sector has experienced seismic shifts in the past decade and the luxury jewellery sector have risen to the challenge. Whilst store-centric sales and trade sales still play a pivotal part in profitability, watchmakers have much more direct access to consumers who are in-market to purchase. The rise in product video showreels, online chat services, call-back capabilities and you have an online shopping experience that’s as immersive and brings just as much joy and tactility as a bricks and mortar purchase.
The bonus of at home downtime
Adding to the equation, the power of consumer downtime. Global lockdown and stay at home orders have allowed people more time to think, do, invest their time in their hobbies and passions. Which for many mean investing in luxury watches or sizing up their next purchase.
Innovation and competition
Aside from the global pandemic, innovation and competition in the watch market continues to boost sales. Smartwatches fuel the total watch market sales, representing as much as 50% of sales. Fitness brands are also reported to have beaten heritage brands.
Competition in the luxury sports watches has also ramped up in recent years, between brands like Bulgari to Chopard and everyone else in between.
A word of caution from the experts
There’s no doubt that the luxury watch market is thriving just now. Many experts, however do advise a word of caution about over-leveraging yourself and to make smart decisions about the pieces you’re investing in. Long term the pandemic could continue to push up prices and increase scarcity of the most desirable models. But no industry in the world is bulletproof right now so continue to invest well!