Collector's watches have been extremely profitable in recent years, with some models fetching record prices at auction. However, this phenomenon raises concerns that speculation may be outweighing genuine interest in watches. What does this phenomenon actually indicate? Serge Maillard, publisher and editor-in-chief of the Swiss watch magazine Europa Star, shares his thoughts.
Text by Serge Maillard
Article published on June 2021, 10
Watches as an investment
The excessive price hikes of some models point to the emergence of a new audience among watch enthusiasts, along with the accompanying problems of the casino effect and digital bashing. However, these problems do not diminish the true dynamism of a scene fueled by passion.
In a recent article about the proliferation of collectibles, from Air Jordans to Porsche 911S, The New York Times noted, "What used to be called collectors were wealthy people who spent too much money, now they're called investors." This description also applies to the watch industry, where the price of certain watches has increasingly given rise to the concept of "investment value."
But what exactly does "investment value" mean in this context? Is the collector watch market really as dynamic as we think? Consultant Thierry Huron (The Mercury Project) answers this question by charting watch auctions in 2020. According to his research, the total value of collector watches sold at major auction houses (Phillips, Christie's, Sotheby's, Antiquorum, and Bonhams) was 3 million Swiss francs, including fees. This figure was down 19% compared to the previous year due to the impact of the COVID-1600 pandemic.
These auctions covered 9400 collector's watches, with an average price of CHF 33,600. This total seems modest compared to the Swiss watch industry's sales (exports amounted to CHF 17 billion in the crisis year of 2020, with wholesale figures lower than the total final sales prices), with the Boston Consulting Group estimating the size of the secondary watch market at €16 billion. However, research by Thierry Huron indicates that the number of brands involved in these sales is very limited.
Top 10 Watch Auction Prices of 2020
1. Patek Philippe / Reference 2523/1
Features: Pink gold dual crown, world time watch, guilloched dial
Successful bid: 4,991,000 Swiss francs
(At Philips on November 6th and 7th, 2020)
2. Rolex / Reference 6263
Features: Stainless steel chronograph watch, black dial, engraved caseback, Paul Newman bracelet
Successful bid: 4,991,000 Swiss francs
(Philips, December 12, 2020)
3. Patek Philippe / Perpetual Calendar
Special features: Very rare, perfectly preserved pink gold perpetual calendar chronograph watch with pink dial and moon phase display
Successful bid: 338 million Swiss francs
(Philips, December 6, 2020)
4. Rolex / Reference 16516 A
Special feature: Oyster Perpetual Cosmograph Daytona, circa 1999
Successful bid: 4,991,000 Swiss francs
(Sotheby's on July 11, 2020)
5. Patek Philippe / Reference 2499
Features: Yellow gold perpetual calendar chronograph watch with moon phase
Successful bid: 260 million Swiss francs
(Philips, December 6, 2020)
6. Heuer / Reference 1133
Special features: Stainless steel chronograph watch with date display, gifted to Haig Arutunian by Steve McQueen
Successful bid: 4,991,000 Swiss francs
(Philips, December 12, 2020)
7. Patek Philippe / Reference 1579
Features: Platinum chronograph watch, blue hard enamel graphics, spidery lugs
Successful bid: 194 million Swiss francs
(Philips, December 6, 2020)
8. Breguet / No. 1297-1808
Features: Gold 4-minute tourbillon, Robin escapement, thermometer, stop slide for measuring seconds
Successful bid: 4,991,000 Swiss francs
(Sotheby's, July 14, 2020)
9. Patek Philippe / Reference 5033
Features: Titanium automatic winding, cathedral minute repeater, annual calendar
Successful bid: 4,991,000 Swiss francs
(Christie's on July 13, 2020)
10. Rolex / Reference 6264
Features: 18K gold, Paul Newman Daytona, JPS (John Player Special) stamp
Successful bid: 4,991,000 Swiss francs
(At Sotheby's from July 24th to 31st, 2020)
Of the 22 lots that sold for over 100 million Swiss francs in 2020, 13 were Patek Philippe, 4 were Rolex, and 2 were FP Journe, with the others including Heuer, Breguet, and Philippe Dufour (see source above).
In both the vintage and current model markets, brand values are increasingly polarized. Whether it's a 1961 model or a 2021 model, certain popular models are generating intense interest. "Auction results are an important indicator of the Swiss watch market's temperature, and some well-known watch brands prove their worth year after year," Thierry Huron wrote in his study, "HammerTrack 2020."
The current state of the watch industry, from a variety of perspectives
The effect of transparency
The value of certain iconic collector's items far exceeds their retail or secondary market prices, and collectors are flocking to online communities of enthusiasts, debating topics like the color of the next Nautilus or the size of the Daytona in new forums like Clubhouse.
The true value of modern brands is also increasingly being borne out by secondary market selling prices: Morgan Stanley's latest watch study, conducted with consulting firm LuxeConsult, is headlined "Rolex solid as rock," and estimates that Rolex's market share (which includes Tudor) has now surpassed that of the entire Swatch Group.
The transparency brought about by digital technology is also coming to the forefront, exposing differences in values that watch brands have traditionally avoided. Many press releases currently circulating lack information about the price of new releases, yet this is precisely the information prospective customers want to know first.
Chinese
This new landscape has come as a major shock to an industry that has historically lacked transparency. We can understand the discomfort of brands faced with the emergence of secondary markets and price transparency (what brand wants to see their products listed with a big red "discount" flag on a pre-owned online site?), as well as the drive to bring more control into the still unregulated digital jungle where "authentic" vintage items coexist with unsold and depreciated items.
Some brands, facing an overheated market, are trying to focus all their attention on their most popular models—Patek Philippe, for example, is discontinuing the Nautilus and planning to replace it with a new model—while other brands are struggling as their models lose value once sold and resold, damaging the value of their new releases as well.
While secondary market activity accelerates, consolidation is also occurring behind the scenes: Richemont acquired Watchfinder, Bucherer acquired Tournear, Hodinkee acquired Crown & Caliber, Watches of Switzerland acquired Analog Shift, and Chrono24 hired an IPO expert as its new CFO. These moves reflect the dynamic nature of popular collector's models and the generally accepted longevity of mechanical watches, even if they represent a low investment value. The situation can always be reversed; for example, asymmetrical models that were not very popular in the past are currently enjoying a strong resurgence.
Brand Value Yesterday and Tomorrow
"There's a real community of enthusiasts in the secondary market, but at the end of the day, we don't get to dictate what happens there," says Omega CEO Reinold Aeschlimann. "We can't target this market with the precision of a fighter pilot. We can only contribute to overall sales by strengthening and streamlining our contemporary collections and emphasizing our heritage."
Even though this brand has never ventured into the pre-owned business, there are waiting lists. For example, 15,000 people (!) registered to receive the 2020 Speedmaster "Silver Snoopy Award" 50th Anniversary Edition. "Of course, creating a waiting list is not the goal," continues Reynold Aeschlimann. "Personally, I prefer a watch to gradually gain popularity rather than suddenly rise and fall.
Ultimately, we believe our job is to maintain the appeal of the brand for future generations. For example, we were one of the first brands to adopt the NATO bracelet. Our younger customers are buying it for their vintage Omega models, and in the future, for our new models too!
