The Fallout Of The Crypto Crash On The Luxury Watch Market

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The crypto crash claimed its first luxury casualty: the Rolex Daytona. After hitting record highs at the start of the year, the prices of the most sought-after watches on the secondary market have now fallen. The global used watch bubble has been fueled by crypto and stock market gains, stimulus cash and speculation. It’s coming apart. So far, the demand for new watches is holding steady. But the luxury watch secondary market is a stark reminder that the bling boom may not last. In 2021, a combination of roaring stock markets and crypto has boosted wealth and sparked wider interest in investing in alternative assets, be it non-fungible tokens or watches. And when markets started to seesaw earlier this year, some investors were keen to invest their money in more tangible stores of value, like a Rolex watch. Consequently, a new breed of young watch dealers joined the longtime collectors.

Whether novice or seasoned, buyers have all hunted the same famous models. In February or March, the holy trinity of the most fashionable watches – the Rolex Daytona, the Patek Philippe Nautilus and the Audemars Piguet Royal Oak – were trading at several multiples of their retail price.

With the S&P 500 flirting with a bear market and Bitcoin losing around 70% of its value since November, that demand is now evaporating. The largest reversals were seen in the Daytona, Nautilus and Royal Oak models, which saw the most dramatic gains. Prices are estimated to be around 25% below their highs. Some brands are doing better, notably Vacheron Constantin and A. Lange & Sohne of Cie Financière Richemont, as some collectors have branched out or been pushed away from the more obvious names. Cheaper models, such as Rolex Stablemate Tudor, didn’t see the same spikes as higher-end brands. And there is always a market appetite for truly rare coins, as opposed to those perceived as merely rare.

While the aftermarket correction may make it a little cheaper to buy a Rolex now, it won’t necessarily make it easier to get a Rolex.

Waiting lists for many new models last at least two years, as not all aftermarket gains have been wiped out. Buying a Rolex in a store always sounds like a good deal. Watches of Switzerland Group, which operates boutiques in the UK and US, is also seeing supply exceed demand for some Cartier, Omega and Tudor models.

The secondary market for other luxury goods, such as handbags, is vulnerable to some of the same elements that have inflated watch prices. It has also seen an influx of new, younger buyers, for example. Yet it has held up so far, perhaps because even though prices have risen, it hasn’t experienced the same bubble. Still, what’s happening in watches may be a taste of things to come in luxury resale and high-end retail stores.

Many of the same factors that drove watches also drove demand in the primary market for sneakers, bags and fine jewelry. Jefferies analysts estimated that crypto wealth accounted for 25-30% of premium sales growth in the US last year. Demand is also closely correlated to stock markets.

Upcoming results from the big luxury houses will likely show strong U.S. revenues, but the second half of the year will be compared to a period in 2021 when sales were booming. Many Americans are heading to Europe this summer to take advantage of the strong dollar, shifting their luxury spending to boutiques in Paris and London. But when they return home this fall, after perhaps dipping into their savings, they may be more inclined to pull their purse strings. Add to that the possibility of a recession and the crucial holiday spending season looks more uncertain.

A revival in China could take over. Luxury stocks rose briefly this week after the country eased quarantine rules for inbound travelers. But for the behemoths of bling, like in the luxury watch market, time may be running out.

Andrea Felsted is a Bloomberg Opinion columnist covering consumer goods and the retail industry.

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