A confluence of factors created a perfect storm of demand and supply
It has always been notoriously difficult to get your hands on a new Rolex. But now it’s almost impossible. And that goes for just about every luxury Swiss watch brand worth its salt.
A heady cocktail of soaring global wealth, revenge buying, fear of missing out (FOMO) and uncertainty surrounding cryptocurrencies has fueled interest in luxury watches like never before.
The transformation of watches from a style accessory into a viable alternative asset has conspired to drive prices up and availability down, creating what industry insiders describe as a “perfect storm of demand and scarcity.”
Empty storefronts greet watch lovers at retailers around the world. The Middle East is no exception.
Last year, the region imported 8.08 billion dirhams ($2.2 billion) worth of Swiss watches, according to FH – the Federation of the Swiss Watch Industry. Most of them were sold in the United Arab Emirates, the region’s largest and eighth largest market for Swiss watches in the world. But now there is a huge waiting list for luxury watches, especially the industry’s Big Four – Rolex, Patek Philippe, Audemars Piguet and Richard Mille.
Luxury watch sales have skyrocketed during the Covid-19 pandemic as people stuck at home splurge on high-end timepieces instead of traveling and enjoying themselves.
Social media has also spawned a whole generation of young collectors looking to flaunt their new Swiss symbols on Instagram.
Not easy to increase production
As global demand far exceeds supply, luxury Swiss watch brands are scrambling to increase production.
But it’s not as simple as it sounds because these watches are assembled and polished by hand – an intricate process that requires meticulous precision and, something the makers don’t have – time.
“The production of Swiss luxury watches cannot be increased in the short term because they are made by hand and require many hours of work,” said Abraham Koshy, chief operating officer of the watch division of the Rivoli group, a major retailer representing Breguet, Harry Winston, Blancpain. , Glashutte, Omega and Longines among other Swatch Group brands in the region.
“The rigorous quality processes involved in achieving the level of perfection required by these prestigious watch brands cannot be sped up,” Koshy explained.
Rolex, the undisputed leader of Swiss watch brands with a 29% market share and a turnover of nearly 31 billion dirhams in 2021, has already clearly indicated that it will not rush things to deal with the shortage.
“Our current production cannot comprehensively meet existing demand, at least not without reducing the quality of our watches – which we refuse to do because the quality of our products must never be compromised,” said the first. Swiss brand in a rare statement.
“This level of excellence takes time, and as we have always done, we will continue to take the time necessary to ensure that all of our watches not only meet our standards of excellence, but also meet the expectations of our customers. In terms of quality, reliability and robustness, Rolex does not compromise on what it takes to produce exceptional watches.
Rolex manufactures around one million watches a year.
Far behind, in second place, is Omega (500,000) followed closely by Cartier (490,000). Patek Phillipe and Hublot manufacture 60,000 units each, followed by Audemar Piguet (50,000) Ulysse Nardin (40,000) and Richard Mile who manufacture only 4,500 pieces per year.
What watch collectors say
Avid watch collector and managing director of the Danube Home Group, Adel Sajan, 31, who has all four major brands in his enviable collection, said his favorite was the Richard Mille-Rafael Nadal RM 35-02 which he acquired three years ago. The self-winding dream watch is currently selling for $462,000 on Chrono24, the world’s leading watch marketplace.
“It took me a year to get it, but it was definitely worth the wait,” said Sajan, who believes the current shortage is caused by a double whammy of increased demand and reduced demand. of production due to Covid-19.
All the main Swiss watchmakers had to stop production at the beginning of 2020, because the Covid-19 put an end to life.
Time seemed to stand still for most of 2020. Watch enthusiasts didn’t.
Watch auction houses seized the opportunity to register record online sales. Between them, Antiquorum, Bonhams, Christie’s, Sotheby’s and Phillips recorded a turnover of 1.2 billion dirhams.
“Suddenly there was more money and fewer watches to buy. The result: a sharp spike in prices and a booming online and second-hand market,” comments a watch expert.
In July last year, a Patek Phillipe Green Dial Nautilus (ref 5711) retailing for Dh1.28,000 in April went under the hammer for Dh1.8 million.
The Rolex Daytona sells for $36,000 (132,000 Dh) from $22,000 (80,808 Dh) in January 2020, while the value of Audemars Piguet 15202 has almost doubled from $39,000 (143,250 Dh) to beginning of 2020.
The best thing about these watches is that their value keeps going up,” said Indian expat Ram Tolani, founder and chairman of Goodwill Insurance Brokers, which has amassed a tremendous collection over the years.
“My first watch was an Omega that I bought 40 years ago on a trip to Singapore. Since then, I’ve bought everything from Rolex and Pateks,” the longtime Dubai resident said.
At the other end of the spectrum is 26-year-old businessman Shauhan Ahamaed Moosa, who started collecting luxury watches just a few years ago.
“Every year on my birthday I buy myself a watch,” said Moosa, who treated herself to a Patek Phillippe a few years ago.
“Luxury watches have become rare because people use them as a form of investment rather than enjoying them on the wrist,” he explained.
Sanjeev Dutta, Executive Director of Commodities and Financial Services at DMCC shares a similar view.
Dutta, who started collecting luxury watches since 2010, urged people to be wary of replicas that have flooded the gray market since the pandemic. “It’s often difficult to tell these carbon copies from the real ones if you’re not an expert,” he said.
Dutta said the watches were out of stock as stocks could not be replenished in time.
Swiss watchmakers often limit production cycles and restrict allocations to preserve their exclusivity.
Rolex: The Waiting Lists Are Not Their Fault
However, Rolex denied deliberately restricting supply as part of a strategy
Rolex said the long waiting list was not their fault as it is not them but the authorized retailers who manage the allocation of watches to customers
Koshi said they are constantly striving to ensure that their top sellers are available in their portfolio at all times. “That said, some SKUs are limited by production and their demand often greatly exceeds their productions and allocations. In such cases, we strive to respond to customer requests as quickly as possible, with the support of partner brands.
“As the UAE is a key market, we have priority in terms of allocation and early deliveries of our brands, however, we are experiencing supply issues for some high demand SKUs. We are trying to mitigate these challenges by improving our order planning and working closely with our core brands to ensure priority delivery to our markets,” he said.
An Emirati collector said it’s not just watches, but everything from fine art, and designer bags to sneakers, which have become ridiculously expensive.
“The scarcity of luxury watches is not new but now it is extreme,” he said.
Arshad Khan, co-founder of Yoshi Markets, said he had been trying to buy a Rolex for months. Khan may have to wait even longer unless he is willing to buy one at a premium through secondary channels where even used models cost more than new ones at retailers.
A member of the Dubai Watch Club said it was once a tight-knit community of people with a passion for the hobby. “Now everyone seems to have become a collector. As a result, even watches that were readily available until recently have become hot,” he lamented.
When the market cools, only time will tell.