Is it profitable to invest in expensive watches?
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Investments in luxury watches are dangerous, Rolex CEO Jean-Frédéric Dufour warned customers and the market about this. In an interview with Swiss journalists, he admitted that he does not like it when brand products are compared with promotions. According to him, the company “sells dreams” and does not trade financial instruments. Buyers, as Bloomberg found, think differently. However, many of them have already been disappointed by investments in elite chronometers, analysts say. Why? And how promising are such investments? Ivan Khorushevsky sorted it out.
Investing in luxury watches can be more profitable than investing in shares of the largest American companies, analysts from the Boston Consulting Group and WatchBox came to such resounding conclusions in the spring of 2023. According to their calculations, prices for accessories have increased by 20% per year since 2018, while the return on the S&P 500 index during the same period increased by an average of only 8%. The situation on the market turned out to be unique and largely man-made, notes Dmitry Krylov, general director of Chasovshchik.ru: “The companies themselves artificially created a shortage, thereby heating up the demand for certain specific models.
The policy based on reducing production and creating some iconic watches is quite old. They are fighting not for the number of sales, but for the value of the brand itself, so that people associate it with something inaccessible.”
The increase in price coincided with the arrival of the COVID-19 pandemic. Many managed to save money during the lockdowns, and a new class of wealthy buyers emerged – crypto-millionaires, who in two years have made money from the growth of Bitcoin and other tokens. Finally, borrowed funds became more accessible as regulators in the US and Europe made unscheduled rate cuts. Rich investors began to look for alternative tools and found them in vintage cars, luxury alcohol and luxury watches.
Demand for the latter increased rapidly: in 2022, the export volume of Swiss devices exceeded $28 billion for the first time in history. At the same time, the cost of accessories also reached its peak, which was three to four times higher than pre-pandemic indicators. Since then, according to Bloomberg, the best-selling watches have lost 40% in price.
The “bubble” burst, explained the owner of the Konstantin Chaykin manufactory, Konstantin Chaykin: “If the price rises gradually with the level of inflation, then this is normal. When a bubble is inflated, the confidence of not only investors, but also people who buy luxury items to demonstrate status, falls, as does the value of such goods. It’s luck, or you have to be a very great expert and professional in order to make good money on such investments.”
In December 2023, Bloomberg issued a verdict: the boom in popularity of luxury watches from Swiss brands is coming to an end. Luxury giant Richemont reported a drop in sales in North and South America. Other market players noted that “once carefree” consumers began to be less willing to spend money. The result is logical, noted investment banker Evgeniy Kogan: “They printed a lot of money during the pandemic. Little by little liquidity is being washed out, the fight against inflation is underway, life is changing.
If earlier for many businessmen it was very cool to come with a watch, for example, Vacheron or Girard-Perregaux, today fashion has become more practical. Now the more interesting watches are those that provide more functions and are less burdensome.”
With Russian clients the situation is less obvious. Within the country, the demand for luxury, according to Kommersant FM’s interlocutors, has definitely fallen. But many wealthy citizens have moved to Dubai, London or Istanbul, and it is possible that there, from old memory, they continue to bring good income to Swiss brands.
Everything is clear with us – Telegram channel “Kommersant FM”.
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