Buying (And Selling) Watches In Tough Economic Times
by Martin Green
What sells watches? This is the 20 billion Swiss franc question in today’s challenging economic climate.
And as exports of Swiss watches continue falling for the fifteenth consecutive month, CEOs, marketing executives, and industry consultants scramble to answer this question.
However, I sometimes wonder if they are actually allowing themselves the time to even ask the question – let alone answer it properly. Perhaps the pressure of group executive boards pushes them into taking swift action in whatever direction seems most favorable at the time.
Such as going outside their comfort zones in the hopes of tapping into consumer markets that are outside their usual realms of activity (see Piaget Polo S: Outside Its Comfort Zone).
I think that this year a record amount of new brand ambassadors have been appointed: these are traditional celebrities such as athletes and actors, but also increasingly social media stars, who enjoy large followings on Facebook, Instagram, and Twitter, as brands try to engage the elusive millennials, many of who are even still figuring out if they actually like watches to begin with.
What to actually look for in a lasting purchase
For the answer to this we can learn a lot from two of the steadiest performers in the watch industry: Patek Philippe and Rolex. Perpetuating success requires impeccable quality. Rolex founder Hans Wilsdorf’s passion for over-engineering each component in his watches earned Rolex a spot as a solid performer from its early days onward. Less then impeccable quality can be compensated with lower prices and clever marketing, but when the market is going down expect sales of “lesser” brands to follow.
When a market falls, it is usually influenced by outside events: political unrest, stagnating economies, falling stock prices. These are examples of times when consumers slow spending on luxury items such as high-end watches, even if the events do not directly impact their incomes.
But that is not all: not only does spending slow, consumers also adjust their focus – not only in terms of value for money in the direction of impeccable quality, but also value retention.
How much money is your watch still worth when you strap it on and walk out of the jewelry store?
How are vintage pieces by the brand valued?
How steady are the prices of second-hand pieces?
I would call Patek Philippe and Rolex the gold standard in terms of value retention in the watch industry, and the fact of the matter is that they often outperform gold as a safe bet when times are tough.
How did they become gold standard?
Patek Philippe and Rolex also obtained this position by being conservative in terms of styling. And whether you appreciate it or not according to your own taste, this has nurtured a recognizable brand image on one hand, while on the other it has created watches that appeal to the tastes of a larger demographic, simultaneously limiting exposure to slowdowns in the market as risk is spread over vastly different types of consumers.
In a twist of irony, overall rarity has had very little to do with this stability: the rarity of a Patek Philippe or a Rolex is not measured in comparison to other brands, but rather to their own brand populations. This is a very unique trait that only few brands have the privilege of experiencing.
The problem with these traits is that they are related to pedigree, which is something that cannot be obtained overnight. It has not been one watch that has defined these two brands; it has been the entire histories of their watch collections as a whole.
Being a consistent performer is a matter of restraint: in order to stay true and very close to your original brand “DNA” the trick is to restrain yourself when the markets are up.
Many Swiss brands have had a hard time doing this – particularly in recent years when previously untapped or little tapped Asian markets seemed to offer unlimited potential. But at times when it seemed quite easy to sell anything with a melodious brand name, it is also very easy for a brand to lose its true self.
This situation becomes magnified when the market shrinks again, and consumers, collectors, and connoisseurs re-evaluate how they spend their money.
If they spend it!
Why have Rolex and Patek Philippe been able to follow a steady course through their watch histories as a whole? Because they lack shareholders; because they are not part of larger entities; because the accountability for their actions is limited to people within the firm, not outside of it.
A grim scenario?
This may sound like a very grim scenario for other haute horlogerie brands not carrying Rolex or Patek Philippe logos on their dials.
And although many of these are part of larger groups or have shareholders, these two brands do help provide clues and answers for others.
In general, ships like to avoid storms. But when they cannot, they approach each wave head on. Although not foolproof, it provides them with the highest chance of actually making it through.
So my advice to brands at the moment is this: instead of going outside your comfort zone, go right back into it. It is very unlikely that you are going to excel at something you have never or rarely done before, but don’t be so quick to willing to abandon the field you have already mastered.
It will not be painless, just as taking each wave head on in a storm is far from pleasant. But the odds of making it through might be the best odds you are going to find.
Likewise, my advice to consumers: look for brands that stay true to themselves. These will prove the best value for money and enjoyment in the long run.