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Investors Inclining Towards Watches as Lucrative Alternative Investment Amidst Market Boom

Rolex Shortage Spurs Secondhand Luxury Watch Market Growth

The luxury watch industry is witnessing a surge in interest from investors seeking alternative avenues for their capital as the market maintains an impressive three-year hot streak. The focus keyword here is “Investors,” and this trend is catching the eye of astute financial minds, turning timepieces into unconventional investment assets.

The insatiable demand for luxury watches, particularly from revered brands like Rolex, has led to a supply-demand disbalance. Rolex, known for its meticulous craftsmanship, is struggling to keep up with the market’s enthusiasm. A single Rolex watch can take up to a year to manufacture, causing waiting periods ranging from several months to even years. As a result, potential buyers are now exploring the thriving secondhand market as a quicker way to acquire these prized possessions.

In the realm of luxury watches, a staggering $75 billion market, secondhand sales account for a substantial 30%, as reported by the Boston Consulting Group. This sector’s growth shows no signs of stopping, driven by a surge in demand, particularly among younger consumers who are keen to embrace this unique form of luxury.

A Budding Market for Savvy Investors

The secondhand luxury watch market’s current popularity can be attributed to the robust demand from the retail sector. With official Rolex channels boasting waitlists stretching from six to 36 months, savvy secondhand shops are strategically stocking inventory to cater to eager walk-in customers.

“We have the watch ready for immediate wrist placement,” shared Yuri Iskhakov, the founder of Prestige Watches, situated in New York City’s Diamond District. Customers at Prestige Watches can walk in and walk out with a watch in just 30 minutes, providing an unmatched level of convenience.

This trend is exemplified by the story of a Texan tourist who, unable to find the desired Rolex model at Macy’s, purchased a 26 mm Rolex Datejust watch for his wife from Prestige Watches. This transaction was executed with remarkable speed compared to the lengthy waitlist and allocation process through Rolex.

Investment Potential Meets Luxury

However, it’s important to note that the secondhand market’s convenience often comes at a premium. Watches in the grey market, as it’s called, can range from just a few hundred dollars more than their brand-new counterparts to several thousands of dollars for rare and sought-after pieces. For instance, while a 36 mm Rolex Oyster Perpetual sells for $6,100 through official Rolex channels, customers can acquire it on-the-spot at Prestige Watches for nearly $13,000.

Investors are drawn to this unconventional market due to its unique blend of luxury and investment potential. According to a recent report from the Boston Consulting Group, nearly 29% of collectors confessed to paying above retail for their latest pre-owned watch. Moreover, 40% cited avoiding long queues at retail outlets as a significant motivation for turning to the secondhand market.

Steadfast Performer in Economic Storms

Interestingly, luxury watches are not only fashion statements but also considered alternative investments, with certain brands outperforming traditional investment vehicles. During the period between August 2018 and January 2023, average prices for pre-owned watches from luxury giants Rolex, Patek Philippe, and Audemars Piguet surged by an impressive 20% annually. This impressive growth occurred even in the face of the COVID-19 pandemic, outshining the modest 8% annual growth of the S&P 500 index during the same period.

Luxury watches have proven their resilience during economic downturns as well. During the Great Recession of 2007-2009, luxury watches not only outperformed the S&P 500 but also rebounded within two years of the 2008 market crash, in contrast to other asset classes that took longer to recover.

Seeking Long-Term Gains

Investors looking to park their funds for extended periods are gravitating towards steel Rolexes due to their perceived potential for appreciation. Yasha Tehrani, owner of Rex Watches, highlighted the interest of older men and younger individuals who are aiming to secure their financial future for the next decade or more.

The market for watches is undergoing a transformation, with authentication services and the digital age fostering transparency and accountability. In the past, buyers were cautious about discounts and promotions due to concerns about fraudulent dealings. However, today’s landscape boasts improved authentication processes and access to reliable information, bolstering the credibility of watch sellers.

Tapping into the Digital Generation

The allure of luxury watches isn’t lost on younger generations either. With a reported 95% of watches no longer in production, their rarity and potential appreciation are appealing to younger buyers. Leveraging this trend, sellers are leveraging social media platforms like TikTok to attract a new wave of customers.

One example is Prestige Watches, which saw a notable boost in sales after going viral on TikTok under the handle “Prestige Brothers.” Through engaging content, the founders showcased their latest offerings and interacted with customers, effectively tapping into a younger demographic’s preferences.

As the luxury watch market continues to evolve, even Rolex joined the game by launching a certified pre-owned program in 2022, signaling the industry’s acknowledgment of the secondhand market’s enduring appeal. With luxury watches serving as both status symbols and promising investment assets, their significance in the world of finance is bound to increase in the years ahead.

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