28 November 2023

The State of the Watch Market

By James Sampson

How is the watch market? - A question we, at Onaro, get asked several times a week. A natural question given the rollercoaster we’ve been on the last few years. However, to see where we are it's important to talk about where we’ve been. 

Watches as an alternative asset class isn’t new...

The market has been steadily growing for years, investors sought alternatives to the stock market and the idea that watches could be used to store value gained popularity. Watches represented a more useable class than perhaps wine or cars. One which could be worn and enjoyed, taken on holiday or passed down in the family. 

As a result, the waiting list for watches at the authorised dealers grew and treatment of new customers has often left a lot to be desired. We have often had customers being pushed into buying watches/jewellery they didn’t originally want, on the ambiguous promise of receiving their desired timepiece. This led to a rise in the popularity of sourcing watches from ‘grey’ market dealers.

The Pandemic and price rises

As we entered 2020 and the pandemic hit, working from home, lockdowns and supply chain issues were something very few saw coming. The idea of cheap or ‘free’ money arose, where people had unlimited time on their hands but no where to spend it. Holidays were cancelled, plans disrupted and life became very insular. 

These constraints lead to huge changes in the luxury watch market. Almost on a weekly basis prices were rising as demand far outstripped supply. The effect of this was seen across the vast majority of timepieces where even previously unpopular models sky-rocketed in value as consumers were priced out of other pieces. A crazy time, one we always felt wasn’t sustainable for the long term.

At the top end of the market, the most in demand timepieces were selling for five times their retail value, if not more. The more the prices rose, the more it would catch the eye of new buyers looking to profit from the price rises, creating a frenzy amongst buyers. As dealers rode the wave, it created an unsettling time as the boom period could never last forever.

What goes up must…

As we approached March 2022 the watch market started to slow down. The invasion of Ukraine by Russia rang the bell for the music to stop and it became clear quite quickly the downturn had begun. Over the next six months interest rates were raised in the UK, along with others worldwide, to combat the rising inflation and cost of living. The result caused a huge global economic shift, consumers purchasing behaviour changed and people began to re-consider large unnecessary purchases.

The impact on the watch market was profound with prices beginning to soften as buyers became thinner on the ground. An industry that many jumped into when times were good, now are looking to take substantial losses as they are unable to sell their depreciating stock. The most popular models, including the Nautilus, Royal Oak and Daytona, to name a few, deprecated as much as 50%. With businesses struggling to sell stock, it became a buyers market and a race to the bottom to sell stock fast, further pushing the prices down. As a business operating in this market, it makes it very difficult. A well capitalised and stable business simply saw it as part and parcel, but undoubtedly there were and still are some casualties within the industry. The price corrections were not just reserved for watches of course, most asset classes were affected.

Stability in the market

As we come to the close of 2023, the market appears to be much more stable. Genuine watch lovers have come back into the market after sitting and watching on from the sidelines, and the reduced pricing has started to attract new buyers to enter the market. Confidence has grown with buyers as they are not worrying as much about prices being significantly cheaper next week. When we look across a wide variety of manufactures, a large amount of timepieces are now available to purchase for retail price, as it always was. Despite this, the more sought after models still command a premium.

Over summer this year, a historically quieter time for the industry as customers tend to be abroad with their families,  we were busier than expected. Many of whom had said the correction in prices was a determining factor in entering the market again for their desired timepieces.

As we come to the close of 2023, the market appears to be more stable. Genuine watch lovers have come back into the market after sitting and watching on from the sidelines, and the reduced pricing has started to tempt new buyers to enter the market. When we look across a wide variety of manufacturers, there is a large amount of timepieces are now available to purchase for retail or under retail pricing, as it always was. 

Despite this, the more sought after models still command a premium and that’s not expected to change. 

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