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Any thoughts whether it will change the industry and to what extent?
lol. dont buy into the media B.S. there won't be any major pivots in trends. The demographics of people who can afford luxury watches remain largely unchanged. Lets do a breakdown of consumers of luxury watches

1) investors/ watch dealers: investors have now realized that Rolex, AP and Pateks were good bets during this downtown. Investor types will now even further gravitate towards watches with high value in the secondary market.

2) collectors: most watch collectors are wealthy. (if you have a watch collection that is worth 500k USD+, you know you are well off. AFAIK watch collectors have 1%~5% of their total assets tied to their watches) For people who are this wealthy, covid-19 has not changed their preferences on watches at all.

3) casual buyers: they buy a single luxury watch once every five years or so to commemorate some kind of a milestone in life. their entire collection is worth less than 50k USD. They usually belong to the upper middle-class and care greatly about public perception and value retention while their taste in aesthetics may vary.

All in all, collectors are not that important to a watch company. They make up for very little percentage of the revenue. Investors on the other hand, always buy used watches, so watch companies do not care about them too much. So the bread and butter are casual buyers.
My crude analysis tells me that watch brands will now care much more about the prices of their watches in the secondary market since many casual buyers sold their watches in pawn shops and online. To do this, they have to limit supply and downsize their company or raise prices. I also foresee that watch companies will offer models in polarized price ranges. We are already witnessing this trend with VC fiftysix. VC is sneakily lowering their price to tap into the Rolex market.

The changes will be subtle but it is changing. With online sites like chrono24 and ebay, most consumers have a ballpark idea on the value of their watches. People definitely count watches as assets.
 

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The question is much broader than the original post. It is about what will happen to the US and World economies post Coronavirus. If the virus will be contained (through a vaccine or herd immunity or whatever) or gone soon enough, i.e. in 12 to 18 months, then we may see a way back to normal. If not, we may see a deleveraging which starts with "belt tightening" followed by inflation. During inflation the prices obviously will go up, but will be lagging, so affordability will drop and some of the brands may end-up going busted. If inflation will end-up being high (e.g., 25%+) many will struggle to have the ends meet. In hyperinflation scenario it will be completely different world till deleveraging phase 4 which is usually post default and years away.
 

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Won’t change the industry, but secondary market prices will come down, extent depending on the depth of the current recession/depression


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The question is will the slow down in production counter balance the drop in demand. As the unemployment number remain in double digits people with and without jobs will be more cautious. No doubt the watch industry has taken a hit. I believe the smaller brands will take the majority of the hit. On the positive we should find some great bargins out there.
 

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The COVID pandemic has shifted the majority of my wearing to everyday/GADA watches. It is now more important for me to wash my watch after going out for the day, which makes leather straps more problematic. Also, while I haven't suffered, many people in my community have, so I am now avoiding gold and famous names when out in public. Dress watches now feel like a relic, as all the formal events I had planned to attend have been cancelled. In short, it has become a daily consideration.
 

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This made me think how Hong Kong as a luxury haven is doing right now, with all the protests since last year and now this pandemic.
 

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This is the big one: the second “quartz” crisis.

What is The largest Market for Swiss watches?
No it’s Not US. Not Russia or Germany Or France or even Europe.

It is hongkong.

The city was suffering from the protests in all 2019... and now with Covid the luxury market has tanked. China is taking away more autonomy. Watches are not even in people’s minds.

China is second largest market. Unfortunately you can see here the rich have taken a hit with factories shut. It’s not that they don’t have money still they are rich beyond dreams. but the focus is on keeping their wealth and investing in opportunities (stock market or takeover ventures) as this is the time to do it. . Most of my watch aficionado friends have decided that the depreciation and in some cases small appreciation from luxury end watches isn’t really worth the hassle especially when new serious wealth can be made from stock markets, properties, takeovers and blue ocean moves. Many are also relocating overseas and buying property elsewhere after Covid 19. ADs has been calling and offering better and better deals because their profits and commission have been wiped.

Unpopular opinion: Covid 19 will be the biggest headache for the Swiss Luxury segment after the quartz crisis. Many companies will downsize or fail.
 

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@apudabam - in which overseas locations are the HK wealthy seeking to buy new properties?

I agree, this will clearly be a headache for many of the companies in the industry. The only positive forces for prices are that some people may be using watches as a way to store or move wealth, and that the cut in production increases scarcity. Beyond that, all negatives.
 

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Actual grail watches from big manufactures will not budge as their buyers are all but unaffected by economic hardship. Some not so well established independents could struggle.

In demand, but not at all rare watches (i.e. steel rolex), will continue to sell well from the boutiques/ADs. Many potential buyers are probably out but there is still more than enough demand there. Other companies predominantly selling around this price range may struggle a bit as some buyers may prioritise value retention a bit more.

The companies that are most in trouble, in my opinion, are those that sell in that "lower end" market of a few thousand. Their buyers will be the most hit by the job losses and the economy being poor.
 

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Something else to consider is that we might see significant manufacturers moving to online sales models as well, something which many high-end brands have been shying away from for a while now. Yes, the experience won't be the same, but in a post-covid world, it will be necessary for primarily brick-and-mortar industries to also have a sizable online presence. Consider the fact that nearly the entire secondary market has moved online, and how much the watch community continues to grow. If brands and retailers have an online presence, it'll definitely increase sales significantly while also forcing brands to re-examine their packaging to ensure that the "AD experience" is made up by the presentation and whatnot.
 

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@apudabam - in which overseas locations are the HK wealthy seeking to buy new properties?

I agree, this will clearly be a headache for many of the companies in the industry. The only positive forces for prices are that some people may be using watches as a way to store or move wealth, and that the cut in production increases scarcity. Beyond that, all negatives.
sydney, london, Toronto and cities in US, singapore or even Japan There have been more and more developers showcasing their properties from these countries in HK.
HKers are generally wealthy and know that Hk isn’t secure long term sadly. Watches are really not on their minds.
 

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I don’t think the post covid market will effect the luxury watch trading market too much. The stock market is gaining a nice recovery the past 3 weeks.
 

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It's too early to predict what's in store for watch industry. We've to wait and watch for next 6 months.

If there is a cure and/or vaccine for Covid-19 and economies start recovery, all will be back to where we were last year.

In case the above doesn't happen and things go bad then this industry will be facing worse crisis than the quartz crisis of 1980s. Not only this but the entire non-essential products would face existential crisis.
 

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Discussion Starter · #16 ·
Thanks, it has been an interesting thread. I think the three years post Covid will not be kind to the industry.


High end watches would be the first thing to go for me, and I buy one a year. My net worth is likely to go down once the markets realize the economic impact, and apart from that, even if have the money, I think my focus on things other than watches.
 

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Thanks, it has been an interesting thread. I think the three years post Covid will not be kind to the industry.


High end watches would be the first thing to go for me, and I buy one a year. My net worth is likely to go down once the markets realize the economic impact, and apart from that, even if have the money, I think my focus on things other than watches.
I agree. I have no idea what to think. Some in these forums say that the high net worth folks will not be affected by COVID-19 and the market downturn. Consequently, they will continue to buy luxury watches and manufacturers/ADs will thrive--or that the very least keep their prices at current levels. With the brands like Rolex (and many others) forced to shutter their plants temporarily, it created a scarcity that will prop up prices in the short term.

Others say that it is difficult to assume prices will stay high because we are only at the beginning. And, depending on how long it will take the world economy to recover, high end watches may suffer. It is hard to think that manufactures/ADs will still be able to command these prices as demand falls off. Unless, I am wrong and these brands are recession-proof.

Being in the 99%, I have to save to be able to afford my first high end watch. I haven't bought it yet because I think it unwise to buy now. I was hoping certain market forces would depress pricing enough for it be justifiable. But with each passing week my argument for buying one becomes weaker. Obviously, the high end market won't miss my dollars. I'm not really their demographic, anyway.

However, it would be good to know if the next 6/12/18 months would be a good time to pull the trigger.
 
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Prices will rise cover C19 losses and then to cover decontamination efforts.
I do not see this happening,.....If mid to higher tier manufacture's were to respond this way not only would they fail to cover their codid 19 losses they would be rolling the dice with their firm's solvency.

Sure manufactures will attempt to hold the line on their pricing in the short term. If economic recovery does not come in the 6-12 month time frame look for prices to fall.
 

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A lot of moderately wealthy people are successful small business owners, and a lot of small businesses are being toasted by Covid-19. It's hard to know or predict how much this demographic has spent or will spend on high-end watches.
 

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Being in the 99%, I have to save to be able to afford my first high end watch. I haven't bought it yet because I think it unwise to buy now. I was hoping certain market forces would depress pricing enough for it be justifiable. But with each passing week my argument for buying one becomes weaker. Obviously, the high end market won't miss my dollars. I'm not really their demographic, anyway.

However, it would be good to know if the next 6/12/18 months would be a good time to pull the trigger.
What are you planning on getting as your first high end watch?
 
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