BCG finds investment in luxury watches from ‘the big three’ tops benchmark stock index.
Despite recent softness in the market, pre-owned luxury watches are still a good investment, at least from the “big three” of Rolex, Patek Philippe, and Audemars Piguet.
A new report from the Boston Consulting Group (BCG) shows that the “big three” average annual return was 20% since August 2018, besting the return from the S&P 500 (^GSPC) (which was up 8% from that time).
The BCG report also found that a collection of watches from “independent” brands like F.P. Journe, H. Moser & Cie, and De Bethune, returned 15% from that time.
A mix of wealthier “core” consumers and new entrants such as younger buyers and women are boosting the overall luxury watch market, one that the report sees growing from $75 billion in 2021, to $101 billion by 2026.
“The core luxury watch consumer (many of whom are our Collector/Investors) is growing in numbers. We expect the number of High Net Worth Individuals to grow ~7% per annum, to approximately 68 million people by 2025. Ultra-high net worth individuals (those with more than $30M of investable assets) are expected to grow ~5% per annum through to 2025,” said Sarah Willersdorf, BCG’s global head of luxury.
The BCG report breaks down the market into four separate watch buyer segments. While that “collector/investor” segment has been the typical driving force (with 60% of the market), it’s seeing big changes in the other areas.
“The Fashionable Professional has been skewing younger, compared to other segments. These younger buyers are typically entering the category with an entry-level watch but aspiring to higher-end brands and models. As earning increases, it’s likely these younger buyers will trade up for more luxurious watches,” Willersdorf said. “For luxury brands, sometimes this high-potential customer is harder to recognize – you’ll overlook them for a bit because they won’t initially look like your very high-end customer.”
Of course the TikTok/Instagram-ization of the watch collecting world have brought it to the masses, and to those younger enthusiasts, and these buyers are also more comfortable buying online, where the second-hand market dominates. “Online sales already exceed auction and store sales, and they are on a trajectory to account for close to 60% of the secondhand luxury watch market by 2026,” the report said.
Even more interesting (and beneficial to watch brands) is the transforming of the watch buying segments to include more women buyers, who have shown rising interest in luxury watches.
“There has been a dramatic increase in women buying jewelry for themselves—and that trend is spilling over into watches,” Willersdorf says. “There’s [also] an increasing trend of women wearing watches that have been more traditionally thought of as masculine. Finally, women are also looking for luxury purchases that hold or increase value over time, so the liquidity of this market is important, even if they’re never going to resell the watch.”
And this all comes back to why luxury watches could be a good alternate investment. The strength of any asset class comes down to liquidity and transparency of the market, and if that improves, more buyers will see the attractiveness of the market. For example, Rolex entering the certified pre-owned market is a way for those owners to access more liquidity for their assets, get new information on price discovery, and retain value.
Which in turn, Willersdorf says, might make splurging on a luxury purchase more guilt free.
“The fact that luxury watches often hold their value over time helps justify the purchase.”