Swiss luxury supervised marketplace struggling to find a footing, document finds

Secondary market prices for luxury Swiss watches continue to decline, according to an updated report from Morgan Stanley in collaboration with WatchCharts.

The file examines certain business metrics including pricing trends, stock ranges and absorption charges. It provides trading information and insights for traders and observing fans as they aim to decide whether the trade has discovered the nearest base to the speculative bubble bursting in March 2022.

Some of the key findings within the file are listed here:

continuous depreciation

The Swiss luxury watches secondary market experienced a 2.1% quarter-on-quarter price decline in Q2 2024. This is the 9th consecutive quarter of price decline since Q2 2022. Yearly performance for the WatchCharts General Marketplace Index is -9.4%, the year all three big-name manufacturers suffered declines. The WatchCharts Rolex subindex fell 7.1%, Patek Philippe fell 10.6%, and Audemars Piguet declined 12.4%.

large-based disease

Secondary market declines were common, affecting almost all brands. Notably, the mismodel with an average market cap above $3,000 saw favorable performance in Q2 2024. This broad-based situation highlights the difficult market conditions for luxury track brands.

LVMH manufacturers underperformed the market as a whole in the second quarter of 2024, with costs falling a notable 3.6%. Richemont brands also suffered significant declines over the past week, indicating ongoing demand conditions for these luxury groups.

Downfall vision for rolex

There are signs of under-consumption of the market for Rolex watches, which may reduce demand for the number one market. Gray marketplace stock was down once and there were shorter wait times for specific models, suggesting speculative purchases were becoming less common. The waiting period for the wider Rolex Submariner was projected to be 68 days in 2024 compared to 105 days in 2023. The wait for GMT-Grasp II has been marginally shorter, falling from 180 days in 2022 to 90 days this week. ,

reduction in price retention

All 9 brands tracked in the file have seen a sequential scale decline in price retention since April 2024. This decline is primarily driven by a continued decline in secondary market prices, which affects the perceived value of these luxury watches. Rolex sees the industry at an average retail price of +19.6% higher by July 2024, compared to +21.4% higher in April 2024. In response to the 90 current-production Patek Philippe fashions, average price retention for the symbol is +30.7% higher at retail, compared to +33.3% in April 2024. Morgan Stanley’s research of 87 current-production Audemars Piguet fashions projects an average price retention of +10.9% above retail in April 2024, compared to +14.9%.

If manufacturers with high-price retention can step up and meet the demand of the number one market, Morgan Stanley said, “it would not be unreasonable to expect that most models will be sold in the secondary market at prices close to or below retail.” Longer term, for example, Rolex has announced a new factory that will launch in 2025. More than 50% of the current production models of the Big Three (Rolex, Patek Philippe and Audemars Piguet) will trade above retail today. A change would be very significant for these highly regarded brands.

prime stock range

The total value of stock available for the Big 3 manufacturers in the secondary market is significantly higher than in 2021. This continued oversupply shows that the market is still dealing with the fallout from the last speculative bubble that burst in March 2022. Morgan Stanley has seen a significant decrease in the amount of gray marketplace Rolex stock being indexed since the start of the week. The gray marketplace is made up of any existing-production Rolex in brand-new condition indexed to the market on the secondary marketplace. On the other hand, the indexed volume and total supply of pre-owned watches has steadily increased this week and is estimated to be more than 350% compared to the first quarter of 2021.

weak absorption charge

The Big 3 manufacturers’ absorption rates, or stock submissions, remain well below 2021 levels. This development is getting worse every year for Rolex and Patek Philippe, which suggests that watches take longer to promote on the secondary market. Pre-owned Rolex watches took an average of 67 days to sell in the first half of 2024, compared to 18 days in 2021. The average duration of stock for other important manufacturers has increased even more, to 173 days for Patek Philippe (from 67 days) and 166 days for Audemars Piguet (from 46 days).

Rolex CPO Program Expanded

Announced in late 2022, the Rolex Qualified Pre-Owned program continues to expand, with an estimated 5,500 active listings from at least 61 approved stores worldwide by July 2024. This development reflects Rolex’s strategic progress to legitimize the secondary and capture more. Provide a marketplace and a managed resale situation for your watches. Morgan Stanley estimates the total secondary market size to be approximately $25B, of which Rolex has a market share of 44%. This means that Rolex accounts for $11B of secondary market value. The total value of Rolex CPO stock, estimated at $125 million, is approximately 1% of the entire secondary market.

CPO Top Class is an estimate of how much more expensive an eye is when purchased through a Rolex CPO Store compared to a non-Rolex CPO broker. Premiums are risky and vary depending on the broker and fashion, although they typically fall between 20% and 40%.

Disappointing gross sales experience

The latest impressions via the Swatch team suggest the business’s troubles appear to be far from over. Swatch Team’s global sales fell 10.7% to CHF 3.4 billion in the first six months of 2024 due to demanding economic and political conditions in China, Hong Kong and Macau, where sales were lower. 30% in the first half of 2024. Swatch Team stock fell 10% on the information.

Luxury goods giant Richemont reported similar problems in China in its quarterly sales update on July 16. Total sales remained flat in the quarter, with revenue from China declining 27%. Alternatively, the watchmaking unit, which accounts for about 17% of Richemont’s gross sales, fared significantly worse. Revenue declined 13% compared to the previous period.

The latest gross sales updates from one of the greatest gamers in the industry don’t look encouraging. The secondary market era for Swiss luxury watches is showing signs of slowing down, it has not yet settled down. Given the decline in secondary market prices, rising prices in the main market, low market sentiment, deteriorating price retention, low stock submissions and the traditionally elevated momentum of the stock, it seems unlikely that secondary prices will stabilize in the near future. ,

This volatility means that secondary market patrons may exercise caution, stores may face longer out-of-stock demand conditions, and shoppers may face less favorable price retention on their purchases.