• Wed. Jun 19th, 2024

Luxury watch prices plummet on weak Chinese consumer confidence


Aug 11, 2022
Luxury watch prices plummet on weak Chinese consumer confidence


The prices of second-hand luxury goods have fallen rapidly in China over recent months, as even the wealthy cut back on their discretionary spending and sell their Rolex watches and Hermès bags to raise cash.

More than a dozen popular brands of luxury watches and bags have lost between 20 per cent and 50 per cent of their value on the secondary market since Shanghai, China’s financial and commercial capital, imposed a strict lockdown in March to crush a Covid outbreak.

The restrictions in Shanghai and dozens of other regions have dealt a heavy blow to small business owners, many of whom accumulated large collections of luxury goods in better times. But the repeated lockdowns have damaged their cash flows.

Last week tens of thousands of tourists in Hainan, an island province billed as “China’s Hawaii”, were prevented from returning home to stem an outbreak there.

The government is promoting Hainan as a duty-free paradise where Chinese consumers can buy the same luxury goods they used to snap up in cities such as Paris, Rome and London before President Xi Jinping’s controversial zero-Covid policy made it practically impossible to travel abroad for short trips.

Watcheco, an industry portal for used luxury watches, reported that the price of second-hand Rolex Submariners — a model coveted by connoisseurs and collectors — had fallen 46 per cent since March

Luxury bag dealerships in Shanghai and Hangzhou have also cut prices of classics such as Hermès Birkin bags by up to a fifth over the same period.

Pawnshops and other luxury goods resellers said there had been a big increase in customers, led by cash-strapped business owners who were struggling to raise capital to pay down debt and keep their operations afloat.

“The boom time is over,” said James Wang, a seller of second-hand luxury watches in the eastern city of Nanjing. “We are entering a correction period that could last for a long time.”

Wang said he bought six Patek Philippe and 29 Rolex Submariner watches from distressed owners in July alone, compared with no Patek Philippes and five Rolex Submariners in the first quarter of this year.

“Patek Philippe says you never actually own its watch, but merely look after it for the next generation,” said Wang. “That’s not the case in a business crisis.”

Shaun Rein at China Market Research, a Shanghai-based consultancy, said the sudden rise in supply and resulting price drops of second-hand luxury goods were evidence of “very weak consumer confidence”.

“It’s probably the weakest I’ve seen in my 25 years in China,” he added.

Some luxury goods investors argued that the recent price falls were inevitable after an unsustainable surge prior to March.

In the six months leading up to Shanghai’s lockdown, the price of second-hand Rolex Submariners rose by 240 per cent. The same bag dealerships that recently cut their asking prices in Shanghai and Hangzhou did so just months after raising prices at the start of the new year.

Sam Xue, a watch investor who owns an electric heater factory in the eastern city of Wuxi, said the price rises were “pure speculation” and unsustainable.

“The weak economy can’t support a luxury boom,” Xue said, adding that he would not buy luxury watches again unless prices fell by another 30 per cent.

Additional reporting by Tom Mitchell in Singapore


Image and article originally from www.ft.com. Read the original article here.