For most people, buying a luxury watch is a milestone event. It follows months (years even) of research, saving and regular visits to a local authorized retailer. So, when your dream watch goes on sale, it’s very tempting to whip out your credit card on the spot. But is buying a luxury watch on sale always a good idea?
What We’ll Cover
Before we go too much into this topic, let’s outline the four different scenarios we’ll cover. They are:
- Scenario.1: Buying a full-priced watch at a discount from an authorized retailer;
- Scenario.2: Buying a watch on sale from an authorized retailer;
- Scenario.3: Buying a preowned watch on sale from a retailer; and
- Scenario.4: Buying a watch at a discounted price on the grey market.
All four scenarios sound somewhat similar. Yet, each has its own set of unique considerations when it comes to making a purchase.
Why Luxury Watches Go On Sale
There are many reasons why luxury watches go on sale. Some may be more pertinent to your decision-making than others. Here’s the three main ones. Feel free to chime in with others in the comments section below.
Reason. 1 – Over-supply
If you read the luxury news, you already know that the luxury watch industry has an over-supply issue. What this boils down to is more watches are being made than the market can handle. This is most prevalent in Asia. The ongoing crackdown on corruption in China is hurting the sales of must luxury brands. Global trade wars, uncertainty around Brexit, and the unpredictable political situation in the US are also major contributors.
Regardless the cause, the end result is the same: overstocked inventory. Inevitably this leads to discounting and sell-downs.
Reason. 2 – Under performance
As with every consumer product, not all luxury watches are created equal. Some are more desirable and attractive than others. Likewise, authorized retailers don’t get to pick and choose the “winners”. Generally, they have to buy models from across the brand’s range to secure the popular watches. You know, the ones that are guaranteed to sell well.
The less appealing siblings eventually go on sale to move the stock through. Then the whole process can start anew. This is not exclusive to luxury watches of course. This is the basis of most third-party retailer models.
*Note: just because a luxury watch isn’t a red hot seller, doesn’t mean it can’t be the right watch for you. Especially if you can pick it up at a discount.
Reason. 3 – Brand close-out
Sometimes relationships between brands and retailers don’t work out. Maybe the watches weren’t selling well enough. Maybe the brand wasn’t happy with the representation it was getting. There are any number of reasons for this. Sometimes, the brand will buy back its stock. Other times, the retailer will look to recover as much of their investment as possible. They do this by putting the remaining stock on sale. (This is especially the case if the brand in question has gone bankrupt).
In any event, this should raise some red flags. Are there any issues/concerns with the brand that has led the retailer to end the relationship? Will you still be able to get the watch serviced once your retailer is no longer an authorized dealer? All important questions to ask before you part with your hard-earned money.
Now that we know some of the reasons why luxury watches go on sale, let’s look at the four scenarios we outlined above.
Scenario. 1: Buying a full-priced watch at a discount from an authorized retailer
This is the ideal scenario. It requires that you already have a well-established relationship with your retailer though. Most likely as a result of many previous purchases. The level of discount will vary. It depends on your relationship and the watch in question. The main upside of course is that you are buying a watch for below market value. If you decide to re-sell at a later date you’re likely to take less of a hit on the resale than you would have otherwise.
It’s important to distinguish between buying a full-priced luxury watch at a discount and buying one on sale. The main difference is the market has already priced in the depreciation on value for the latter. In layman’s terms, that means the market didn’t think the watch was correctly priced to create sufficient demand at full retail. As such, if and when it comes to re-selling the watch, you will likely see a further drop in value.
Scenario. 2: Buying a watch on sale from an authorized retailer
When it comes to buying a watch on sale from an authorized retailer, there is one key consideration. Do you like the watch? In other words, it doesn’t matter what the market thinks the watch is worth. What matters is that this is the watch you want. Are you going to get enjoyment out of wearing it? Are you going to feel proud having it on your wrist? If you’ve been pining after it for the last 6 months and it goes on sale, there’s no reason you shouldn’t pull the trigger.
If you buying this luxury watch on sale in the hope of being able to flip it for a profit, you’re destined for disappointment. As we already discussed above, luxury watches go on sale for a reason. It is very unlikely you are going to find a desirable model with strong resale value on sale. It’s the 21st-century. There are too many channels available now to retailers to sell popular models through. If it’s on sale, you can be sure there’s a reason.
Scenario. 3: Buying a preowned watch on sale from a retailer
This is an interesting one. Preowned luxury watches are fast becoming a big business in their own right. Some estimates put the size of the second-hand market at around USD 5 billion a year in revenue. This makes sense when you think about it. Often times when someone is in the market to buy a new luxury watch, they want to sell their current one at the same time. Some authorised retailers offer a trade-up service. Others, like Xupes, specialise in the buying and selling of pre-owned luxury products.
There are several advantages to buying pre-owned. From tracking down discontinued models to significant discounts on retail. Sometimes it’s the only way to get your hands on a sought-after model, like the Patek Philippe Nautilus or the Rolex Deepsea. As with the primary market, however, the secondary market also needs to turn over stock. That means underperforming models regularly go on sale. That’s why it’s important to do your research. You don’t want to buy a pre-owned watch at full price simply because it’s just come into stock and hasn’t been put on sale yet.
Scenario. 4: Buying a watch at a discounted price on the grey market
Broadly speaking, the luxury watch grey market is split into two segments. The smaller of the two is the one that deals with models in high demand. Prime examples include the Rolex GMT-Master II Ref 126710BLRO Pepsi and the Rolex Cosmograph Daytona 116500LN. This market primarily services collectors and enthusiasts. Those who don’t want to wait on long lists at authorized dealers. Or those who are seeking specific, discontinued models. These types of watches rarely go on sale. If you see one on sale, it’s likely a scam.
The vast majority of the grey market meanwhile deals with excess inventory. We’ve all come across these sites before. They have names like Time Nation and Watch Express. They offer a broad range of luxury watches for sale, the majority of which are “brand new in box” or “new old stock”. Nearly all are offered at a discount on recommended retail.
There’s no denying there’s some good deals to be had on the grey market. The flipside of course is that you don’t get a manufacture warranty. Plus, you can be pretty sure your resale value is going to be about half what you paid. That said, if you can find the luxury watch you love for a price you can afford, who are we to say you shouldn’t buy it?
So, Should You Buy A Luxury Watch On Sale?
The simple answer is, it’s up to you. Are you buying this luxury watch for personal enjoyment? Do you plan to hold on to it? Is it within your budget? If the answer to these questions is yes, then go for it. Buy the watch and wear it in good health. If on the other hand you think you will be able to buy it at discount and then on sell it for a premium, you may want to do some additional research. Even when it comes to new luxury watches. Chances are, if you can negotiate a discount with your authorized retailer, so can others.
If you’ve had any experience buying a luxury watch on sale, we’d love to hear about it in the comments section below.