Fashion

How the Rise of the Pre-Owned Watch in China is Disrupting the Watch Industry

China has become one of the most competitive markets in the world, and the watchmaking industry, like many others, has had to re-adjust to new trends to keep pace with the demands of a radically shifting market there.

According to Bloomberg, “ex-factory sales of Swiss watches rose 6.3 percent in value over 2017 to $20.8 billion.” The same report said that this is “the second consecutive year of export growth after downturns in 2015 (-3.3 percent) and 2016 (-9.9 percent).” Furthermore, estimates released by the Federation of the Swiss Watch Industry, in January 2019, shows that China is now the third biggest export market, seeing a growth of 11.7 percent.

But despite these impressive numbers, the industry again showed signs of decline by the middle of 2018, and its China numbers dropped from 18.8 percent to 11.7 percent for the year. This decline was at least partially caused by a new government policy that increased import duties from 30 percent to 60 percent for luxury watches. Between that and China’s recent crackdown on buying agents (“daigou agents”) who make overseas purchases for their customers, many wealthy elites have started to make less showy acquisitions. Pre-owned watches have become a reasonable alternative and an inconspicuous choice compared to splashy new models. Meanwhile, according to Bain & Company, “Chinese consumers made 27 percent of their luxury purchases in China in 2018, up from 23 percent in 2015,” and the consultancy predicts that number will grow to 50 percent by 2025. Given these changes in the market, it isn’t surprising that watchmakers and retailers are looking for alternative sources of income, and vintage watches are proving to be an appealing solution.

Thanks to this new direction in consumer buying behavior, the demand for pre-owned watches can no longer be seen as a temporary trend. And now, this change has taken an innovative turn as the pre-owned market becomes an even larger part of the industry, where even big names like Audemars Piguet are getting into the game by trying to attract customers back to their boutiques by selling pre-owned watches.

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The fact that pre-owned watches come with discounted price tags makes them more appealing for high- and low-end luxury consumers alike, and this allows top brands like Rolex, Omega, and Cartier to become available to more consumers than just a select minority of elites. This democratization of the market is delivering strong numbers for the pre-loved watch industry in Europe and North America, but it’s surprising that this success is also happening in China where class distinction is still a large part of customer buying decisions. But even in China, the definition of “value” is slowly changing, and luxury consumers are becoming more aware of pieces that will gain in value over time.

And because of social media and new technologies, consumers are much more knowledgeable than they were in the past. They also have a lot more choice than before, thanks to high e-commerce availability, and they no longer have to worry about fakes due to a group of trusted resale websites that guarantee their merchandise (Tourneau, Watchfinder, and Chronoexpert). Additionally, some dealers even offer buy-back guarantees, proving to customers that the resale value of vintage watches will remain strong. Esquire estimates that the best investment watches remain the classics, including Rolex, Vacheron Constantin, Jaeger-LeCoultre, Longines, and Patek Philippe, but there are also younger brands like Farer that have quickly become darlings of watch connoisseurs. And surprisingly, Chinese consumers have even embraced these younger brands with ease, proving that those consumers have a strong grasp of the market.

Millennials will soon represent 40 percent of the global personal luxury goods market, and Chinese millennials, in particular, are a promising demographic for the luxury watch industry in the future. They are known as an informed customer base that understands value, and their income levels will only continue to rise. So, with the continued prosperity of the younger Chinese generations, online sales, and growing interest in sales at auction houses, the pre-owned watch market looks increasingly positive and ready to expand.

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