The Effects of Coronavirus on the Online Watch Market and Prices of Sought-After Steel Watches
Despite the worrisome situation, online sales of luxury watches aren’t too affected (yet), according to Chrono24.
There’s no denying the current situation and, as a consequence, its effects on the global economy. Certainly, this is nothing compared to health issues caused by Coronavirus, but still far from insignificant. Gross domestic product, employment (and therefore consumption) and financial markets are under severe strain. Key luxury markets around the world are affected, and so are watch brands – all of them – with direct consequences on employees and subcontractors. According to this column by bain.com, « luxury market globally will contract by 25% to 30% year-over-year in the first quarter » despite signs of recovery on the Chinese market. This is true for physical points of sale, but what about the online watch market? Well, according to market-leader Chrono24, things are quite different.
Those who have studied or used statistics know that the more data you collect, the more accurate the result of a statistic study will be. As such, when Chrono24 decided to run a study on the effects of Covid-19 on online sales of second-hand watches, being the market leader, you can expect the results to be relevant. With over 450,000 watches listed and EUR 1.5 billion in annual transactions volume (in 2019), Chrono24 is the world‘s leading online marketplace for new and pre-owned luxury watches. Today, by looking at the numbers published recently by the online marketplace, we’ll try to give you an accurate view of the consequences of Coronavirus on the online watch market.
Note: all the graphs below have been produced by Chrono24 and should be credited as such.
Before we move on to a more in-depth analysis of the data, we first have to check the numbers that are exposed by Chrono24 in this study, the first one being a classic for online e-commerce; traffic.
Chrono24 is reporting an approximate 20% decrease in sessions, as of the second week of March 2020, which basically corresponds to the spread of the virus outside of China. This is nothing exceptional and we, at MONOCHROME, also experienced the same kind of drop in traffic over the same period. The online marketplace indicates signs of recovery, and we are experiencing an identical situation here.
More important and relevant are sales. Disregarding the drop in sales in 2019, week 52 (corresponding to the holiday season), Chrono24 is reporting a significant 15% diminution of sales, mainly over the past two weeks – as of March 15th – once again corresponding to the start of confinement and social distancing measures applied to multiple countries around the world – in particular Europe, Chrono24’s largest market. While the reduction of sales is nothing to be overlooked, it remains (for the moment) relatively contained. However, the situation could easily continue to degrade over the coming weeks.
The number of cross-border shipments (in quantity, not in value) is not affected yet by Covid-19, according to Chrono24. This data, compared to the previous graph on sales, shows that if quantities of transactions aren’t too much affected yet, the average value per watch is lower. People are thus still buying second-hand watches online, but not with the same value per watch.
Perhaps the important graph from the Chrono24 study has to do with increases and decreases of prices, the online marketplace indicating that “dealers have been changing their prices in both directions” with more amplitude than in the past months. This, in financial market terms, could be translated by an increase in the volatility of the markets. Again, if we do a financial analogy, this indicates a higher level of stress on the watch markets with dealers more prone to react to the decreasing demand of most watch models, by adjusting their prices down, but also by increasing the prices of certain sought-after models.
This is a highly interesting report, which could be compared to one of the most relevant financial indexes, the CBOE Volatility Index, commonly known as VIX Index – an indicator of the stock market’s expectation of volatility or “the fear index” – which has reached its highest-ever level (surpassing the level reached during the 2008 financial crisis) amid the coronavirus crisis. With some timepieces becoming investment vehicles, the watch market is more inclined to be partially driven by reactions to external macro-economical factors than in the past and this shows in the volatility on prices.
The Impact of Coronavirus on sought-after watches
With close to half a million watches listed, Chrono24 can easily gather precise pieces of information on the average price of the watches with most executed transactions. However, in its study, Chrono24 is listing only six watch models, three of them known as some of the most hyped and “prone to be sold at premium” models of the watch industry – the Pepsi GMT-Master II, the Nautilus 5711 and the Royal Oak 15202ST. But Chrono24 is also listing three other watches, known to be widely available on the second-hand market and which often sell for a lower price than the RRP – the Moonwatch, the Navitimer and the Monaco.
While the three ‘less-hyped’ watches haven’t been affected until now by the Coronavirus situation, as their average prices remain relatively stable, the three other models, namely the ROI-driven watches that are currently suffering premium over retail price and speculative bubble, the situation was slightly different, with a common pattern in the graphs. Those three watches have been affected by an almost instantaneous decrease of price, once again confirming the investment-driven market for these watches, and the higher volatility on the markets. However, this decrease appears less important in percentage than the graphs indicate, being comprised between 2.5% and 4%. In response to this decrease, the prices have seen a rise to stabilize to a level almost identical to those before Covid-19 – a pattern that is well-known on financial markets too.
What to conclude?
The question isn’t whether the watch market will be affected or not. It is affected now and will be even more so in the coming weeks. The real question is: who will be the most affected players? No doubt that physical points of sale, most of them closed in Europe and the US due to confinement measures, will see a massive drop in revenues this spring 2020. Some studies indicate a decline of 25% of overall sales for 2020, which could still be rather optimistic. No doubt that watch brands will be massively impacted too, some having stopped production (Rolex, Patek, AP and more) and others, while still operating, are relying on partial unemployment measures offered by the Swiss Council. Sales are thus going to be extremely low for March 2020, with the future remaining unknown.
What about online sales? While it’s still too early to see the real impact, online platforms could well benefit – or at least be less impacted – by the Coronavirus situation. The online actors of the second-hand watch market – which we’ve listed in a buying guide to help you fulfil your passion for watches from home – could potentially benefit from a relocation of consumers, moving from classic brick & mortar retail to online watch shopping. For those with both offline and online, it could help to minimize the drop in revenues. As such, it seems more crucial than ever for watch brands to look at e-commerce and certified pre-owned solutions.
Second, this study also shows how the watch market has moved, on certain specific watch references, from a passion-driven to investment-driven market, with return on investment and profitability in mind. The shortage of stainless steel Rolex, Patek Philippe Nautilus and Audemars Piguet Royal Oak and the fact that some of these watches sell for two to three times the RRP isn’t new, yet Covid-19 could even amplify this situation, in the same way that gold is traded in reaction to the volatility of stocks. As indicated by the study, prices of the Pepsi, the 5711 and the 15202ST are not yet impacted and the situation could remain the same. Just like gold, there could be a potential opposite correlation between these watches and the level of stress of the economy.
Sadly, these watches are often acquired for different purposes than being worn on the wrist of an enthusiast. Steel (watch) is the new gold…
I think it’s too early to tell. Price increases are probably still related to CH24 uncapping their commission. Some listings were grandfathered and as those go out of date the new terms are forced upon you. A £10k watch used to generated a fee of £299 and it’s now £650. That additional fee has been passed to the top level price. In addition, most companies are no longer shipping which is about to create a bit of a cash flow issue. And it can’t really be solved by lowering prices. I have an outstanding order via CH24 – when will I get the watch? No idea as it’s in a safe somewhere while the staff are at home. I massively low balled my offer and it was still accepted.
You have touched on so many things and everything in this article Brice. Excellent piece of journalism. Just a minor note the VIX surpassed briefly its highest level reached in 2008 but quickly settled below it.
All the best to monochrome staff and readers and their families. Stay safe please and looking forward to the end of the coronavirus crisis hopefully sooner than later.
Which watch are you waiting for Colin
Thanks JD. Indeed, the VIX went up to 82.69 briefly (vs. 80.74 in 2008). We’ll edit so to be accurate.
Thanks for this good article with facts and figures.
Thank you Brice for deep analyse. I think, we can make conclusions later, in 2-3 months. But at the first sight I agree with you.
Stay safe and keep writing ))
I have a much simpler formula that always works , when people start paying 50% over retail for Rolex stainless steel sport watches it is followed by a big financial crash .
Personally I haven’t noticed any drops as yet (at least on the 3 brands im looking to buy – and they’re not Rolex, Pateks or AP’s and my offers are so close – up to 90% – to the asking price and yet they are still being rejected by the dealers. Dealers so far seem to be sticking to their guns. Time will tell though, I am not in a hurry to fork out ££££
$7200 submariner 2019 model 116610 just sold. Another about to go for $7500 on the bay. Think we’re closer to seeing prices come down. GMTs will take longer but eventually it will happen. No demand and too much supply. Just my opinion
We will get a glut of watches towards back end of this year. It takes time for a recession to start to bite and i suspect that many “collectors” will be looking to liquidate some assets and watches are easy to sell. More supply and a recession too boot – I suspect that prices will come down over the next 6-12 months. I have a Rolex GMT 16710 Coke in my sights but will wait till they drop. I’m in no hurry.