Why Inventory Is Scarce and How to Use That To Your Advantage

During these trying times in the first half of 2020, we’ve seen a lot of impact on the global economy.  The positive news is this hasn’t put a large dent in the luxury watch market in terms of consumers buying/selling.  

There is still plenty of activity going on and buyers are still hungry to add to their collections.  There are a few reasons for this.  During economic downturns, people look to store their money in assets that will hold value or appreciate.  So when they unwind their stocks, and other portfolio investments, they look to alternative means.  Also, this sector of the luxury market gets impacted less than the other luxury sectors due to the buy-in that the value is intrinsic within the asset.  By this I mean, it’s not like during a time when job security is scarce and the economy is tanking you’ll see people stock up on designer bags and shoes.  But they still continue to store money in gold, platinum, precious metals, watches, art.


So in general, the demand and purchasing of luxury timepieces hasn’t really slowed down.  It’s just the nature of the types of watches people are buying that has shifted.

Now, the interesting thing is, since demand hasn’t slowed, but operations of timepiece manufacturers have, you have a supply/demand bottleneck constraint.  Most of the Swiss watchmakers have closed their shops and dramatically reduced their annual production allocations.  So you have an ongoing purchase need from watch enthusiasts globally who are buying new/old stock and even vaulting old stock highly sought after pieces to hold as they know value will appreciate in the coming year(s).  This lack of new inventory is jacking up prices on the market for all timepieces, especially those made with precious metals, and for the brands that have the longevity investor grade value (think Rolex, AP, Patek, etc).


The other reason inventory is scarce, is because COVID-19 is dramatically restricting the shipping logistics not only domestically but worldwide.  There are orders that are going unfilled.  There are orders that have been filled but can’t make it through international customs, and/or won’t make it to their final destination until months later which has impacted commerce greatly.  So the limitations based around actually receiving a watch one buys within a reasonable timeframe or at all has become unreliable.  This can work against you as a trader when you’re trying to do business internationally.  However, it can also work to your advantage when doing business locally, domestically, or in a manner where you can guarantee delivery where others fall short.  Make sure to communicate that reliability in your watch listings, and to potential buyers when you’re trading as it can give you the upper hand in closing a deal.  


The other concern buyers/sellers are focusing on now is the risks associated with buying a watch.  For example, the concern that the watch may need repair/service/polish, or is coming from a source that isn’t spreading COVID.  These may seem like silly concerns to a seasoned trader, but they are valid.  The reason the repair risk is valid is just like the OEM manufacturers, the watchmakers and repair shops are mostly closed and limited in capacity to get orders done.  Turn-around times are much longer, and some services aren’t even being offered.  So you can imagine the concern a retail buyer may have if they don’t have a network of trusted colleagues to execute on these needs.  That said, this can also yield an opportunity for you to offer them comfort and confidence in dealing with you.  If you tell them that you have people in your network who can take care of any issues that arise faster and cheaper than they know of, you become a value center.  It helps you do more deals, and keeps customers longer without losing them to competitors. 


The other advantage here, and something you should consider as a watch trader when you’re buying inventory is, try to buy complete sets and pieces that are keeping excellent time.  You don’t want to keep running into repair and polish issues during this type of slow-down, as it will start to impact your momentum and cash turnover.


In summation, understanding the new market risks we’re dealing with is important to your profitability trading.  The more you can follow these trends, and navigate them, the better off you will be.  In every aspect of the above challenges there is an equal opportunity to use those to your advantage.  Address these concerns with your customers when you’re selling watches and help them understand why/how doing business with you is the way to-go.  Especially with all that’s going on recently.

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