Focus on Value Retention

[Rbacs]

While I have been interested in watches for over a decade, I recently purchased my first few luxury watches. I really focused on what I liked versus value retention but so many discussions happened to be focused on value retention/appreciation. Has it always been this way or only the last few years? I can appreciate people not wanting to lose money but why is there so much focus as money other luxury goods don’t necessarily retain their value. Just a general question and not trying to argue that either view is better than another. Any insight would be appreciated. Thanks!

[Tools]

It seems to be a focus of more recent, but vocal, generations rather than watch collectors as a whole.

The vast majority of folks who buy a Rolex are just looking for a good quality luxury brand, not much different than any other product.

[Rbacs]

Thanks Tools. Makes sense

[codecow]

I think about value retention with vehicles as well. The more expensive the item, the more I care whether it retains value.

[Robison347]

During the past decade the number of affluent people has grown while the capacity of high end watchmakers to produce watches has stayed fairly static. Right now there seem to be several times as many people seeking to buy Rolex as the company is making.

That has created the current situation where a significant number of the people who buy the most desirable models flip them for a profit on the secondary market. As long as there are more people desiring that model than there are new ones in the Rolex pipeline, that situation will prevail. My guess is, it will change with economic slowdowns, which will decrease the number of people who want to buy.

I think prices have the potential to fall quickly if the flippers become disenchanted with their returns and stop buying. That will free those watches to be bought by collectors, who won’t sell them at all, or at least not as soon or as often. Each collector who gets a new watch is one less buyer in the secondary market, which can drive that market down as fast as an excess of buyers drove it up.

Over the longer tern, Rolex always raises prices. The $14k two tone Datejust models were once $1400, and that was in my time as a Rolex owner. So many of us have confidence our good used watches will always hold value, simply because the brand new versions will keep rising in price so our used ones will follow.

That is very different from the situation with cars, both because the lifespan of watches is longer, and the year to year model change is much less. A 2003 Mercedes looks like an old car because the models have changed so much, where a 2003 Rolex looks like new in many cases.

[kopi-c]

Originally Posted by codecow

I think about value retention with vehicles as well. The more expensive the item, the more I care whether it retains value.

Then why even purchase an expensive item in the beginning?

Cars just like watches depreciate in monetary value over a period of time..

[enjoythemusic]

Only during past few years to any real extent. Sure there is, was, and always will be those 'special' pieces, yet I look forward to getting back to 'norms' in general. We sure have picked up A LOT more enthusiasts, or at a minimum, more widespread awareness.

[HHIslander]

I tend to only buy watches I like and turn the analytical left side value calculation part of my brain off when making purchase decisions. It keeps watches as a hobby. Having the view that watches are akin to an investment portfolio doesn’t seem like much fun to me but to each his own.

[1William]

Value retention is equal to buying watches or cars that are desirable and somewhat difficult to get. The SS Daytona has always been difficult to get from an AD at retail that is now or 20 years ago. The balancing between value retention and getting a watch or watches you will wear is the trick. If you are able to buy a watch at fair market value or retail and it is desirable you will not have an issue getting your money back out of it in the future. The key is the time window and how long that will take. I bough a Rolex Hulk in 2018 for 7k. Sold it for 18.5k a little while ago. Will you see that kind of value in the future. I think not, at least in that time window. So many threads are really just about money and that is ok as that is part of the watch game. So many others are about making judgements on others about the buying/selling/trading they do. Find a watch or watches that you like and will wear and buy them, wear them, enjoy them and when the time comes do as you please.

[Blansky]

I think most people tend to balance it out, even if they don't dwell on it. Nobody wants to spend a lot of money (which is relative) on something that's essentially worthless in a few years. Although these days with tech that's become the way of the world. I think people are happy if the watches maybe hang around a half to 2/3 value if they sell them in a few years. Most people don't or didn't really expect them to go up in value unless it was a collector item.

But emotional purchases like watches and dream cars, are sometimes given a pass on financial practicality and we sort of allocate it into the mad money/pleasure column.

What we have seen in the last few years though is people getting into watches as commodities which has had a negative affect on the hobbyiest/WIS community.

[learningtofly]

Originally Posted by kopi-c

Then why even purchase an expensive item in the beginning?

Cars just like watches depreciate in monetary value over a period of time..

Originally Posted by Blansky

I think most people tend to balance it out, even if they don't dwell on it. Nobody wants to spend a lot of money (which is relative) on something that's essentially worthless in a few years. Although these days with tech that's become the way of the world. I think people are happy if the watches maybe hang around a half to 2/3 value if they sell them in a few years. Most don't or didn't really expect them to go up in value unless it was a collector item.

But emotional purchases like watches and dream cars, are sometimes given a pass on financial practicality and we sort of allocate it into the mad money/pleasure column.

What we have seen in the last few years though is people getting into watches as commodities which has had a negative affect on the hobbyiest/WIS community.

Daft question, good answer.

[Phwtch1]

Originally Posted by Robison347

During the past decade the number of affluent people has grown while the capacity of high end watchmakers to produce watches has stayed fairly static. Right now there seem to be several times as many people seeking to buy Rolex as the company is making.

That has created the current situation where a significant number of the people who buy the most desirable models flip them for a profit on the secondary market. As long as there are more people desiring that model than there are new ones in the Rolex pipeline, that situation will prevail. My guess is, it will change with economic slowdowns, which will decrease the number of people who want to buy.

I think prices have the potential to fall quickly if the flippers become disenchanted with their returns and stop buying. That will free those watches to be bought by collectors, who won’t sell them at all, or at least not as soon or as often. Each collector who gets a new watch is one less buyer in the secondary market, which can drive that market down as fast as an excess of buyers drove it up.

Over the longer tern, Rolex always raises prices. The $14k two tone Datejust models were once $1400, and that was in my time as a Rolex owner. So many of us have confidence our good used watches will always hold value, simply because the brand new versions will keep rising in price so our used ones will follow.

That is very different from the situation with cars, both because the lifespan of watches is longer, and the year to year model change is much less. A 2003 Mercedes looks like an old car because the models have changed so much, where a 2003 Rolex looks like new in many cases.

This makes sense. More enthusiasts with less to go round sounds like a reasonable factor to the recent focus on value retention.

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[nighthawk77]

For me, it's a secondary factor when acquiring a watch. There are a few watches I'd like to own and experience, but eventually, I hope to pare back the collection at some point to a core few.

Additionally, I also recognize that my tastes may change over time, and/or I simply may not enjoy a watch as much as I had hoped prior to acquiring it.

Knowing that I won't take a huge loss if I do decide to sell provides some reassurance.

[brandrea]

Originally Posted by Tools

It seems to be a focus of more recent, but vocal, generations rather than watch collectors as a whole.

The vast majority of folks who buy a Rolex are just looking for a good quality luxury brand, not much different than any other product.

[codecow]

Originally Posted by kopi-c

Then why even purchase an expensive item in the beginning?

Cars just like watches depreciate in monetary value over a period of time..

It’s not an investment, but if you stay in the hobby at least the “stuff” hobbies I have, I keep collecting. That means sometimes I sell or trade.

It’s fun to me to not get destroyed if I sell or trade something no matter what it is.

[kopi-c]

Originally Posted by learningtofly

Daft question, good answer.

Daft reply.

[BroncoOne]

Originally Posted by kopi-c

Then why even purchase an expensive item in the beginning?

Cars just like watches depreciate in monetary value over a period of time..

Some watches do, some don’t.

You can also transfer the value to the next generation just by gist it your watches.

[Yobber76]

Originally Posted by codecow

It’s not an investment, but if you stay in the hobby at least the “stuff” hobbies I have, I keep collecting. That means sometimes I sell or trade.

It’s fun to me to not get destroyed if I sell or trade something no matter what it is.

I think this has merit to many people, while most hobbyists love the items they collect, most of us often trade or sell to buy something new. Companies like Tag Heuer, Breitling and Panerai make excellent watches, but they don't hold value, and often are difficult to sell or trade. I have one of each in my collection, love them all.
Rolex, on the other hand holds value better, and has more "hype" recognition, creating more demand in the market. You can argue quality of each brand, but people that love a particular watch company or companies may not agree.
So when choosing a luxury watch for say $10K, it's not wrong to say, "If I wanted to sell/trade this watch for something else, what watch brand would give me the best trade value. Rolex would be a great buy. Add that they make excellent watches, with quality parts that can last generations, and you have a winning formula. I have owned 6 Rolex watches, traded 3 of them for other Rolex watches. All of my trades were for more than I paid for the watches, making the trade easier. My Tag, while a great watch, has no trade value, but I still love it.

[Calatrava r]

Value retention enters the picture when people decide to own more than one watch. It makes no sense to purchase a bunch of watches where you can only wear one at a time and each one you buy loses a lot of value. Collectors collect things of value. They only collect worthless things where the cost to acquire the stuff is nominal. If you only own one watch and wear it every day, most people in that situation don't care what the watch is worth.

[pk552502]

Nothing wrong with smart buying. I don't consider watches as investments, but I like to think my money is pretty safe for the most part. Not trying to make a profit, but high quality watches should be a store of value to an extent. When I buy a watch, I like to think I got a good value. For instance, I love Breguet watches but would only buy them on the used market.

[rlawall]

In my experience collecting watches over the last 20+ years, the fact that a Rolex will "hold" it's value overtime had been discussed as a side benefit, considerably less important than the design, materials, complications and durability.
This seems to have changed quite a bit, starting around the mid-late 2000s based on what I have seen.
What was once a lesser consideration has become a primary motivator in the purchase decision process.
While I never seek to "lose" money on a purchase, a purchase like this is way more about style, durability and complications that fit my lifestyle than it is about appreciation or "investment" value.
I travel quite a bit, so sadly the complications I appreciate most, have become some of the most sought after and expensive...

[Rbacs]

Thanks for all of the responses. A lot of good points were raised. I will continue to buy what I like, as I hope to retain them long term.

[BraveBold]

Pretty sure Rolex as a store of value / medium of exchange goes back several decades. This is because of the aforementioned traits (reliability, consistency of style, quality) wrapped up in a well-marketed brand.

I guess the question is “focus” and what that means. Perhaps more “focus” has shifted to speculation during a particularly speculative period (reminder: not unique to Rolex). But “value retention”? I think that has been a key ingredient to the brand’s general allure back to the 80s (at minimum).

[Dirt]

Value retention has been a thing for over 20 odd years with regard to SS Rolex watches.
Over the last 7 or so years SS Rolex more specifically has morphed into an investment vehicle and in some people's minds it seems to be conflated with a get rick quick mentality where some are considering it as an active hustle.

Then there is the other end of the spectrum where a Rolex watch may be actively hunted as part of a core business model by professional thieves where it's the easiest money they could make with weapons even being utilised to expedite the crime and multiple layers to the syndicate.
That is why we no longer see openly advertised GTGs on forums at a venue for like minded watch collectors to meet and have some fun.
The really high end GTGs are never heard about openly and are very strictly closed shops. Only the very inner circle of collectors get an invite and unlike 20 years ago we very rarely even hear about them after the fact where as it was more openly spoken about.
That gives one an indication of how serious the money/Rolex equation is.

Make no mistake.
To many of the protetariate, Rolex smells of money.
Way back in the day, there were those of us who seriously collected watches with some quiety pursuing it to make money out of it. It was fully understood that if a watch was a SS Rolex there was considerably more potential depending on the reference.
If a watch was a PM Patek there was also some good potential.
Now even my dog or the neighbours dog would be inclined to eye off a Rolex and see $ signs.
Funnily enough there is another brand that shall remain nameless, where there is even more potential to "make some very good money" if one can get hold of the right references but it requires more expertise and connections to be able to play in that space. Very few people are aware of it so it's not openly asked about on forums like it is for Rolex watches.
The fact that it's openly asked about and forms part of forum rules tells one it's real enough.

The dynamic is getting worse from what I have seen on a number of levels

[Dirt]

Originally Posted by BraveBold

Pretty sure Rolex as a store of value / medium of exchange goes back several decades. This is because of the aforementioned traits (reliability, consistency of style, quality) wrapped up in a well-marketed brand.

I guess the question is “focus” and what that means. Perhaps more “focus” has shifted to speculation during a particularly speculative period (reminder: not unique to Rolex). But “value retention”? I think that has been a key ingredient to the brand’s general allure back to the 80s (at minimum).

"Speculative period".
That's another good way to frame it.
We have all seen people chase easy money where ever they can.
Once it was just the share market generally speaking.
Now it's virtual currency.
Even cat shit is worth very serious money if the cats are fed the right coffee beans grown in the right place.
The world is going mad.