Strange happenings in Hong Kong - grey market dealers

[Vince_76]

History may not repeat itself, but it sure does rhyme. Don’t forget that ROOs used to be all the rave and ROs traded at a discount. Trends come and go.

The phenomena of ROOs (desirable models too) and the code trading at a discount, though all sold via AP’s direct POS, may serve as a bellwether to other models. Sure, we won’t get a 40% discount. But I think it is more likely than not that for run of the mill royal oaks, we end up +/- MSRP. 15550s and 15510s are not that rare. The premium has been trending down, and this is with the 50th rotor btw.

[aa909]

Originally Posted by GS93108

I wasn't attributing my comprehension of the thread to any one person, rather it was my impression in general. That said, I'm sure that non AP brands will indeed revert to discounts from RRP, even perhaps directly from the retailer to the consumer. I just don't understand the mechanism in relation to AP.

Whilst the RO is the darling and the ROO/Code lines aren't as regarded as highly, the plethora of 'cheap' product available now is most likely due to the 'get on the train' mentality and buy something you don't want to get something you do. Is that likely to continue in 2023? I don't think so.

Thus looking at 2023 products only, then RO/ROO/CODE will all be treated the same by AP and thus fewer available in the secondary market and thus discounts on any 2023 models will be because someone has taken a bath - as per macros scenario - but that will be exceptional and account for an insignificant quantity IMO.

for this to be true, AP will ultimately have to manufacture fewer pieces in total, and far fewer of the less desirable pieces. that will balance supply / demand but what does that do for APs (and Patek's) long run cash flow? The exclusive boutique model works when the market is hot, but it hasn't been tested in recessionary times. I guess we'll see what happens.

[dmash]

Originally Posted by Vince_76

History may not repeat itself, but it sure does rhyme. Don’t forget that ROOs used to be all the rave and ROs traded at a discount. Trends come and go.

The phenomena of ROOs (desirable models too) and the code trading at a discount, though all sold via AP’s direct POS, may serve as a bellwether to other models. Sure, we won’t get a 40% discount. But I think it is more likely than not that for run of the mill royal oaks, we end up +/- MSRP. 15550s and 15510s are not that rare. The premium has been trending down, and this is with the 50th rotor btw.

I’ve been reiterating this point countless times as I feel so many guys are overlooking the reality that every RO/ROC this year is technically a limited edition model. 2023 onwards models will simply not maintain the same value, it goes against all logic. So even if 50ths hold MSRP, very well could be the case normal ones do not.

There are 100% still speculators in the market buying RO/ROC thinking it could potentially be a long term hold as it’s discontinued after this year. Which in any normal time, *is* the only type of watches which people speculate on, ones that are LE/are discontinued models. Any modern SS in production watch to fetch above retail is nutty (imo).

[GS93108]

Originally Posted by dmash

Completely entitled to your opinion. But I’m simply reiterating and showcasing trends/real data points, the above is purely speculation and going counter what we’re currently seeing. No floor has formed for any luxury type good, with most people smarter than me forecasting we are nowhere near the end.

We’ll see though

Additionally you’re in UK which is a horrendous market for watches all around, for any brand (supply wise). So you can be much more affected with price gouging than others in US/Asia.

Yep, let's see. I'd very much like a discount from AP anywhere in the world, but again I think that's very unlikely, and certainly don't have clairvoyant powers so I keep my fingers crossed like everyone else. But I'd still like some theory to hang my hope on with regards to AP - other than today's trend - which as we all know "past performance does not guarantee future guarantee future results"

[Vince_76]

Originally Posted by aa909

for this to be true, AP will ultimately have to manufacture fewer pieces in total, and far fewer of the less desirable pieces. that will balance supply / demand but what does that do for APs (and Patek's) long run cash flow? The exclusive boutique model works when the market is hot, but it hasn't been tested in recessionary times. I guess we'll see what happens.

Exactly. More risk but more reward. If shareholders start putting on the pressure due to lack of sales/velocity, it will get very interesting. AP’s model does allow for full control of the brand experience, but it also means that they do not have the luxury of offloading their watches to ADs, which they must accept to keep their designation (then it’s the ADs problem)

[GS93108]

I'll be back next year and we can see if the trend has continued - and thus we can then try and understand how - or we will see if RRP is the best we can do, save the odd anomaly.

Again, no confrontation on my part, I am simply curious as to theories that aren't simply continuations of the current trend to < RRP which ultimately cannot happen if the origin of supply from AP never drops below RRP. In simply terms, for < RRP to happen there needs to be a patsy taking a loss AFTER it has been supplied by AP and I bet those bubble patsies are disappearing every day.

[ajw45]

First off, I don't think we'll see ROs discounted at the boutiques any time soon. However, that doesn't mean there won't be shorter waits and greater accessibility in the near term. We all know AP is pushing production, they are up 10% this year, will probably grow another 10% next year, so primary supply is going to go up while demand in EU and China is taking a dump. If those markets are down 20% while production is up 10%, it's a huge increase in US allocation just as all the flippers and investors are starting to wake up.

As for the secondary, the trend is evident and there is no bottom, pre-owned watches should and need to go back to being less than msrp, Codes and ROOs are there, ROs are on their way. Once secondary dealers are again providing value with watches that are priced below MSRP, boutiques have competition again, just like they used to.

More supply, less demand, and a return to price competition from a well stocked secondary market will imho all be non-trivial. AP will hold primary pricing, they have to, but the drop in secondary prices will drive behavior in the primary market. Why buy a Code to wait a year for a RO if secondary pricing on the same RO is the MSRP or less? Boutiques will have to show value again and if that's not price because AP will protect the brand at all costs it will have to be service and access/availability.

[macrowatch]

Originally Posted by GS93108

I'll be back next year and we can see if the trend has continued - and thus we can then try and understand how - or we will see if RRP is the best we can do, save the odd anomaly.

Again, no confrontation on my part, I am simply curious as to theories that aren't simply continuations of the current trend to < RRP which ultimately cannot happen if the origin of supply from AP never drops below RRP. In simply terms, for < RRP to happen there needs to be a patsy taking a loss AFTER it has been supplied by AP and I bet those bubble patsies are disappearing every day.

I'll take the bullish case! Flame suit on! Code will finally be universally loved by next year!!! I mean this sincerely. They are so, so close if not already there with the 100k+ models. Now they just need the entry level code to have that same thoughtfulness.

Originally Posted by ajw45

First off, I don't think we'll see ROs discounted at the boutiques any time soon. However, that doesn't mean there won't be shorter waits and greater accessibility in the near term. We all know AP is pushing production, they are up 10% this year, will probably grow another 10% next year, so primary supply is going to go up while demand in EU and China is taking a dump. If those markets are down 20% while production is up 10%, it's a huge increase in US allocation just as all the flippers and investors are starting to wake up.

As for the secondary, the trend is evident and there is no bottom, pre-owned watches should and need to go back to being less than msrp, Codes and ROOs are there, ROs are on their way. Once secondary dealers are again providing value with watches that are priced below MSRP, boutiques have competition again, just like they used to.

More supply, less demand, and a return to price competition from a well stocked secondary market will imho all be non-trivial. AP will hold primary pricing, they have to, but the drop in secondary prices will drive behavior in the primary market. Why buy a Code to wait a year for a RO if secondary pricing on the same RO is the MSRP or less? Boutiques will have to show value again and if that's not price because AP will protect the brand at all costs it will have to be service and access/availability.

My guess is they reverse the production plans and maintain or even drop production next year. Just speculation, but if Apple is cutting production, surely even luxury is already contemplating the shifting nature of M2 affecting their businesses.

[GS93108]

Originally Posted by macrowatch

I'll take the bullish case! Flame suit on! Code will finally be universally loved by next year!!! I mean this sincerely. They are so, so close if not already there with the 100k+ models. Now they just need the entry level code to have that same thoughtfulness.



My guess is they reverse the production plans and maintain or even drop production next year. Just speculation, but if Apple is cutting production, surely even luxury is already contemplating the shifting nature of M2 affecting their businesses.

Agreed, Code has really really matured - if only they had debuted the current models at launch, we'd all be talking so much differently I'm sure.

As to production levels. I believe I read that 50,000 this year is for this year only and then they'll drop back a little. I also believe that FHB has stated that >50k production is a huge undertaking and not simply a flick of the switch.

One more thing, AP is a private company (for now) and can tweak resources as it sees fit without answering to third parties. If they need to reduce supply to maintain 'value' then I'm sure they will, even if that hits their bottom line.

The one thing that might cause AP some pause is their egregious price increases. Inflation/currency issues aside, being 'greedy' on the QP's last time around isn't something that will be sustainable.

Finally, I did have a very brief exchange with FHB earlier in the year and he told me that their plans and products for the next three years are set in stone already - does that mean that they can't dynamically hold product back? I doubt it. But it does mean they are unlikely to be able to turn on more production that hasn't already been planned.

Like him or loathe him, FHB is a smart cookie and there's no way he's committed resources to production levels to feed a possible bubble and there's no way he'd feed demand at the expensive of 'exclusivity' or 'luxury' or 'value retention'. He knows the game, the question is what happens post FHB.

[psm11]

I think what we are seeing is exactly what AP and FHB have told us their intention is -- making sure that when you buy an AP it doesn't lose half its value when you walkout the door. In other words, they want their pieces to maintain value (not necessarily increase in value). A large consensus on here is that prices will hover around MSRP which is exactly what AP wants.

All and all good new for us.

Please, please, please AP stop with the 2x year prices increases. I really hope that current market trends makes AP press pause on them. 15510s will be over $30k out the door with another increase (which is insane for a basic piece like that). Almost $50k for a stainless ROO is bonkers (and the secondary market clearly shows that the ROOs are way overpriced).

@GS9 -- is the 50k output really only for this year and they will scale back next year? Just asking because that is the exact opposite of what my SA told me the other week. He stated output will increase next year. But if you have a direct line to FHB your word carries more weight.

[dmash]

BNIB BLUE 26240st listed for $74k OBO on eBay. And it’s going to sit as C24 has had them at $75k for weeks and nobody touching. White has been sitting at $59k as well.

That watch was getting asked 175k a mere 5 months ago. Unreal



STRONGLY hope this continues to drop, as I’m on the list for a black ROC. Will happily pick up the second my SA calls me at MSRP.

[dmash]

Originally Posted by psm11

Please, please, please AP stop with the 2x year prices increases. I really hope that current market trends makes AP press pause on them. 15510s will be over $30k out the door with another increase (which is insane for a basic piece like that). Almost $50k for a stainless ROO is bonkers (and the secondary market clearly shows that the ROOs are way overpriced).

This x10

The last one was already a money grabber on most models and not just myself who thinks that. That would be absurd to do another one any time soon. OVER $50k out the door for a rubber strap chrono offshore which is already selling for $35k? OVER $30k out the door for a basic stainless 3 hander? Bonkers, but it is what it is.

Quite frankly, I firmly believe if another increase happens in January, AP is selling out to one of the big names. And they’re milking it until then as they well know it will lose some of its luster. Current prices aren’t sustainable whatsoever for most models, yet they’ll increase again (after so many in such a short time)? Put the pieces together (again, just my 2c).

[tyngshen]

Originally Posted by psm11

I think what we are seeing is exactly what AP and FHB have told us their intention is -- making sure that when you buy an AP it doesn't lose half its value when you walkout the door. In other words, they want their pieces to maintain value (not necessarily increase in value). A large consensus on here is that prices will hover around MSRP which is exactly what AP wants.

Three hander and chrono CODEs are losing 50% the moment you walk out of the boutique, so I don’t think they’re doing very well in that regard.

[GS93108]

Originally Posted by psm11

@GS9 -- is the 50k output really only for this year and they will scale back next year? Just asking because that is the exact opposite of what my SA told me the other week. He stated output will increase next year. But if you have a direct line to FHB your word carries more weight.

I believe FHB is on record in an interview somewhere regarding increases in production and 50k being maxed out for a while. I certainly didn't hear it from him directly.

That said AP's production and supply are no longer directly equal. It used to be somewhat hand to mouth in that they produced something and then shipped it, but now they have some 'stock piling' going on. I do know this for a fact directly from FHB, whether that stock piling is significant or not I do not know. But it wouldn't surprise me if this year's 50k included some inventory that was manufactured last year but specifically for this year. Thus are they actually yet capable of manufacturing 50k units, let alone more?

Just for clarity, I don't have any special contact with FHB, it was all in the past.

[psm11]

Originally Posted by tyngshen

Three hander and chrono CODEs are losing 50% the moment you walk out of the boutique, so I don’t think they’re doing very well in that regard.

Agreed. Obviously not something that is going to happen overnight (or uniformly across all models). IMHO, CODEs are way overpriced and AP needs to adjust based on what the market is doing. I really like the CODE at $20-$25k but $30k-$50k just sours me on it.

[dauster]

Originally Posted by dmash

This x10

The last one was already a money grabber on most models and not just myself who thinks that. That would be absurd to do another one any time soon. OVER $50k out the door for a rubber strap chrono offshore which is already selling for $35k? OVER $30k out the door for a basic stainless 3 hander? Bonkers, but it is what it is.

Quite frankly, I firmly believe if another increase happens in January, AP is selling out to one of the big names. And they’re milking it until then as they well know it will lose some of its luster. Current prices aren’t sustainable whatsoever for most models, yet they’ll increase again (after so many in such a short time)? Put the pieces together (again, just my 2c).

I agree with this LVMH is knocking on the door and they will milk it to the end


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[ajw45]

Originally Posted by GS93108

I believe FHB is on record in an interview somewhere regarding increases in production and 50k being maxed out for a while. I certainly didn't hear it from him directly.

That said AP's production and supply are no longer directly equal. It used to be somewhat hand to mouth in that they produced something and then shipped it, but now they have some 'stock piling' going on. I do know this for a fact directly from FHB, whether that stock piling is significant or not I do not know. But it wouldn't surprise me if this year's 50k included some inventory that was manufactured last year but specifically for this year. Thus are they actually yet capable of manufacturing 50k units, let alone more?

Just for clarity, I don't have any special contact with FHB, it was all in the past.

FHB said another 5% increase next year - 53k units - in public interviews just a couple months ago. That plus he said they are building towards 70k / year so no reason to think they won't keep increasing production 5-10% per year until they get there.

I bet the stock piling is (was) due to rebalancing. Between the strong dollar and issues EUR/GBP instability and Chinese market/covid issues, they probably have stock originally intended for those markets which they are weighing sending to the US market or holding until conditions get better - e.g. currency stabilizes, or like Rolex they reprice shift in EUR and GBP against the USD and if China changes the covid 0 policy.

In aggregate this year, global Swiss exports to the US have increased percentage wise by double digits and disproportionately more than other regions so a big shift from previous years where China was the big growth market.

[APWhale]

Originally Posted by psm11

Please, please, please AP stop with the 2x year prices increases. I really hope that current market trends makes AP press pause on them. 15510s will be over $30k out the door with another increase (which is insane for a basic piece like that). Almost $50k for a stainless ROO is bonkers (and the secondary market clearly shows that the ROOs are way overpriced).

5968 in steel is over 50k retail and doesn’t have a ceramic bezel…

Originally Posted by tyngshen

Three hander and chrono CODEs are losing 50% the moment you walk out of the boutique, so I don’t think they’re doing very well in that regard.

Where do you see brand new Code chronos selling for 25k?

[anx21]

Originally Posted by APWhale

Where do you see brand new Code chronos selling for 25k?

Don't think they are at 25K brand new yet, but definitely trending there. I have been offered a 2019 chrono (full set, pre-owned, white gold, non-ceramic, gator strap) at 23K. The case and dial are great on the updated smoked dial ceramic ones but the font and date window really spoil it. Looking forward to the next iteration

[VogelPhoenix]

Originally Posted by Vince_76

Exactly. More risk but more reward. If shareholders start putting on the pressure due to lack of sales/velocity, it will get very interesting.

Which shareholders are there, other than Jasmine and Olivier Audemars? Honest question.

[Vince_76]

Originally Posted by VogelPhoenix

Which shareholders are there, other than Jasmine and Olivier Audemars? Honest question.

I don’t know, specifically, but have heard that there is a contingent of minority shareholders. This was noted in the talks regarding a buyout from LVMH

[GS93108]

Originally Posted by ajw45

FHB said another 5% increase next year - 53k units - in public interviews just a couple months ago. That plus he said they are building towards 70k / year so no reason to think they won't keep increasing production 5-10% per year until they get there.

Thanks for the info.

[Fifteen]

Saw a 15500st blue in Osaka just now. It was equivalent to about 70k usd, or 10M Yen. Still too high I think

[Emery]

Originally Posted by anx21

Don't think they are at 25K brand new yet, but definitely trending there. I have been offered a 2019 chrono (full set, pre-owned, white gold, non-ceramic, gator strap) at 23K. The case and dial are great on the updated smoked dial ceramic ones but the font and date window really spoil it. Looking forward to the next iteration

Meanwhile in Oz, we still have people trying to flog off 3-hander codes for 30k usd

[dmash]

Originally Posted by Fifteen

Saw a 15500st blue in Osaka just now. It was equivalent to about 70k usd, or 10M Yen. Still too high I think

Lol entirely out of their mind, market is near half that and *less* than half that for non blue.

[Benzsiam]

Originally Posted by dmash

Lol entirely out of their mind, market is near half that and *less* than half that for non blue.

I think the blue dial is still around mid 40.

I am waiting for RG ROC to come down to a more reasonable price, right now is still very high.

[aa909]

Vacheron 18K White Gold Openface Complete Calendar, 2022 model full set, excellent condition sold for $37K. Retail is $47K ($50K with tax) and they were going >$60K earlier this year!

Vacheron Overseas chrono Blue Dial full set listed for retail.

Nautilus 5712/1A watch only $75K (haven’t seen one this cheap since pre-COVID)

Nautilus 5980r (full rose gold bracelet model) $188K, these were >$300K in February.

AP Code Perpetual Calendar full set $82K (well below retail)

People taking a bath on secondary market.

[FireC]

Originally Posted by Vince_76

History may not repeat itself, but it sure does rhyme. Don’t forget that ROOs used to be all the rave and ROs traded at a discount. Trends come and go.

The phenomena of ROOs (desirable models too) and the code trading at a discount, though all sold via AP’s direct POS, may serve as a bellwether to other models. Sure, we won’t get a 40% discount. But I think it is more likely than not that for run of the mill royal oaks, we end up +/- MSRP. 15550s and 15510s are not that rare. The premium has been trending down, and this is with the 50th rotor btw.

Been reading Howard Mark’s memos huh? Good stuff

[dauster]

Originally Posted by aa909

Vacheron 18K White Gold Openface Complete Calendar, 2022 model full set, excellent condition sold for $37K. Retail is $47K ($50K with tax) and they were going >$60K earlier this year!

Vacheron Overseas chrono Blue Dial full set listed for retail.

Nautilus 5712/1A watch only $75K (haven’t seen one this cheap since pre-COVID)

Nautilus 5980r (full rose gold bracelet model) $188K, these were >$300K in February.

AP Code Perpetual Calendar full set $82K (well below retail)

People taking a bath on secondary market.

damn 5712A for 75k where do you see this ?

[Reign]

Originally Posted by aa909

Vacheron 18K White Gold Openface Complete Calendar, 2022 model full set, excellent condition sold for $37K. Retail is $47K ($50K with tax) and they were going &gt;$60K earlier this year!

Vacheron Overseas chrono Blue Dial full set listed for retail.

Nautilus 5712/1A watch only $75K (haven’t seen one this cheap since pre-COVID)

Nautilus 5980r (full rose gold bracelet model) $188K, these were &gt;$300K in February.

AP Code Perpetual Calendar full set $82K (well below retail)

People taking a bath on secondary market.

All the reason for people to remain choosy and use the opportunity to pick up their supposed grails


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