The second-hand market in luxury watches can seem really hard to understand at times. Timepieces that are pre-owned often find themselves being sold at prices that are far above what you would find if you bought new watches from the same brand.
For as much as luxury markets can have unique characteristics, it’s not simple to figure out what elements concur in determining the prices of second-hand luxury watches.
Here at 440 Industries we gave this topic some thought and are now sharing what can be considered a few factors that impact the price of luxury watches.
To help you navigate the post we’ve broken down the topic into a few paragraphs listed below.
- Pre-owned is about, scarce, iconic, and timeless pieces
- Higher Price as a Part of A PR Strategy
- Pre-owned allows for collection curation in an inflated market
- Pre-owned is an opportunity to recruit new customers
- Pre-owned influences supply and demand and price
1. Pre-owned is about, scarce, iconic, and timeless pieces
Not all the watches that are produced by high-end watchmakers go out to the market and find great success. For as much thought and hard work can go into the design and production of luxury watches, some become iconic timeless pieces, while others can be barely noticed by consumers.
In this sense, the first thing to consider is that not all luxury watches reach high second-hand value, actually, only a handful of models can gain this price mark-up.
If we look at those who do succeed, there a couple of factors that play a role in determining a watch model success:
- Scarcity. Luxury is about exclusivity and about the perception of scarcity, those watches that increase in price are hard to find. There may be so few available that people can compete to bid on the price. In this sense, the higher cost of purchase is associated with antique or vintage value, or to an auction process, which – by design- awards the watch to the highest bidder.
- Timelessness. This second factor relates to the heritage value of the product. In this case, we see that high markup watches are not following fads of fashions, but instead have a timeless design that keeps them relevant and interesting after many years or decades.
These two factors are certainly some of the most important to consider as they don’t apply only to luxury watches but to luxury products in general.
In this sense, we need to remind ourselves that luxury products follow the principles of Veblen goods or goods which because of their social currency value, tend to be more desirable when their price increases. This is against the general principles of demand and supply whereby demand decreases when prices increase.
Let’s not move to consider now another perspective on the matter: brand management.
2. Higher Price as a Part of A PR Strategy.
As the second-hand market for luxury products has become quite attractive, brands use it as a form of public relations strategy. In this sense having some of your watches being sold and bought on auctions as pieces of art provides a high added value to all other watches by the same manufacturer.
This is part of a marketing communications strategy that relies on earned media. In earned media strategies brands realize that in order to influence the perceptions of their brand, companies cannot simply rely on their ‘owned media’ or media they directly control. Real persuasive communications come from PR or third-party entities (or customers) who express their unbiased and unfiltered opinions on our products. In this sense, watchmakers can foster a large community of customers and resellers that can build reputation, status, and overall value for your products.
Talking about fostering a large consumer community, our next point goes into more depth analyzing the values and goals that buyers pursue with their luxury watch purchases.
3. Pre-owned is about sustainability and moderation in consumption
Buying products that are pre-owned is an important element of contemporary shopping behavior as it is a product connected to sustainable consumption. According to this perspective, products which are imperfect but have a story, are more valuable for the meaningfulness they have acquired in time.
In this sense, pre-owned timepieces can be a good way to connect to new customer segments that may be aligned with these values. These segments can include both LOHAS customers (Lifestyle Of Health and Sustainability) or even younger generations which are more accustomed to the dynamics of share economies.
This approach – based on the heirloom, second-hand value – is something that is very much aligned with the typical behavioral use of luxury watches which are passed down from generation to generation.
In this sense, the luxury watch sector can really benefit from a series of behavioral aspects which are already connected to established uses of the products.
Moving on, taking the ‘art’ component of luxury watches in more consideration, we can delve into the collection curation aspect of second-hand purchases which we’ll address in the next section.
4. Pre-owned allows for collection curation in an inflated market.
In alignment to what we have discussed previously, choosing a watch that is pre-owned is an opportunity to buy a product that has already been validated by the consumer market. If we see these product purchases as investments, then we can look into how a product has increased in price over time. This could be a way to gain two benefits:
- The expectation of value increases. A product that is already more expensive than its retail cost is likely to keep increasing in value in the future. This is a good indication that we should buy the product as an investment, not simply as a consumer good.
- More manageable selection. The second advantage is connected to the fact not all products have a life extension that allows them to trade on second-hand markets. In this sense, if we want to scout the market for opportunities to buy then, second-hand choices are a good way to look into a more narrow slice of the market and better manage our options.
Great, we’re almost done. There’s one final element to consider in this context, which is part of a customer acquisition strategy through pre-owned watches. Let’s see that in more detail in the next paragraph.
5. Pre-owned is an opportunity to recruit new customers
Last but not least luxury watch manufacturers can take advantage of the opportunity to use the second-hand market to recruit new customers. This is because not all luxury watches are sold at a markup price on the second-hand market, and having a choice of pre-owned timepieces can help a brand make its products affordable for new customers who may not want to invest in a new watch from the start, but may want to try out the experience of ownership first.
That’s it! Now that we’ve covered our main points let’s draw a few conclusions.
There you have it! In this post, we looked at some of the reasons that can push second-hand watches to retail at even higher prices than their cost as new. With no intent to oversimplify a complex and tiered luxury market, we shared some of our ideas that can justify why these products seem to defy the traditional rules of market pricing.
Let us also mention a downside of our strategy: this is in the case that the luxury second-hand market becomes flooded with too many products and as a result the overall equity of the brand becomes diluted. This is an issue to take into serious consideration, as as a result of loss of perceived value on the account of second-hand products, even first-hand products could suffer a loss in value if they for instance become too common.
This means that even if the second-hand market is potentially very versatile and profitable, brands should always put great care in devising strategies designed to tap into their product’s equity.
If you are interested in reading more, please find below some more resources that can help you understand luxury markets. Enjoy!