Browsing the myriad of watch sellers online, you might have caught yourself thinking “If these guys can sell watches and make money from it, I can do it too!“. A frantic search on Ebay begins. Search item: Watches. Sort by: Price, lowest to highest. Flying past your mind’s eye are all the watches you’ll invest in, wear and then sell for huge profits. That ocean villa in Bora Bora is within touching distance! Unfortunately, it’s not that easy and here’s 5 reasons why.
5. Watches are expensive to maintain
It is said that the two happiest days of a boat owner’s life are the day she buys the boat and the day she sells it. There may be good days in-between, but most of the time will be dealing with expensive maintenance whilst the boat floats in a dock, unused and depreciating. The same is true for watches, and especially true for vintage watches. To begin with, wearing your investment Submariner might seem like a benefit, but soon you’ll start worrying about those scratches that weren’t there before. Scratches gained from the original owner’s life as a military diver are great. Scratches gained from your wrist knocking against one too many doorknobs are not great. A stock certificate isn’t as interesting an investment as a Submariner, but it doesn’t matter if you scratch it.
If your watch sits in a safe untouched and unworn for years, it will need servicing regardless. Any would-be buyer of your watch will demand its service history and will instantly begin haggling the price down if you can’t provide it. This cost of maintenance may be sustainable for one watch, but the more you own, the more you’ll be paying out. Perhaps investing in a watchmaker is a better bet than the watches themselves?
4. Vintage watches need immense knowledge and attention to detail
Being able to name several Speedmaster references off the top of your head does not make you enough of an expert. Whilst books, auction catalogs and online resources are invaluable sources of information, it requires years of hands-on experience to discern the real deals from the Frankenwatches and flat-out fakes. Sometimes the differences are obvious (Alarm bells should start ringing if a Rolex case back reads To Jack, With Love as Always from Marilyn) and other times it will be a 0.1mm difference in the height of a letter printed on the dial. Until you can spot these differences within a moment’s notice, especially if you’re buying online from a seller who uses a potato as a camera, don’t start buying watches as an investment.
15 years ago, no-one was paying attention to vintage Heuer and now the market for Carreras has completely exploded. 5 years ago, you could buy a Universal Geneve Tri-Compax for $2500, and now you see them selling for double or triple that price (if you’re lucky). Making money off watches requires incredibly foresight and timing. Once you know the details that allows you to buy genuine pieces, you then need to know which brands and references will continue to grow in value. Then you need to be able to predict the next set of watches that are currently undervalued and soon will skyrocket in price. Then you need enough capital to get as many as you can before that happens.
2. New watches have to be sourced well below market price to be profitable
It is virtually impossible to make money from new watches if you are a regular person. By the time a watch is inside the display case of a jewelers, it has been marked-up several times over as it changed hands from manufacturer to distributor to jeweler. Even if you can convince that sales assistant to give you a 15% discount, 15% doesn’t leave much room for profit when you sell it. The CEO of The Watch Fund, a successful investment fund focused on wristwatches, is able to buy a $500,000 grand complication from a boutique brand for up to 70% off! Even if the value of that piece does not grow over time, there is $350,000 of leeway when selling under RRP. Unless you have industry connections who secure a regular discount of 70%, don’t kid yourself into thinking that you can make serious money when selling new watches.
So you’ve managed to successfully avoid all the above pitfalls and after a few years, you’ve decided to cash out of the watch game. But where do you go to make your money? Who do you turn to sell your watches for you? Being such a shrewd collector, any auction house will jump at the chance to sell your world class horological portfolio but they’ll charge a sizable commission on whatever you sell. Online watch sellers may buy your watches, but only at a low enough price that allows them to add their own mark-up when it hits their digital shelves. Selling directly to a collector bypasses the need for hefty commissions but it places the burden of making a profit on your salesmanship. These problems exist in other investment fields as well, but those fields offer a more structured relationship between client and financial expert (broker, financial planner, etc) that increases the chances of making money. If you value secure and stable investments, it’s probably best to stick to mutual funds and leave buying watches for the love of the craft, not because of the money it can make you.