In line with the CEO of Audemars Piguet, the luxury watch market is well positioned to avoid a crash as limited supply and a latest generation of young collectors drive demand.
In line with WatchCharts, aftermarket luxury watch prices fell 8% last yr, with some top models down greater than 20%. Experts warn that the watch bubble could burst with cryptocurrencies, NFTs and other post-pandemic booms. Nonetheless, in the last two months prices have began to stabilize because of what some see as sustained, strong demand.
“I do not think prices will go much lower,” said Francois-Henry Bennahmias, CEO of Audemars Piguet – one of the so-called Big Three of the world of luxury watches, together with Rolex and Patek Philippe. “People still need to reward themselves, and after they need to reward themselves, they appear at the most respected firms, in watches, jewelry, fashion, whatever you wish.”
Bennahmias said the luxury watch market is benefiting from an enormous and structural shift to younger buyers. During the pandemic, a wave of millennials and Gen Z consumers poured into the world of collectible watches, who were educating themselves online and coveting rare watches worn by sports stars and social media celebrities.
As top watchmakers depend on the promise of limited production, supply cannot sustain with demand.
“The volumes from watch firms have not evolved,” said Bennahmias. “And the demand went crazy because we saw an influx of young individuals who just got increasingly more fascinated with watches. And a few individuals with money who hadn’t even checked out watches before found that constructing a group of watches might be something interesting. “
Audemars Piguet’s Royal Oak Offshore Selfwinding Chronograph in black ceramic, celebrating the collection’s thirtieth anniversary.
Source: Audemars Piguet
Bennahmias said that unlike the whimsical investors in 2021 meme stocks, today’s young watch collectors are here to remain. The average age of an Audemars customer is now 10 or 12 years younger than in the company’s recent history. Despite spending most of their lives online and immersed in digital products, Gen Z and Millennials have a selected fondness for highly crafted, mechanical watches.
“When the Apple Watch got here out in 2014, everyone was telling us that we were actually going to die,” Bennahmias said. “They said no young person will ever wear a watch again, in the event that they do it would be a smartwatch. The funny thing is we thought young people couldn’t appreciate exclusivity, craftsmanship, watchmaking. It was.”
Bennahmias said younger generations have gotten some of the brand’s top ambassadors.
“They’re the ones preaching the choir on social media and every thing else. It’s our greatest ad campaign ever, they usually’re actually bringing their parents to the brand,” he said.
Market margins
A giant challenge for watchmakers is the aftermarket, where used watches will be sold on any of the dozens of online watch sites.
As the demand for watches exceeds the supply of latest stock, the prices of used watches have skyrocketed, as have web sites like Chrono24, Watchfinder and Watchbox that buy and sell used watches. Sales of used watches hit $22 billion in 2021, accounting for nearly a 3rd of the total $75 billion luxury watch market, in accordance with data last report from the Boston Consulting Group.
Pre-owned versions of some top trophy models – similar to the Patek Philippe Nautilus, Rolex Daytona and Audemars Piguet Royal Oak – will be two or 3 times the retail price. A used Audemars Piguet Royal Oak “Jumbo”, which is latest at $35,000, is currently listed on Chrono24 for $115,000. Some have put up over $130,000.
The margins have caused widespread frustration amongst collectors, who say watchmakers are deliberately cutting back production to spice up prices and resale value – making their watches more attractive as an investment. Bennahmias said that many price adjustments are “healthy” and that watchmakers prefer customers who’re true, long-term watch enthusiasts to speculators attempting to bid up prices.
“I intend to make this very clear to everyone,” Bennahmias said. “We’re not playing on the market. We do nothing to make the price go a technique or the other. We produce a number of watches that we imagine might be accepted by the world. We are saying it’s the right number, then the market is free they usually’ll do what they need.”
Audemars Piguet made just 50,000 watches last yr and is expected to supply around 51,000 this yr, Bennahmias said. Founded in 1875 and still family-owned, the brand has long prioritized quality, craftsmanship and exclusivity over revenue growth.
Audemars Piguet continues to expand its production and facilities in Switzerland. But Bennahmias said that even when the company wanted to satisfy the demand, which could be well over 80,000 watches a yr, it might not have the opportunity to search out and train watchmakers quickly enough.
Francois-Henry Bennahmias, CEO of luxury watchmaker Audemars Piguet.
Source: Audemars Piguet
“The board, meaning relations, has never asked me for any percentage increase in 11 years,” said Bennahmias. “They never said, ‘Francois, we wish 10%, 15% or more.’ NO. They are saying, “Francois, we still need to be in about 200 years.” It’s a very different vision of constructing brand success.”
Bennahmias admits the company has “made mistakes” with regards to serving customers who flock to their stores only to be told they haven’t any watches available or that the waiting time in the event that they’re lucky enough to get listed is as much as two years. He said sales staff at the moment are higher trained to elucidate the limited production, the low number of models produced and the number delivered to every country.
He also said he wants 30% of all watches to go to buyers who’ve never owned an Audemars Piguet to proceed attracting latest customers.
“We’re learning every single day and it’s not at all times perfect,” he said. “Over the last three or 4 years, we have learned that we want to coach people more.”
Audemars Piguet’s Royal Oak Offshore Selfwinding Chronograph in black ceramic, celebrating the collection’s thirtieth anniversary.
Source: Audemars Piguet
Audemars is now celebrating the thirtieth anniversary of its popular Royal Oak Offshore, a bigger version of its iconic Royal Oak. Nonetheless, when Offshore was launched, the model was widely disregarded, in accordance with Bennahmias.
“People destroyed it,” he said. “When the watch got here out, people checked out it and said, ‘You guys are crazy.’ And we weren’t so sure we were going to run it. Slowly but surely, it gained momentum, to the point where it was an enormous success.”
Next steps
Bennahmias, who will leave his role as CEO at the end of this yr, declined to call a possible successor or next position.
During his tenure, he greater than tripled Audemar Piguet’s sales to over $2 billion and is well-known in the watch world for his close ties to Jay-Z and other hip-hop stars, in addition to Hollywood celebrities, skilled athletes and entertainers.
Some speculate that his next job might be sports or music in addition to the luxury industry or watches.
“I feel I did what I used to be speculated to do with Audemars Piguet,” he said. “I actually have so many other things I would like to do in life. I actually have many various passions. One of them is music. The second is sports. And of course luxury, and I would like to do other things. I’m not done yet.”