Luxury watch prices have fallen due to weak Chinese consumer confidence

Luxury watch prices have fallen due to weak Chinese consumer confidence

Prices of second-hand luxury goods in China have plummeted in recent months, as even the wealthy have cut back on their discretionary spending and are selling their Rolex watches and Hermes bags to raise cash.

More than a dozen popular luxury watch and bag brands have lost between 20 and 50 percent of their value on the secondary market since Shanghai, China’s financial and commercial capital, imposed strict lockdown measures in March to curb the Covid outbreak.

Restrictions in Shanghai and dozens of other regions have led to a heavy blow to small business owners, many of whom have accumulated large collections of luxury goods in better times. But repeated shutdowns have hurt their cash flows.

Last week tens of thousands of tourists in Hainan, an island province dubbed the “Hawaii of China”, were prevented from returning home to stop the outbreak there.

The government promotes Hainan as a duty-free paradise where Chinese consumers can buy the same luxury goods they used to be snapped up in cities like Paris, Rome and London before President Xi Jinping’s controversial zero-covid policy made it virtually impossible to travel abroad for short trips.

Watcheco, an industry portal for pre-owned luxury watches, reported that the price of used Rolex Submariners – a model sought after by connoisseurs and collectors – has fallen 46 percent since March

Luxury handbag dealers in Shanghai and Hangzhou also slashed prices on classics such as Hermès Birkin bags by up to a fifth over the same period.

Pawn shops and other luxury goods resellers said there was a surge in buyers, led by cash-strapped business owners struggling to raise capital to pay off debt and keep their businesses afloat.

“The boom time is over,” said James Wang, a seller of second-hand luxury watches in the eastern city of Nanjing. “We are entering a correction period that could last a long time.”

Wang said he bought six Patek Philippe and 29 Rolex Submariner watches from distressed owners in July alone, compared with Patek Philippes and five Rolex Submariners in the first quarter of this year.

“Patek Philippe says you never own its watch, you just care for it for the next generation,” Wang said. “That’s not the case in a business crisis.”

Shaun Rein of China Market Research, a Shanghai-based consultancy, said the sharp increase in supply and the resulting drop in prices of used luxury goods was evidence of “very weak consumer confidence”.

“It’s probably the weakest I’ve seen in my 25 years in China,” he added.

Some luxury goods investors argued that the recent decline in prices was inevitable after an unsustainable surge before March.

In the six months leading up to the Shanghai shutdown, the price of a used Rolex Submariner rose 240 percent. The same bag dealers who recently lowered their asking prices in Shanghai and Hangzhou did so just months after raising their prices at the start of the new year.

Sam Xue, a watch investor who owns an electric heater factory in the eastern city of Wuxi, said the price increases were “pure speculation” and unsustainable.

“The weak economy it cannot support the luxury boom,” Xue said, adding that he would no longer buy luxury watches unless prices fell another 30 percent.

Additional reporting by Tom Mitchell in Singapore

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