Richemont Buyback

[Calatrava r]

Anybody following the reports Richemont has bought back inventory from its retail partners of 567 million over the past two years to eliminate excess inventory and prevent brand devaluation. Brands include Cartier, VC, IWC and Piaget.
I know this is not a PP topic but it makes one wonder where the Swiss watch industry is headed which will at some point affect all the brands.

[jon_jon]

All the Swiss watch manufacturers have increased production significantly over the past 10 years, moreso during the post-recession recovery years. Patek has probably doubled production during the past 10 years as well. However with the slowdown in the luxury consumer market in China (due to high taxes and government crackdown) over the past couple of years and the Swiss National Bank de-regulation, the supply of new watches have far exceeeded the demand.

Thierry Stern has spoken about the slowdown and talked about cutting production. Independent companies like Patek and Rolex can more easily cut production and/or withold inventory. But I don't see Patek or Rolex buying back unsold inventory like the Richemont group.

[thomaspp]

I have read. Do they calculate the buy back price at retail prices? If so, the actual number is a lot lower.

As to the future of modern watches, my take is the divide between in demand watches and those that aren't has never been greater. Also the number of really in demand watches seems to be quite small if you look at the overall pool of modern high-end watches.

Very hard for patek to cut back numbers now with new buildings, employees, etc. all on board and constructed.

[Calatrava r]

Originally Posted by thomaspp

I have read. Do they calculate the buy back price at retail prices? If so, the actual number is a lot lower.

As to the future of modern watches, my take is the divide between in demand watches and those that aren't has never been greater. Also the number of really in demand watches seems to be quite small if you look at the overall pool of modern high-end watches.

Very hard for patek to cut back numbers now with new buildings, employees, etc. all on board and constructed.

I do not know how many watches 567 million dollars represents. I would not expect Richemont to pay more than they got for each piece which would be dealer wholesale. Interesting Baume & Mercier is included and they just did a buyback few years back on that line when they revamped it. For those who believe watches have some element of hard intrinsic value, this is an eye opener. Market value is entirely a function of demand.

[thomaspp]

Originally Posted by Calatrava r

I do not know how many watches 567 million dollars represents. I would not expect Richemont to pay more than they got for each piece which would be dealer wholesale. Interesting Baume & Mercier is included and they just did a buyback few years back on that line when they revamped it. For those who believe watches have some element of hard intrinsic value, this is an eye opener. Market value is entirely a function of demand.

Of course! Rarity, complexity, gem setting etc etc means nothing without demand.... arguably the most sought after watch (Paul Newman Daytonas) have none of those things yet demand is massive and price go up and up. They have a wonderful design, proportions, connoisseurship, celebrity connection, cult icon, etc which drives demand but in the end, demand is everything...

Meanwhile complicated minute repeaters and others from many brands sit and are near unsellable. It is crazy to think about and very ironic but I find the insane demand for simple steel sports watches to be a consumer backlash on the brands who overpriced and overproduced for too long...




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[soundserious]

Originally Posted by thomaspp

Of course! Rarity, complexity, gem setting etc etc means nothing without demand.... arguably the most sought after watch (Paul Newman Daytonas) have none of those things yet demand is massive and price go up and up. They have a wonderful design, proportions, connoisseurship, celebrity connection, cult icon, etc which drives demand but in the end, demand is everything...

Meanwhile complicated minute repeaters and others from many brands sit and are near unsellable. It is crazy to think about and very ironic but I find the insane demand for simple steel sports watches to be a consumer backlash on the brands who overpriced and overproduced for too long...




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Very well put.

[Russell996]

Originally Posted by thomaspp

Meanwhile complicated minute repeaters and others from many brands sit and are near unsellable. It is crazy to think about and very ironic but I find the insane demand for simple steel sports watches to be a consumer backlash on the brands who overpriced and overproduced for too long...

Not sure the insane demand is anything to do with a consumer backlash, it is what it is - insane!
Most of the people paying above retail didn’t previously own a PP and are simply caught up in the media hype for these pieces. I see nothing in the demand to backup your assertions of it being a backlash.

[Russell996]

Originally Posted by Calatrava r

Anybody following the reports Richemont has bought back inventory from its retail partners of 567 million over the past two years to eliminate excess inventory and prevent brand devaluation. Brands include Cartier, VC, IWC and Piaget.
I know this is not a PP topic but it makes one wonder where the Swiss watch industry is headed which will at some point affect all the brands.

Isn’t this an old story from a couple of years back, demand in the market is now strong worldwide.

[tyler1980]

Originally Posted by Calatrava r

Anybody following the reports Richemont has bought back inventory from its retail partners of 567 million over the past two years to eliminate excess inventory and prevent brand devaluation. Brands include Cartier, VC, IWC and Piaget.
I know this is not a PP topic but it makes one wonder where the Swiss watch industry is headed which will at some point affect all the brands.

you have to take into consideration that one is a public company where as Rolex, AP, and Patek are not. Public companies have a tendency to flood product into the market to get sales. They have external shareholders who they are pressured to meet revenue targets for and their value as a company is sales growth and share price and not necessarily the products themselves. Sometimes they are too aggressive and have to buy things back. Reichmont does not play the scarcity game.

[Fat_ninja]

Originally Posted by Russell996

Isn’t this an old story from a couple of years back, demand in the market is now strong worldwide.

Yep. This coincides with cracking down on discounts and AP doing more boutique pieces


Burbury is also starting ro destory inventory as well. A lot of high end retailers have tries to support their brand this way


Cant be luxury, if it sells as a discount

[1William]

The watches will end up in the consumer market but it will be done by the bigger company not AD's discounting and dumping. I would believe that most of the companies look at sales on a time horizon of years if not decades. Everything you want is still in the market but the prices are what slows most of us down.

[KBM]

Originally Posted by tyler1980

you have to take into consideration that one is a public company where as Rolex, AP, and Patek are not. Public companies have a tendency to flood product into the market to get sales. They have external shareholders who they are pressured to meet revenue targets for and their value as a company is sales growth and share price and not necessarily the products themselves. Sometimes they are too aggressive and have to buy things back. Reichmont does not play the scarcity game.

Makes complete sense, Tyler.

[thomaspp]

Originally Posted by Russell996

Not sure the insane demand is anything to do with a consumer backlash, it is what it is - insane!

Most of the people paying above retail didn’t previously own a PP and are simply caught up in the media hype for these pieces. I see nothing in the demand to backup your assertions of it being a backlash.

Thanks R! I bet you and I both know plenty of long time watch people and collectors who are chasing basic stainless steel sports watches (myself included!). I get a kick out of it myself and can’t get over the irony.

The traditional system (designed by the marketing departments of the watch brands themselves) is broken: before the steel sports watches were the “entry level” watches for the novice collector and then complicated watches were things you’d chase over time and owning them carried a great deal of weight among the collector community (application watches and such). Now the complicated watches sit/low demand for them and and you need to buy those first in order to get the basic steel watch! rather funny... but also sad.

I venture that the complicated watches were the big revenues generators so what will happen now? I suppose something like the 5740 is the answer they are hoping for, we shall see.

Have a good day!


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[Hermann]

Sorry but Patek Philippe and Rolex absolutely don't need it to buy there watches back. A few watches in each company are not bestsellers but also they find a buyer it only needs more time.
But a Patek is a Patek and a Rolex a Rolex

[GB-man]

Originally Posted by thomaspp

Thanks R! I bet you and I both know plenty of long time watch people and collectors who are chasing basic stainless steel sports watches (myself included!). I get a kick out of it myself and can’t get over the irony.

The traditional system (designed by the marketing departments of the watch brands themselves) is broken: before the steel sports watches were the “entry level” watches for the novice collector and then complicated watches were things you’d chase over time and owning them carried a great deal of weight among the collector community (application watches and such). Now the complicated watches sit/low demand for them and and you need to buy those first in order to get the basic steel watch! rather funny... but also sad.

I venture that the complicated watches were the big revenues generators so what will happen now? I suppose something like the 5740 is the answer they are hoping for, we shall see.

Have a good day!


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I think they have no choice but to embrace putting comps in the aquanaut and nautilus line just like they do in the calatrava.

RM and AP have been way out in front of this making and selling complicated high end sport pieces. Fortunately for Patek their brand is so damn strong they could catch up immediately if they wanted to in this space. Whether they will or not I’m guessing they will because there’s so much money on the table.

[AK797]

The huge consolidation down to a few brands and within them a few models is I think part of a general subconscious belief that the watch market will shrink down significantly in future and that it will be more sports-based, with only a few brands surviving, and so gives some more tangible substance behind the current craziness, hype and flipping.

[Vipes]

Originally Posted by thomaspp

Thanks R! I bet you and I both know plenty of long time watch people and collectors who are chasing basic stainless steel sports watches (myself included!). I get a kick out of it myself and can’t get over the irony.

The traditional system (designed by the marketing departments of the watch brands themselves) is broken: before the steel sports watches were the “entry level” watches for the novice collector and then complicated watches were things you’d chase over time and owning them carried a great deal of weight among the collector community (application watches and such). Now the complicated watches sit/low demand for them and and you need to buy those first in order to get the basic steel watch! rather funny... but also sad.

I venture that the complicated watches were the big revenues generators so what will happen now? I suppose something like the 5740 is the answer they are hoping for, we shall see.

Have a good day!


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It will be interesting to see how the market reacts to the 5740.

[benlee]

What happened to these watches after thery are recalled? Are their parts recycled back to the new watches that were made? They can't be actually destroying the watches like what I heard LV or some fashion brands actually burn their excess stocks.

[jon_jon]

Originally Posted by Vipes

It will be interesting to see how the market reacts to the 5740.

I am interested in what the 5740 market will be like in 3 years. It is not a limited edition and the market for a $100k watch is not the same as that for a $30k or $50k. If Patek "over-produce", meaning produce more than demand, there will be a lot of unhappy people.

[Vipes]

Originally Posted by jon_jon

I am interested in what the 5740 market will be like in 3 years. It is not a limited edition and the market for a $100k watch is not the same as that for a $30k or $50k. If Patek "over-produce", meaning produce more than demand, there will be a lot of unhappy people.

I think you're right. Look at AP. The SS Royal Oaks are doing pretty well especially the 15202 (limited production piece). When they updated the Royal Oak Perpetual, the SS ones were readily available and not as hot. The all ceramic perpetual is doing really well due to the limited production.

[tyler1980]

Originally Posted by Vipes

I think you're right. Look at AP. The SS Royal Oaks are doing pretty well especially the 15202 (limited production piece). When they updated the Royal Oak Perpetual, the SS ones were readily available and not as hot. The all ceramic perpetual is doing really well due to the limited production.

i saw the first one at an AD about 3 months ago. Its been 2? years since launch. SS blue dial has not been readily available. BTW it sold very quickly for a watch of that price.

Boutique maybe different, but AD's generally have not had them in quantity nor have they had them sitting for extended periods or time. Late last year my AD flat out said AP still wouldn't sell them one, as i was considering one at the time. So they finally are trickling out to the dealer network now it seems. They seem easy to get now, just not at launch which is pretty normal to me.

[Russell996]

Originally Posted by jon_jon

I am interested in what the 5740 market will be like in 3 years. It is not a limited edition and the market for a $100k watch is not the same as that for a $30k or $50k. If Patek "over-produce", meaning produce more than demand, there will be a lot of unhappy people.

Why would people be unhappy, if they have a 5740 they will have an amazing piece - one of the great all time watch designs.
Seems like Patek can’t win, make more Nautilus so I can get one but not enough so it still goes up in value.

[Vipes]

Originally Posted by tyler1980

i saw the first one at an AD about 3 months ago. Its been 2? years since launch. SS blue dial has not been readily available. BTW it sold very quickly for a watch of that price.

Boutique maybe different, but AD's generally have not had them in quantity nor have they had them sitting for extended periods or time. Late last year my AD flat out said AP still wouldn't sell them one, as i was considering one at the time. So they finally are trickling out to the dealer network now it seems. They seem easy to get now, just not at launch which is pretty normal to me.

My assumption is based on the ones I see being sold by gray dealers. Do you think AP is slowly cutting supply to ADs since they are trying to move towards boutique/online model?

[SW1]

Originally Posted by jon_jon

I am interested in what the 5740 market will be like in 3 years. It is not a limited edition and the market for a $100k watch is not the same as that for a $30k or $50k. If Patek "over-produce", meaning produce more than demand, there will be a lot of unhappy people.

Couldnt care if its worth 50% of its value. If you want an investment can think of 100 better alternatives. Buy it, enjoy it and consider any depreciation the cost of ownership. The 5740 suits the person who wants a PC in the sports watch genre. Probably the same person who buys a 5320 over a 5196 or even 5146. Why would you pay such a huge premium to swap annual invconvenience into not in your lifetime?

[tyler1980]

Originally Posted by Vipes

My assumption is based on the ones I see being sold by gray dealers. Do you think AP is slowly cutting supply to ADs since they are trying to move towards boutique/online model?

for sure. I don't buy grey and prefer AD to boutique so i had a hard time finding one until recently. The grey ones were coming from boutiques no doubt. Demand is softer two years later so they seem to be a bit more liberal with the AD allocations. From AP's perspective, if its hot then AD's don't get one.

[jon_jon]

Originally Posted by Russell996

Why would people be unhappy, if they have a 5740 they will have an amazing piece - one of the great all time watch designs.
Seems like Patek can’t win, make more Nautilus so I can get one but not enough so it still goes up in value.

Human psychology is a funny thing. If you have a rare item and no one else can have it, then this makes the owner happy. If you have a nice item and it is no longer a rare item and anyone can buy it and it is being sold by gray market sellers at a steep discount, this makes many people unhappy.

If you are a true collector and enjoy the watch for its intrinsic value, then it shouldn't matter.

[metdrdg]

^ well said

[thomaspp]

Originally Posted by jon_jon

Human psychology is a funny thing. If you have a rare item and no one else can have it, then this makes the owner happy. If you have a nice item and it is no longer a rare item and anyone can buy it and it is being sold by gray market sellers at a steep discount, this makes many people unhappy.



If you are a true collector and enjoy the watch for its intrinsic value, then it shouldn't matter.

Ha! So true. Problem is all of these damn watches we love are overpriced in the end and the “external” considerations all weigh on our subconscious like it or not!


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[Starwalker]

Originally Posted by tyler1980

you have to take into consideration that one is a public company where as Rolex, AP, and Patek are not. Public companies have a tendency to flood product into the market to get sales. They have external shareholders who they are pressured to meet revenue targets for and their value as a company is sales growth and share price and not necessarily the products themselves. Sometimes they are too aggressive and have to buy things back. Reichmont does not play the scarcity game.

completely agree! Panerai is a perfect case-study.

[SL BRABUS]

As long as Patek Philippe, Rolex, and Audemars Piguet control the supply by keeping it tight they won't have any problem.....

Also the marketing of the brand got a lot to do with it too....