The luxury fashion industry has often billed its products as more than just purchases, but also assets. Watch collectors sometimes refer to their collections as “portfolios,” full of assets that can hold value over time and even appreciate in value.
But recent events have shaken confidence in the idea of investing in alternative assets. When the FTX cryptocurrency exchange collapsed in early November, users collectively lost billions of dollars. At the same time, the deteriorating US economy and rising inflation mean that the average American consumer is in a difficult financial situation. As other investments and assets such as NFTs trend lower than ever, can luxury fashion still hold the appeal as a safe asset to invest in?
Many resellers say yes. Tirath Kamdar, general manager of luxury at eBay, said a big part of eBay’s appeal to luxury consumers is that they can buy something for a good value and sell it at a later date to get some or most of the original to recover costs. In a survey of its users that eBay conducted earlier this month, 85% said they considered luxury items such as watches to be safer and less volatile assets to invest in, “compared to other assets.”
“Many of our customers see luxury as a currency,” Kamdar said. “We’ve grown over previous recessions, and Bain still reports [the luxury industry will grow] through this year.”
But there is a caveat. For luxury items to be safe assets, the customer must be knowledgeable about what they are buying, Kamdar said.
To that end, eBay has a pricing tool called Terapeak that it made free to all users last year, allowing them to see the current retail price, historical resale price, and listing history for products. It is intended to be helpful for both sellers and buyers in understanding what they are buying, how well it holds value and what its future value may be. Handbag reseller Rebag has a similar tool called Clair that customers can use to estimate the resale value of any bag before purchase.
“Specific categories like watches and handbags have the greatest chance of appreciating over time, but they require a lot of customer knowledge,” says Yuriy Dovzhansky, principal at Visible Ventures, which has invested in resale companies like Recurate.
Handbags are comparable to watches in this regard, but only for specific brands. While many luxury Swiss watch brands can be valuable assets – including Rolex, Patek Phillipe, Omega, Paneria and Tag Heuer – only three handbag brands share the same qualities – Hermés, Chanel and Louis Vuitton – according to second-hand luxury platform LePrix.
Besides education, the other factor is whether or not those prices hold. Tim Stracke, founder and co-CEO of watch trading marketplace Chrono24, said he recently attended an investor conference where an investor told him his watch portfolio was currently outperforming his stock portfolio.
“Watches are a stable asset,” Stracke said. “You can buy a Rolex directly from the brand and immediately resell it for more than you paid. Although that’s also because it’s impossible to get a Rolex on the primary market right now. The waiting list is years long. “
But even watches are not completely immune to market conditions. Prices of watches when bought straight from the brand have risen by as much as 10% this year, tracking inflation and accounting for increased production costs. But in the secondary market, watch prices are actually falling, falling about 2% in September, according to watch market tracker WatchCharts.
“Watch prices on the secondary market are falling,” Dovzhanksy said. “It’s a pretty significant drop. There is definitely some volatility there. If you’re really knowledgeable, that’s great, but I wouldn’t say it’s my best recommendation for the safest investment.”
For some in the luxury space, luxury assets are still preferable to the unregulated volatility of the crypto market.
“I’ve had customers who bought rings from us in 2019 come back for a re-appraisal this year because the value of diamonds has gone up a lot recently,” says Olivia Landau, founder and CEO of fine jewelry and diamond brand The Clear. Cut. “People are interested in old-school investments like gold or diamonds because they’ve seen how crypto and NFTs treat everyone.”