UAE: Why are luxury watches so hard to buy?

It has always been notoriously difficult to get your hand on a new Rolex. But now it’s nearly impossible. And that pretty much goes for almost every luxury Swiss watch brand worth its salt.

A heady cocktail of soaring global wealth, revenge shopping, fear of missing out (FOMO) and the uncertainty surrounding crypto currencies have fuelled interest in luxury watches like never before.

The transformation of timepieces from a style accessory to a viable alternative asset have conspired to push prices up and availability down, creating what industry insiders describe as a ‘perfect storm of demand and scarcity.

Empty display cases greet watch lovers at retailers across the world. The Middle East is no exception.

Last year, the region imported Dh8.08 billion ($2.2 billion) worth of Swiss watches, according to FH -- the Federation of the Swiss Watch Industry. The bulk of them were sold in the UAE -- the region’s biggest and the eighth largest market for Swiss watches globally. But now there’s a massive wait list for luxury watches, particularly, the industry’s Big Four – Rolex, Patek Philippe, Audemars Piguet and Richard Mille.

Sales of luxury watches shot through the roof during the Covid-19 pandemic as people stuck at home splurged on high-end timepieces instead of travel and leisure.

Social media also spawned a whole generation of young collectors looking to flaunt their newfound Swiss symbols on Instagram.

Not easy to ramp up production

As global demand far outstrips supply, luxury Swiss watch brands are scrambling to scale up production.

But it's not as easy as it sounds as these watches are assembled and polished by hand – a complex process that requires meticulous precision and, something, manufacturers don’t have – time.

“The production of Swiss luxury watches cannot be increased at short notice as they are handmade and require several man-hours,” said Abraham Koshy, chief operating officer of watch division at Rivoli Group, a leading retailer that represents Breguet, Harry Winston, Blancpain, Glashutte, Omega and Longines among other Swatch group brands in the region.

“The stringent quality processes involved to attain the level of perfection required by these prestigious watch brands cannot be expedited,” Koshy explained.

Rolex, the undisputed leader amongst Swiss watch brands with 29 per cent of market share and a turnover of almost Dh31 billion in 2021, has already made it clear that they will not rush things to meet the shortage.

“Our current production cannot meet the existing demand in an exhaustive way, at least not without reducing the quality of our watches – something we refuse to do as the quality of our products must never be compromised,” the leading Swiss brand said in a rare statement.

“This level of excellence requires time, and as we have always done, we will continue to take the necessary time to ensure that all our watches not only comply with our standards of excellence, but also meet the expectations of our customers in terms of quality, reliability and robustness. Rolex does not compromise on what it takes to produce exceptional watches.”

Rolex makes around one million timepieces annually.

Far behind, in second place, is Omega (500,000) closely followed by Cartier (490,000). Patek Phillipe and Hublot manufacture 60,000 units each, followed by Audemar Piguet (50,000) Ulysse Nardin (40,000) and Richard Mile which does just 4,500 pieces per year.

What watch collectors say

Avid watch collector and group managing director of Danube Home, Adel Sajan, 31, who has got all big four brands in his enviable collection said his personal favourite is the Richard Mille-Rafael Nadal RM 35-02 which he acquired three years back. The self-winding dream watch currently retails for $462,000 on Chrono24, the world’s leading watch market.

“It took me one year to get it but it was certainly worth the wait,” said Sajan, who reckons the current scarcity is caused by a double whammy of increased demand and reduced production due to Covid-19.

All leading Swiss watchmakers had to stop production in early 2020 as Covid-19 brought life to a grinding halt.

Time seemed to standstill for the most part of 2020. Watch enthusiasts didn’t.

Watch auction houses seized the opportunity registering record online sales. Between them Antiquorum, Bonhams, Christie’s, Sotheby’s and Phillips clocked a revenue of Dh1.2 billion.

“Suddenly there was more money and less watches to buy. The result: a sharp spike in prices and a booming online and second handmarket,” said a watch expert.

In July last year, a Green Dial Nautilus by Patek Phillipe (ref 5711) which retailed for Dh1,28,000 in April went under the hammer for Dh1.8 million.

The Rolex Daytona is selling for $36,000 (Dh132,000)) up from $22,000 (Dh80,808) in January 2020 while the value of Audemars Piguet 15202 has nearly doubled from $39,000 (Dh143,250) in early 2020.

The best thing about these timepieces is that their value keep appreciating,” said Indian expat Ram Tolani, founder and chairman of Goodwill Insurance Brokers who has amassed a formidable collection over the years.

“My first watch was an Omega which I bought 40 years ago during a trip to Singapore. Since then I have bought everything from Rolex and Pateks,” said the longtime Dubai resident.

At the other end of the spectrum is 26-year-old businessman Shauhan Ahamaed Moosa, who started collecting luxury watches barely a few years ago

“Every year on my birthday I buy myself a watch,” said Moosa who gifted himself a Patek Phillippe a few years back.

“Luxury watches have become scarce because people use them as a form of investment rather than enjoying it on their wrist,” he reasoned.

Sanjeev Dutta, Executive Director of Commodities and Financial services at DMCC holds a similar belief.

Dutta, who began collecting luxury timepieces since 2010, urged people to be wary of replicas that have flooded the grey market since pandemic. “It’s often difficult to tell these true copies from real ones if you are not an expert,” he said.

Dutta said the watches are out of stock because inventories could not be replenished in time.

Swiss watchmakers often limit production runs and restrict allocations to preserve their exclusivity.

Rolex: Wait lists not their fault

However, Rolex has denied it is purposely restricting supply as part of a strategy

Rolex said the long waiting list was not their fault as it’s not them but authorised retailers who manage the allocation of watches to customers

Koshi said they constantly strive to ensure that their best sellers are available across their portfolio at all times. “Having said that, certain references are limited by production and their demand often far exceeds their productions and allocations. In such instances, best endeavour is made to meet customer requests as soon as possible, with the support of partner brands.”

“The UAE being a key market, we have priority in terms of allocation and early deliveries from our brands, however, we do face supply issues for certain high demand references. We try and mitigate these challenges by improving our order planning and by working very closely with our brand principals to ensure priority delivery to our markets,” he said.

An Emirati collector said it’s not just watches but everything from fine art, and designer bags to sneakers have become ridiculously expensive.

“The scarcity of luxury watches is not new but now it’s extreme,” he said.

Arshad Khan co-founder of Yoshi Markets said he’s been trying to buy a Rolex for months. Khan may have to wait even longer unless he’s prepared to snag one at a hefty premium though secondary channels where even pre-owned models command more price than new ones at retailers.

A member of Dubai Watch Club said they used to be a tight knit community of people who were passionate about the hobby. “Now everyone appears to have become a collector. As a result even watches that were readily available until recently have become red hot,” he rued.

When the market cools only time will tell.

• Dubai