In today’s Finshots, we look at the booming luxury watch market in India and explore what’s fuelling this surge.

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The Story

Something is brewing in the Indian watch industry. Here’s a TL;DR (too long; didn’t read).

India’s growing faster than most other economies, and that growth is driving big changes. Rising incomes are leading to bigger spending, and more people are splurging on high-end luxury items and collectibles. Think stuff like fine art, rare wines, whiskey, sneakers, and yes, luxury watches.

Interestingly, luxury watches are quickly becoming a new obsession for the wealthy, including millennials and Gen Z. For younger buyers, these timepieces represent a blend of fun, status and a touch of exclusivity. While for high-net-worth individuals (HNIs), they are emerging as prized investment assets. In fact, collectibles are evolving from mere keepsakes to serious investment opportunities. And luxury watches are among the hottest picks in this trend.

And it’s not us saying this, but a recent report from Knight Frank that ranked luxury watches as the top investment choice for super-rich Indians in 2023, even surpassing art. And a Deloitte survey shows that the preference of discretionary spending is also driving young consumers to invest in these timepieces. For context, 78% of Indian consumers plan to buy a watch for themselves within the next year. So yeah, the luxury watch market in India has hotted up.

But how did we get here?

To begin with, the Trade and Economic Partnership Agreement (TEPA) between India and Switzerland has a big role to play. This deal is set to shake up India’s luxury watch market. Over the next seven years, it will gradually slash customs duties on Swiss watches from 22-23% to zero. And that’s a big deal, especially when you consider that Swiss watch exports to India hit over CHF 200 million in 2023 alone. The sector has been growing at a solid 11% annually for the past two decades! It’s no wonder that the Indian market looks irresistible to Swiss brands. And it’s also why Switzerland and other EFTA (European Free Trade Association) countries are gearing up to invest $100 billion in India over the next 15 years.

Then, there’s the fact that about 60% of Indian consumers buy luxury goods every year, whether it’s watches, leather goods or jewellery. When it comes to watches though, Indians are especially brand-conscious. In fact, 64% of Indian buyers prioritise brand image over price, compared to global consumers who focus more on price-to-value. That’s why prestigious Swiss brands like Rolex, Patek Philippe and Audemars Piguet are finding such a keen audience in India. Even in a cost-conscious country like ours, the luxury market is booming, with watches playing a significant role. The sector’s already worth $7 billion and is only growing fast.

And finally, over 50% of Indian consumers are open to buying pre-owned luxury watches in the next year or so, as compared to 40% globally. Thanks to the appeal of cost savings and sustainability. So, the pre-owned market is taking off too, adding even more fuel to the demand for luxury timepieces.

All these signs point to strong growth for India’s luxury watch market.

By now, you’re probably thinking “Why am I still investing in stocks, mutual funds and SIPs? Maybe I should just snag a luxury watch instead!”

But before you jump to conclusions, hang tight, because here’s where things get even more interesting.

Look, investing in luxury watches is quite different from stocks or bonds. Watches are a unique asset class, and their returns can be a bit unpredictable. If you look at the WatchCharts Overall Market Index, which monitors the prices of 60 top luxury watch models from the top 10 luxury watch brands in the secondary market (or a market where second hand watches are traded), you’ll see that over the past year, the index has declined by 8% (from 65,000 to 59,700).

And that’s not exactly what you’d want from an investment where your hard-earned money is at stake, right?

Logically speaking, collectibles are real property, so you would expect their prices to appreciate at least in line with inflation. And with the growing number of global millionaires, you’d think that the demand would push prices even higher.

That was certainly the case in 2021 and 2022, when the index shot up to over 95,000 in just one year. But of late, that trend hasn’t kept up, and top watches haven’t appreciated as quickly as they used to.

So, then why bother investing in luxury watches at all, you ask?

See, luxury watch investing can be lucrative but it works differently from other assets like stocks or real estate. The basic economics boils down to a few key factors that make watches a unique investment.

First up is brand and rarity. In the watch world, a brand is more than just a name. It’s a mark of craftsmanship and heritage. Iconic names like Rolex, Patek Philippe and Audemars Piguet are renowned for their ability to hold value over time.

Take Rolex, for example. Its stainless-steel models haven’t lost their value since the 1970s, thanks in part to Rolex’s deliberate pace of production. Some of their watches take up to 500 hours to make, and certain models come with a six-year waiting list. It’s this combination of meticulous craftsmanship and scarcity that keeps their value high.

Next, trends play a crucial role. Just like any other investment, the value of luxury watches can fluctuate with trends, celebrity endorsements or pop culture moments. Being aware of which models are currently in demand can be just as important as knowing the watch itself.

Finally, patience is key. Investing in luxury watches is a long game. Some models can take years, even decades, to appreciate significantly. For instance, the 1968 Rolex Daytona now commands over $300,000, while actor Paul Newman’s Rolex Daytona fetched an astonishing $17.75 million at an auction in 2017. So, while the returns can be impressive, it’s often a matter of waiting for the right moment.

All this shows that while brand and rarity can work their magic, investing in luxury watches is definitely a marathon, not a sprint.

So, let’s zoom out and look at how they’ve performed over a decade. According to the Knight Frank Luxury Investment Index, luxury watches have appreciated by 138% over the past ten years (as of Q4 2023). However, in 2023, the rise was only about 5%. So, while the long-term trend is solid, short-term returns can be modest. Plus, don’t forget about hidden costs like insurance, storage and maintenance, which can eat into your returns.

Sure, there are some standout performers, like the Rolex Pepsi GMT-Master, which saw a nearly 6% price increase in the pre-owned market last year. But not all watches are so lucky. Many don’t perform as well in the resale market.

At the end of the day, buying a luxury watch might be less about the investment and more about the experience. You get to wear, showcase and enjoy it while waiting for the right moment to sell. And when the demand spikes, you might just make a sweet profit.

And don’t forget that luxury watches also offer a way to diversify your investments. They’re not as affected by wild swings like the stock markets and can provide a stable alternative compared to traditional assets.

So, there you have it — the scoop on the Indian luxury watch market. It’s a thriving space packed with opportunities, whether you’re into style or investing. And it’s definitely a market worth watching.

Until next time…

P.S. Since we wrote about timepieces, here's an interesting nugget we bet you didn't know. 1 million seconds is about 11.5 days. And 1 billion seconds stretches to a whopping 31.7 years! Mind-blowing, right?

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