Rolex CEO Explains Why a Luxury Watch Shouldn't Be Treated as an Investment
The freewheeling days of the early 2020s are decidedly behind us, when the market for collectibles such as luxury watches, whiskey, and trading cards peaked. But despite the current cooling market value for luxury timepieces coupled with sky-high interest rates, the head of Rolex has some words for those who see his products as investments.
Rolex CEO Jean-Frédéric Dufour spoke with the Swiss newspaper NZZ last week ahead of the Watches and Wonders industry trade show in Geneva, which he also cofounded and serves as president. When asked how the industry is currently doing, Dufour admitted that 2024 would be a "challenging" year for watch manufacturers.
"It marks the end of a phase in which all manufacturers have been doing well," he explained. "In good times, production tends to be too high. When markets weaken, as is the case now, retailers come under pressure to cut prices. This is extremely problematic because discounts damage emotional products like ours."
Dufour continued, conceding that the strong franc and rising price of gold, as well as geopolitical unrest, have are largely contributed to the mixed outlook.
"We produce everything here at Swiss costs. So the Swiss franc is a challenge," he noted. "The cost of raw materials has also risen massively. A kilo of gold currently costs almost 66,000 francs. Thirty years ago, when I started in the watch industry, it was still 18,000 francs. Of course that makes watches more expensive. The rise in interest rates is also affecting people’s mood to spend, and the geopolitical situation isn’t helping either."
"But, you know, we’re used to it in the industry," he added optimistically. "We sold Swiss watches abroad when a dollar still cost four francs."
But when it was pointed out to Dufour that two or three years ago, cryptocurrency investors were liquidizing their investments into physical assets, he did not mince words on investing in luxury watches.
"I don’t like it when people compare watches to stocks," he said bluntly. "It sends the wrong message and is dangerous. We make products, not investments."
Though the market is volatile and will surely rebound eventually, that's probably of little comfort to those who bet big in watches.
"In 2023, traditional markets experienced a resounding recovery, while collectible markets suffered a continued decline that spread across nearly every sector," collectible data and analytics company Altan Insights said in a report earlier this year. "Yes, the bubbles have popped. The frothy markets of 2020 to 2022 are no more."
