Play the long game, sell a Rolex
Sadhika Mani
FY B Sc
Reading time: 8-9 minutes
Isn’t there something just so alluring about the gleam of that shiny new pair of Dior shades, the almost musical clinking of the gleaming gold Cartier bracelet and the heavy weight of that Rolex sitting on a wrist?
When a good of such heavy value is purchased, are its costs and benefits considered, is it bought solely to boost one’s social standing or to be used for the purpose of its make?
Too many questions in one go, I’m aware, but when Jean-Noël Kapferer said,
“Luxury is the expression of a person’s identity. It is not the price that counts, but the prestige and personal value a person associates with it.”
I had to disagree.
The general sentiment in the luxury goods market is that the motives that push people to induce sales is mostly psychological. The ‘snob’ and ‘bandwagon’ effects are obviously the most popular, being that when the goods get too accessible to people it discourages purchases by the ‘snooty/snobby’ crowds and in contrast, the bandwagon effect pushes people to buy these goods just because the herds are buying it.
Another popular reason that people concur on is the need for prestige through owning an expensive good, a rather concerning trend especially in South Korea among the younger generations.
But a growing portion of what is driving luxury good sales is purchase for resale, basically using a Birkin bag like an investment vehicle.
The easiest way to go about breaking this down is to divide India’s population up into two sections:
I. Group A
Essentially the ultra rich, the silent wealth of the country, the top 1% of the economy. Although every country has a different income bracket you need to fall in to be a part of that 1%, all of them have hefty pockets and generously loose fingers when it comes to spending on luxury goods.
One thing to be noted when it comes to the ‘old money’ or ‘classy money’, whatever you deem to call it, is that they want to own anything that will set them apart from the others, something unique, something that they have and you don’t. This is exactly why most of their clothing is custom-made, their shoes, their watches, their guns and their golf clubs.
An extra pocket here, a floral inlay here and an initial inscribed there, anything that makes it one of a kind.
The easiest example to use here would be watches. The wealthy love their watches, they even go so far as to have it custom made for millions of dollars just to show it off and then put it away. Anyone who is familiar with the watch game would consider the following brands as household names- Rolex, Armani Exchange, Patel Philippe, A. Lange & Söhne and Frank Muller, all of which you have to be put on an ‘interest-list’ for with the nearest dealer and when you get your watch is dependent on the model of the watch and the demand for it (or if you’re a reliable client in the eyes of the dealer).
And then there’s the watch-makers that accept custom requests, and I don’t mean a little scritch of an initial on the wrist-straps or a name on the back-dial, no, I mean customized from scratch– from the material of the watch, the movement of the hands, the finer details like inscriptions on the dial and after-delivery services.
The men who custom-make their watches would scoff at the Rolexes as they sport their personalised Vacheron Constantin, Audemars Piguet and Richard Mille pieces.
It’s the same with cars and clothes really, with their Japan and German make motors that purr smoothly down the tarmac and personally-tailored fabrics from Savile Row.
My point being, to the rich, a luxury good serves its purpose in its own right. Their first thought upon entering a showroom isn’t about the maximum price they could sell it for.They do sometimes sell it off if they no longer see it to be of use, but at the end of the day, their primary motive is to own it and use it as a power move, leveraging its value over others.
II. Group B
Let’s say Group B consists of the middle and upper-middle class of the population, to whom purchasing luxury goods is actually a luxury and not a daily occurrence like those from Group A. Most in this income bracket would purchase luxury goods as a means to boost their social standing, in hopes that the flashy branding would push up their prestige in the eyes of others. This is also the section of the population most influenced by the previously mentioned snob and bandwagon effects.
Here is where the catch is: there’s a certain sect of even this subsection of the population that uses luxury goods like a speculative share. Buy at retail price and sell when the time is most fortunate, i.e, when the price is at a high and at the precipice of falling.
The most popular goods for which the resale market exists are expensive bags, expensive watches and expensive shoes, probably in that order. This could be attributed to two factors (and this is said greatly out of intuition):
(i) the pure fanaticism to own something just because it is in trend
(ii) people preferring to earn greater sums of money by waiting longer for rare items to reach peak prices
The general population that makes up ‘Group B’ deals with this in two different ways again- either by mass manufacturing knock-off versions of these luxury brands and selling them to people who are either hugely unaware of the fact that they are being scammed, or by people who just don’t care enough to where or how they acquire these brands as long as they look as close as possible to the original brand. This emphasizes how much it’s the brand name that the hoards are obsessing over rather than quality or uniqueness like the population of Group A did.
The second way is by buying and reselling these luxury items. While the market for such ‘pre-owned’ luxury items is still in its nascent stages in India, it’s definitely a huge deal in developed countries like America, France and Italy. Coming to India, even though gold and real estate might not entirely classify as luxury goods, the fact that they’re considered status symbols based on how much you own of it is enough to have it be used as a relevant enough example here, because people do purchase these items in bulk and keep them aside to sell for a rainy day (essentially using them as safe haven assets).
If one were to look into the Knight Frank Luxury Investment Index for 2024, a popular report on the growth trends of high value items like art, classic cars, coins, coloured diamonds, fine wine, furniture, jewelry, watches, and rare whisky, we would see that the value of luxury watches have appreciated by 138% over ten years, hence implying that to earn well off of luxury goods you have to see it as a marathon rather than a sprint because in short term, it was only a 5% increase in a quarter.
Plus, the luxury goods resale market itself has grown in size over the past four years, now making up for 15.53% of the personal luxury goods market. This is highly advantageous for not only the people trying to make money off of resale and investment in luxury goods but also, regular purchasers of designer goods who can now sell off luxury products that would normally collect dust at the bottom of the racks after having run its term of being in trend on sites like Vestiaire Collective and Second Movement and through private dealings.
There’s also other factors that could be understood using data collected from the resale market, outside of it just being a great place to play around with investment opportunities; that being helping companies understand if rebranding helps push or bring down sales. If in the case that the rebrandings don’t work, very obviously the resale rates are going to drop as well as in the case of Burberry, the company’s average resale value falling about 17% after a change in their creative director Daniel Lee in 2022 to improve less than satisfactory sales.
Another angle that the resale market data contributes to is whether or not aggressive hikes in prices, to make the product seem more desirable (essentially playing into the snob-effect to induce sales) works well enough or not.
My point being here, is that yes, while the driving motives behind which people acquire luxury goods is largely attributed to psychological reasons like prestige and ‘herd-mindsets’, there’s a good amount of the population out there that uses the market to make large margins of profit. Sure, it’s not quite as effective as the share market, but the opportunities to earn these hefty sums of money if one is just ready to wait things out and play the long game is monumentally underestimated.
And hence, Jean-Noël Kapferer’s quote should have thus been
“Luxury is not just the expression of a person’s identity. The prestige and personal value do count based on how people associate it but the price that it will eventually add to your coffers matters more”