Prices of second-hand luxury goods in China have fallen sharply in recent months, as even the wealthy cut back on their discretionary spending and sell their Rolex watches and Hermès bags to raise cash.
Twelve popular brands of luxury watches and bags have lost between 20 percent and 50 percent of their value on the secondary market since Shanghai, China’s financial and commercial capital, imposed a strict lockdown in March to curb the Covid outbreak.
The restrictions in Shanghai and dozens of other regions have dealt a heavy blow to small business owners, many of whom amassed large stocks of luxury goods in good times. But repeated lockdowns have hurt their cash flow.
Last week, tens of thousands of tourists on the island province of Hainan, billed as the “Hawaii of China”, were prevented from returning home to prevent the outbreak.
The government is promoting Hainan as a duty-free haven where Chinese consumers can buy the same luxuries they used to snap up in cities like Paris, Rome and London before President Xi Jinping’s controversial zero-covid policy made travel abroad practically impossible. For short trips.
Vacheco, an industry portal for used luxury watches, reported that the price of second-hand Rolex Submariners – a model coveted by connoisseurs and collectors – has fallen 46 percent since March.
Luxury bag dealerships in Shanghai and Hangzhou slashed prices on classics such as Hermès Birkin bags by a fifth over the same period.
Pawnshops and other luxury goods resellers said the big increase in customers was led by cash-strapped business owners struggling to raise capital to pay off debt and keep their operations afloat.
“The boom time is over,” said James Wang, a seller of second-hand luxury watches in the eastern city of Nanjing. “We are entering a correction period that will last a long time.”
Wang said he bought six Patek Philippe and 29 Rolex Submariner watches from distressed owners in July alone, compared to no Patek Philippe and five Rolex Submariners in the first quarter of this year.
“You will never own a watch of it, but take care of it for the next generation,” says Wang, said Patek Philippe. “That’s not the case in a business crisis.”
Shan Rein at China Market Research, a Shanghai-based consultancy, said the sudden surge in supply and falling prices of second-hand luxury goods were evidence of “very weak consumer confidence”.
“It’s probably the weakest I’ve seen in my 25 years in China,” he added.
Some luxury goods investors argued that the latest price decline was inevitable after an unsustainable surge prior to March.
In the six months before Shanghai’s lockdown, the price of second-hand Rolex Submariners rose by 240 percent. The same bag dealerships that recently cut their asking prices in Shanghai and Hangzhou did so just months after raising prices at the start of the new year.
Watch investor Sam Xu, who owns an electric heater factory in the eastern city of Wuxi, said the price hike was “pure speculation” and unsustainable.
“A weak economy cannot support a luxury boom,” Xue said, adding that he would not buy luxury watches again unless prices fell by another 30 percent.
Additional reporting by Tom Mitchell in Singapore