Prices for second-hand luxury goods have fallen rapidly in China in recent months as even the wealthy cut discretionary spending and sold their Rolex watches and Hermes bags to raise cash.
More than a dozen popular luxury watch and bag brands have lost between 20% and 50% of their secondary market value since Shanghai, China’s financial and commercial capital, imposed a strict lockdown in March to crush a Covid epidemic.
Restrictions in Shanghai and dozens of other regions have dealt a blow to small business owners, many of whom have amassed large collections of luxury goods in better times. But the repeated closures have damaged their cash flow.
Last week, tens of thousands of tourists in Hainan, an island province dubbed “China’s Hawaii”, were barred from returning home to stem an outbreak there.
The government is promoting Hainan as a duty-free paradise where Chinese consumers can buy the same luxury goods they bought in cities like Paris, Rome and London before President Xi Jinping’s controversial zero Covid policy made virtually impossible to travel abroad. for short trips.
Watcheco, a pre-owned luxury watch industry portal, reported that the price of pre-owned Rolex Submariners – a model coveted by connoisseurs and collectors – has fallen 46% since March.
Luxury bag dealers in Shanghai and Hangzhou also slashed prices of classics such as Hermès Birkin bags by up to a fifth over the same period.
Pawnshops and other luxury goods dealers said there had been a surge in customers, led by cash-strapped business owners who were struggling to raise capital to pay off their debts and keep their operations afloat.
“The boom time is over,” said James Wang, a second-hand luxury watch salesman in the eastern city of Nanjing. “We are entering a period of correction that could last a long time.”
Wang said he bought six Patek Philippe and 29 Rolex Submariner watches from struggling owners in July alone, compared to none of Patek Philippe and five Rolex Submariners in the first quarter of this year.
“Patek Philippe says you never actually own their watch, just take care of it for the next generation,” Wang said. “That’s not the case in a trade crisis.”
Shaun Rein of China Market Research, a Shanghai-based consultancy, said the sudden increase in supply and resulting drop in prices for second-hand luxury goods was evidence of a “very weak consumer confidence”.
“It’s probably the weakest I’ve seen in 25 years in China,” he added.
Some luxury goods investors have argued that recent price drops were inevitable after an unsustainable surge before March.
In the six months leading up to the Shanghai lockdown, the price of used Rolex Submariners rose 240%. The same bag dealers who recently cut their asking prices in Shanghai and Hangzhou did so just months after raising prices at the start of the new year.
Sam Xue, a watch investor who owns an electric heating plant in the eastern city of Wuxi, said the price hikes were “pure speculation” and unsustainable.
“The weak economy cannot sustain a luxury boom,” Xue said, adding that he would not buy more luxury watches unless prices fell another 30%.
Additional reporting by Tom Mitchell in Singapore