This week, on Instagram, there have been quite a few great pieces discussing “flipping” watches. What is it, exactly, that irks so many people about flipping?
First of all, I think it is really important to define exactly what is meant by flipping. Any watch bought in the secondary market that had previously been worn is NOT what I consider to be flipping. Buying a discontinued mint watch from a secondary dealer with a view to selling it later at a profit is also NOT what I consider to be flipping.
@rareandfine caught the spirit of it well this week in his following comment… “it is still too easy to make money…just buy going into your AD, wait 12 months and sell it the same day you receive your watch for a profit. That doesn’t have to do with collection. And for me that’s also not investing or speculating….it is merely a quick arbitrage business.” Yes, its become bish-bosh, make some dosh.
That last element catches the spirit of flipping very well. It is arbitrage. The seller is able to buy at a cheaper price and sell almost immediately at a higher price without actually owning the watch for any amount of time. As @horology_ancienne describes, a flipper does not love the watch he buys. He does not sell the watch because of financial struggle. Rather, he buys and sells immediately for the purpose of one thing – financial gain. The flipper turns the watch into a commodity without meaning.
I actually witnessed this reference sold to a dealer by a “client” on the very same day it was delivered to him from his AD. £4000 profit.
I think I would like to add another element to the definition. The buyer also knows at the point of buying that he can sell at a higher price. If price fell between the time he orders his watch and its delivery to him, he can change his mind and just leave the watch with the AD. There really is no risk to the flipper in this example.
Even given the 30%+ margins from secondary dealers, hot watches can be flipped for quick and easy profit.
Another crucial angle that needs to be highlighted is that a flipper has no intention of wearing a watch at all. I think this is quite central to the issue.
When Patek Philippe used to deliver watches that were sealed in plastic bags on delivery, it always seemed to me to be the case that those who kept the watches in sealed plastic always had their eye on re-selling rather than wearing. I struggle to see how a watch in plastic, even if owned for months, can be anything other than flipper-tactics. The watch may not be sold immediately, but the intention was always to sell and not to wear. To pretend otherwise is a sham.
As an extension to @rareandfine’s arbitrage point, I suggest that a flipper can often hold a watch unworn for a period of time. It doesn’t have to be sold immediately – especially if the market is very strong and prices are climbing rapidly.
Both @horology_ancienne and @drjuanola addressed the issue this week. The former argues that what is especially irksome about the process of flipping is “not just that a deserving collector is deprived of his prize but the damage that is done to genuine small family jewellers with honest intentions that lose their contracts and potentially jobs.” This is well said. If an AD becomes innocently involved in clients’ flipping watches, that small AD could lose their contract with Patek Philippe.
The trouble is, there really are far too many ADs who encourage the process. Indeed, @han_can_eat, describes that in his geographical location, “flippers get most of the allocations. ADs simply don’t care if you are going to flip the watch as long as you also take pieces that are less desirable. In fact, I’ll go as far as saying that ADs encourage this kind of behaviour.” Yes, @han_can_eat, you absolutely nail it there.
Package deals are a big problem. If you want this Aquanaut, then buy some other watches too that nobody wants.
My AD is a very small family business. I have been dealing with him for over a decade. He knows my way of buying and he trusts my way of buying. Over that last decade, I have bought many watches that are perceived as super hot. Not only do I not wait years, but I have never been asked to buy watches as a package deal. That is how a relationship should work. If, instead, ADs are adopting some sharp practice by giving allocation priority to flippers because they can unload other less-desirable watches too, then that really is something that Patek Philippe need to address.
To play Devil’s Advocate, let me assume that in future, allocation of (for example) Ref. 5711A is only made to collectors who will not flip. Lets just assume that this can be done and the flipper is removed from the equation. What will happen?
Well, since the demand for Ref. 5711A is significantly greater than the supply, won’t the effect of supply being placed amongst collectors who do not sell in the secondary market just lead to an even greater increase in secondary market price? The flipper, essentially, is a source of supply. If that source of supply is curtailed, then the only way of getting a Ref. 5711A is by allocation from an AD.
Fortunately, there is a flaw in this logic. Many flippers (often dealers) tend to hoard the hot watches to create an even greater constriction of supply. Patek Philippe supply the market yet flippers/dealers hoover up supply as a means of driving the market exponentially higher. This is how bubbles get created. Many collectors tell me that the flipper/dealer is a crucial supplier of liquidity and that they provide supply. I think supply would be better allocated if it went to long-term collectors directly from an AD. Cut out the middle-man flipper/dealer. In the long run, this will protect the brand image better.
I have seen a dealer show a “hoard” of 100 steel Nautilus.
@theopencaseback wrote a very interesting article on this subject where he described “a sort of cultural tipping point underway.” Call it a rebellion amongst long-term collectors who are just getting fed up with how the market is being manipulated.
Some have suggested that Patek Philippe turn a blind eye to the geographical bloc of ADs who take advantage of their supply by forcing their customers to buy package deals. It is said that many ADs encourage clients to flip watches as it creates a very rapid turnover in sales. I know of people who get allocations of super hot watches from ADs who are fully aware that the watch will be flipped within a year. But it creates rapid turnover and almost guaranteed repeat business.
Yes, @theopencaseback, @horology_ancienne, and @drjuanola, we are all getting quite tired of the flipper. They do a great deal of damage to the Patek Philippe brand and to genuine collectors. However, the answer to the problem is not for Patek Philippe to open the floodgates and supply more. @horology_ancienne describes eloquently why this is most definitely not the answer.
From my perspective, and I have been ridiculed for saying it, the answer resides within Patek Philippe. It is their responsibility to take a long and hard look at their AD list. It is well-known that many ADs abuse their position. Yes, this of course drives up a lot of sales volume for the AD and for Patek Philippe. However, at what price to the long-term reputation of the brand is this short-term boost to sales? How much damage is done to the long-term collector who is impacted by it?
The damage to Patek Philippe’s reputation from ADs who encourage flipping and who indulge in “package deals” is considerable.. As more and more hard core collectors see this process taking place, more and more hard core collectors are sending a message to Patek Philippe that damage is taking place. Something draconian needs to be done.