[MelisQ]

Hey all,

I'm curious to hear your opinion on the following:

Lots of people save up for luxury watches such as Rolex watches. They often do so on their bank or savings accounts, with the risk of inflation. But what if professional watch dealers (such as Hodinkee) had saving plan offerings? E.g., buying 'shares' of the watch until you have 100% of it and you're able to claim the watch; in the meantime, you can enjoy its value appreciation and save towards a clear goal. Would this be interesting to you?

 

[Spaceview M2]

Another idea not on my radar.
There is nothing more important when you can't even afford a watch is to have available cash to pay your own bills. So I am wondering who would dedicate scarce cash reserves and throw it at a watch that may or may not appreciate in the future and once committed to the transaction, do you have the ability to 'remove' your investment (penalty free) due to unforeseen personal issues (I.E medical, loss of job etc?). Also, will the cash you send be invested and making money off the money you have sent them while holding your watch? I find these 'ideas' very questionable at best. Sorry but I smell something fishy here. Have you ever heard of the Bitcoin exchange FTX?

 

[CometHunter]

I'm sorry, but I just can't see this concept as being fiscally sound...especially if your net worth is under seven digits. And only a fool would consider the wrist watch to be a good investment, let alone one that would appreciate in value. That's just not something you can predict.
I don't care it it's a gold Rolex Oyster DayDate or a steel Seiko5. If you can't "afford" the watch, If you can't walk into the store (or log onto the same) and totally pay for the watch then and-there, in cash and not worry whether or not there's a "discount", then you have no business buying that watch.

 

[Ezra New York]

Lots of people save up for luxury watches such as Rolex watches.

I think there might be a misconception here held by people who don’t have the money for a luxury watch (myself included,) and that is that people buying luxury watches save up for them. I don’t think the vast majority of them are saving up in the general sense of the term. It’s said a lot because it’s good advice, and that’s never go into debt over a watch. If a $5000 purchase would severely financially burden you today that same $5000 saved up 20 dollars at a time down the road is just as tenuous if your position hasn’t changed. To me, it makes more sense to “invest” manageable amounts of money into affordable watches that can be traded and liquidated easily with small losses to build a collection that builds up to a goal.
that doesn’t mean you don’t have a nugget of a good idea there. Maybe it’s something you could make work as a retail business or maybe as a philosophical idea around investing. In my limited and amateur opinion, there’s better ways to do it.
interesting concept though.

 

[Wednesday]

My question for you here is, who is offering the money? At what interest rate? Who is holding the watch until I pay for it? Who is holding the money until then? There are already multiple vehicles for this process (credit cards, loans, layaway, etc.). In fact, what you're describing is called "layaway" in the US.

Layaway is a payment option used by some retailers to make purchases manageable for shoppers who want certain goods but can't afford to buy them on the same day that they shopped for them. The way it works is that you go to a store, pick out what you want and take it to the Layaway counter. Your goods are stored in your name, and you pay for them a little at a time, until you finally pay in full and can take your items. This ensures that the items you want are being saved for you even if you can't buy them when you pick them out.

Your question, if I understand correctly, focuses on whether people would be interested in buying watches on layaway directly from the manufacturers. My guess is that some would, but only those who either can't really afford it and wouldn't buy the watch if they actually had that same amount of money in their hands (as it's easier to watch money trickle out slowly than to hand over a large lump sum), or people who would otherwise be putting the watch on a credit card but prefer to use the financing option directly through the manufacturer. But here, I find this is less relevant to ask potential buyers whether they would be foolish enough to over-extend themselves on something they can't afford (because many do, all too frequently), but rather you should be asking sellers if they are willing to provide layaway financing. I'm not sure how this is a business model though, as it is a well-established financing option that many retailers already offer, but most don't because it is burdensome for them.

Different retailers have different rules (whether and how much of a deposit to charge, how much will be nonrefundable if you change your mind and decide you don't want all or part of what you picked out, how much if any interest to charge, how long you have to pay (3 months, 6 months), etc.

Most retailers don't like to do layaway because it is expensive and cumbersome for them to manage. They have to hold stock that they can't sell while it is being paid for in increments, with no guarantee that they will actually be paid for. They have to keep records of how much has been paid for each item. They have to keep track of items that have been abandoned so that they can get those items back to the floor for sale, etc. The retailer essentially becomes a banker for the customer, holding their money until they can finish paying off the items, plus they have to warehouse the goods being saved.

I personally have never used layaway as I do not buy what I can't afford. Many people like it though. I believe it is a tempting option for people with no credit or poor credit and can't get credit cards, but I believe fewer and fewer retailers offer it, considering the expense and hassle for them. I can't imagine most companies offering such a service these days, especially as most people who are realistically thinking about buying an expensive watch would have their own credit cards or ability to take out a loan. Again, it's the administrative burden on the retailer that would make this not likely.

I agree with Ezra above that most people who are buying expensive watches are probably not saving up for very long as they are likely already in a higher income bracket in the first place. If I can't afford a watch unless I save for a long time, then once I saved up that larger sum of money, I would likely find that amount to be too much to spend on a watch (this amount will be different for each person of course). For example, there are several watches in the $25,000 and up category that I would love to have, but it would take me many months (probably over a year) to save up that much. If I did eventually save up $25,000, I would have a hard time justifying putting that much money into a little piece of metal on my wrist. After all, I'm also saving for retirement, kid's college funds, savings accounts, vacation fund, home repair emergency fund, etc. It would be the same for me whether I saved that $25K in a savings account or a watch company directly. For my personal income level, I couldn't justify it.

I don't mean to criticize your ideas or be negative, but since you asked, I'm just being honest. I do respect that you are trying to think of something new, so I would say keep thinking.

 

[Wednesday]

I want to add something here. It seems like both of your posts have a goal of making expensive watches available to people who otherwise can't afford them. The specific amount is irrelevant, as what's "expensive" for one person will be chump-change for another. The point seems to be that you want to put more watches into more people's hands so that they can reap the benefits of value appreciation. I strongly question whether this is a worthwhile goal, and I must disagree that watches necessarily appreciate.

1. If someone can't afford a watch, then encouraging them to do so is, in my opinion, unethical. Just because they pay a little at a time, doesn't negate the fact that they can't afford it. You are asking someone to tie up their money in a watch, which is not good if they suddenly need that money for something. There is NO guarantee that the chosen watch will be worth anything more than what was paid originally, and in most cases, it will be worth less. A buyer will have to be found and again, a loss is more likely than a gain. If they put that same amount into an interest bearing account, their money would be right where they can get at it and they would likely be much better off financially than if they had taken a gamble on a watch.

2. If you can't afford it outright, and don't have the discipline to save your money in a standard bank account, but choose instead to pay for it via installments through a company, a credit card, layaway, or anything else, it's the same thing. You have to think about what else you could be spending that money on each month as you send in your installment payments. At worst, it is money that could otherwise be diverted to bills, high interest credit cards, car payment, mortgage/rent, emergency fund savings, retirement savings, kids' college funds, potential home repairs/improvements, etc. If these things are not taken care of, then the watch budget is eating into one of these.

3. Preferably, they are funding their watch by avoiding unnecessary spending like going out to eat, etc. (which is how I saved for my watch), but if they are doing this, then they aren't using a "pay-in-installments" method and aren't the subjects of your questions. Also, as I said previously, for someone in the income bracket that is your focus and would need the type of services you have suggested, once they saved up $25K - $50K or more, a watch would be an extremely foolish thing to spend that much money on. That much money should be put on paying off the house or other debt, or investing in retirement funds (do you know how few people have anywhere NEAR enough saved for retirement?), or fixing a leaky basement, or investing in something less risky. I promise you, not ONE reputable financial advisor would advise someone in this income bracket to "invest" that much money in a watch. "Expensive" watches are best bought by people with incomes where they aren't sacrificing much (if anything) and to encourage people to spend more than what they can afford, is like I said earlier, unethical.

3. That said, people buy things they can't afford and shouldn't buy, all the time. I believe that behavior surrounding credit cards and savings accounts prove that people do not like to save but they do love to spend and are willing to pay a premium to have something now rather than save and wait for it. But there is no need to create yet another way for people to spend, as there are already many, many ways to part foolish people from their money.

4. It seems that you are working on the assumption that watches are a good investment, but I have to challenge that assumption. Watches physically deteriorate over time, which limits their usefulness and value from a long-term perspective. Yes, they last a long time and there are many old watches out there, but they don't last forever and honestly, who really wants most of them? Look at all the vintage watches out there. SO MANY vintage watches, and MOST of them are not selling for that much. Maybe a few of them are being sold at a profit, but a profit to whom? To the grandson who inherited a watch, sure, it is a profit to him if he sells it, but it wasn't his money that bought the watch. If he sells it, he will likely get less for it (as compared to his monthly salary now) than his grandfather paid for it (as compared to the grandfather's monthly salary back in his day). And frankly, if Grandpa had put that money in stocks instead, it would probably have vastly outperformed his watch and netted his grandson more money.

5. As soon as someone puts money into a watch (whether by increments or all at once), they are not able to make that money work for them anymore. They are not earning interest in savings or another investment. If they're lucky, the watch will be increasing in value by the amount of inflation, but then, if they had invested in a traditional investment vehicle, so would their investments most likely. And the traditional investments are more likely to yield a profit if sold, whereas sale of a watch will more likely yield a loss. I've read the articles about watch values increasing, but again, that's IF you have the right watch and IF you can find a buyer willing to pay more than what you paid.

6. In summary, while I appreciate the idea behind what you seem to be suggesting, the value of the suggestion is not there. If ownership of an expensive watch is the goal, there are already many ways to buy things you can't afford right now (and it is questionable whether a person should be doing so in the first place, potential appreciation or no); and, if investment is the goal, there are already many ways to invest even small amounts of money. Finally, for appreciation to be realized, the watch must be sold at a higher price than it was bought for, and must be at a higher profit than would have been realized had the funds been otherwise invested. The premise that watches are a good investment is a faulty one, and most people should not be gambling with their limited means.