“As a collector myself I may buy for my museum but, it is a private deal. We are not manipulating the auction market.”So says Philippe Stern, but Patek Philippe has been supremely successful in conjuring a frenzy for its line of current wristwatches. What has Patek Philippe allegedly done specifically? Well, at the start of the 80s, Patek started aggressive buying of their vintage pieces on the second hand market "for their museum". A strategy allegedly proposed and developed by Alan Banbury (acclaimed horological expert who was a personal consultant to Philippe Stern during the creation of the museum collection) to reawaken interest in the brand. Crucially they also made sure the results were loudly accounted in the press as evidence for the mounting value of old watches. Remember up until this point, that watches were really not bona fide collectibles. That all changed, particularly when the Calibre 89 fetched $3.7 million. Suddenly, this event created a market among collectors for wristwatches.
Apparently, many of the pieces in that 1989 auction were ones bought previously at auction for many times less some years before. Had Patek Philippe bought and held them for the 1989 auction or were they from private owners? Either way, this had the effect of pushing up prices steadily; for both vintage, but more importantly, for their continued new product. All in all, a finely judged marketing strategy that has paid dividends for the company, as well as certain auction houses.
And you only have to look at the PP magazine to see regular direct or subtle references to the performance of their watches at auction implying the constant investment potential of practically any piece with Patek Philippe on the dial.
So when the company seems vague or keeps shtum about whether a particular line is due for the chop or not, they are just continuing their strategy; let rumour do the rest. As an example, take the latest surge in 5070 (you know, the one that’s basically a finely finished vintage Speedmaster) and 3712/1a (a 5055/5085 movement in a Nautilus case). Strategically placed rumours, certain high profile and arguably ludicrous sales at auction (when the pieces are still in dealers if you bother to look) works wonders.
Of course, the huge jump in prices is a function of the interaction of buyers AND sellers. Has Patek's "so called" manipulations benefited the brand? Yes, certainly, but has also benefited some of the lucky owners of Pateks by luck or judgement.
Question is, PP seem so far below the supply-demand equilibrium point, with so many wait listed watches on deposit in dealers. Why not produce more? I think the answer is two fold. Back to Mr Stern:
“The first thing we look at is in creating demand and adjusting production. The worst thing is to over-produce. We currently do not have the resources to increase production significantly. This will only be done if we find the right watchmakers. Our limitation is in finding the right people. After that, the challenge is in ensuring the quality and good reputation is maintained. We will be increasing volumes slowly though.”I agree there is a resource limitation, but there’s another issue. The usual rule of luxury goods production guidelines is always produce one item fewer than demand, but I don’t think this applies so simply here. A Patek Philippe must remain a dream, an elusive and exclusive piece so it will never hit supply/demand=0.99; more like 0.5. Otherwise their ability to charge a premium would disappear disproportionately quickly in relation to the closeness to the market limit - in an irreversible flash. I’ve seen this in the car industry, it’s a won way ticket of brand suicide.
Mr Stern is no fool and is in the game for the long run, through ups and downs, boom and bust, operating at this level gives huge protection against the impending burst of the watch bubble.
And in their defence? Let us not forget the lucky (or smart) who reap the benefits of this alleged situation.
In addition, Patek are one of the few who are trying to do something about limiting production and feeding secondary markets at least on the serious pieces.
At least unlike so many pretenders in the luxury market, Patek is backed by real history and substance and the indisputable quality of their products relative to what else is available and comparable.