Wednesday, September 12, 2012

Flipping Watches for Fun and (Sometimes) Profit, Part 1

As I mentioned in my last post, several months ago I started paring down my watch collection to the bare essentials, because, to put it simply, you can only wear one watch at a time.  The watches culled from the herd were posted in the for sale subforum on WatchUSeek and on eBay.  I'd never considered myself a flipper - what many watch enthusiasts who often buy watches only to "flip" them by resale only a short time later - but that's basically what I've become, having sold at least a dozen watches to forum members and eBay buyers. 

The craziest part is that, when everything is tallied up, I've actually made back more money that I spent on the watches in the first place.

This is about as far from the norm as flipping can get.  Most of the time, flipping a watch will net you only a fraction of the price you've paid for it.  It's simple supply-demand economics: why would someone buy a watch - a preowned one, for that matter - from you when they can get a brand-new one straight from the source?  The most straightforward answer is "because they can get it from me for a whole lot cheaper."

But offering prospective buyers a good deal entails more than undercutting the retail price.  The supply-demand ratio of the piece - whether it's discontinued, a limited edition, or just a highly sought-after model - is the ultimate arbiter of what kind of price you can realistically expect to get.  All the watches that managed to bring home more than I spent on them had some sort of supply limitation that only amped up their demand - and enabled me to sell them at an aggressive price.

Example #1: Rolex Explorer I 114270
Purchase Price: $3570
Sale Price: $3800

Several things converged to enable this profitable flip to take place.  First, the 114270 was discontinued and replaced with the 39mm 214270 model - a model that has gained infamy for its stunted hour and minute hands.  Second, I picked up the watch preowned - a common necessity for discontinued models, unless you come across old-new stock - which meant that I paid considerable less than Rolex's bloated retail price.  Third, this particular watch had an extremely recent serial number that pegged its production in the year directly preceding the discontinuing of the model, which made it attractive to those who were interested snagging a 36mm Explorer I that was as close to new as possible.  These factors, coupled with the brand attraction that Rolex exerts on a significant portion of the watch enthusiast market, enabled me to price the Explorer competitively at $4000 - and find a buyer within 24 hours of posting.

Wait a minute, you say - if the buyer paid $4000, how come the sale price I listed is only $3800?

The cost of doing business - specifically, shipping/insurance costs, and PayPal fees - reduced the $4000 to a little over $3800.  You have to account for those costs if you want to make an actual profit on the flip.

The lessons learned from this transaction:

- People will pay well for discontinued models, if they're popular and/or rare enough.
- If you buy the watch used to begin with (and at a bargain price), it's far easier (but not necessarily easy, per se) to recoup or make a profit over your original investment.
- People love a Rolex.  I've only had one watch sell faster than this one, and it was priced to be a steal.

Next time: the resale value of a limited edition Omega only sold in Japan.

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