In today’s Wall Street Journal, the lead front page article entitled “Invisible Hand - How Top Watchmakers Intervene in Auctions” confirms the importance of the relationship between the prices fetched at auction for high-end second hand watches and the impact those prices have on the brands in the primary (new) market. Specifically, The WSJ article discloses that prominent watchmakers, including Omega and Patek Philippe, have for years bid on their own watches in aftermarket auctions to boost the perception (and create the reality) that their watches are investments that will increase in value over time. The net results for companies engaging in these activities include stronger brands and higher prices at the retail counter for their new watches. This phenomenon was first disclosed in Futureshop and highlighted as a key strategy in my book. It is not surprising that we are beginning to see the widespread adoption it in the luxury goods sector - not just to boost prices but to envigorate the underlying brand. Indeed, Omega - a one time prominent brand that saw a rapid decline in its brand value admits to recently using this strategy to revive the luster of its brand.
The WSJ article also briefly touches on the ethical nature of this activity - an important topic which I will leave for discussion in the future.