Expectations were high at an April auction for a pair of Michael Jordan’s sneakers, which Sotheby’s estimated would sell for $2 million to $4 million. An anonymous collector had agreed in advance to pay an undisclosed amount for the used Air Jordans (an “irrevocable bidder” in auction parlance); the only question was how many people would try to top that existing price. The answer, it turned out, was zero.
The sneakers sold after one bid, presumably to that irrevocable bidder, for $1.8 million. With auction house fees, the total came to $2.2 million, squeaking past the low estimate but nevertheless a global auction record.
Welcome to the world of high-end collectibles in 2023, where healthy—sometimes even superlative—prices for cars, memorabilia, watches and handbags have failed to mask an uncomfortable reality: As interest rates rise and the economy falters, the overall market is slowing down.
Global economic volatility is “going to have an impact on the collectibles market over the next 6 to 9 to 12 months,” says Sarah Willersdorf, a managing director and partner and the global head of luxury at Boston Consulting Group (BCG).
Waning price growth for these objects was probably inevitable. Like almost every other luxury category, collectibles saw their value soar during the first years of Covid-19, when people had money to burn and nowhere to go. Now money is more expensive, and consumers are being pulled in different directions: After covering car payments, pricey restaurants and even pricier vacations, a second Rolex or fifth handbag is less of a priority.
Nonetheless, this slowdown flies in the face of what was once a major selling point for the collectibles market—namely that these secondhand watches, purses and trading cards were a viable hedge against the stock market.
“We’ve definitely seen things move closer to in tandem” with the stock market, says Rob Petrozzo, co-founder of the fractional ownership trading site Rally, where people can buy and sell shares of everything including Lamborghinis and Audemars Piguet watches. “This new investing generation came of age in a Covid window where making 20% in a week was normal,” he continues. “But now we’re seeing people realize that not everything goes up. People are starting to ask questions and do more research.”
Although industry experts are slightly less bullish than in years past, few doubt collectibles’ longevity: Resale sites have normalized the buying and selling of these used goods, and a younger generation takes for granted that luxury objects are meant to be bought, then sold, then bought again. Resale revenue is expected to grow to $47 billion by 2025, according to McKinsey & Co.’s The State of Fashion 2023 report, up from $15 billion in 2022.
“My hypothesis is that even if you do have a slowdown more than we’ve already seen, it’s basically going to be a blip and then continue to accelerate up, so over the long term you’re going to see premiums hold,” Willersdorf says.
Cars
The collectible car market has shifted into neutral. “The news isn’t as optimistic as it was maybe a year or two ago,” says Brian Rabold, Hagerty’s vice president for automotive intelligence. “The market overall is starting to slow. It doesn’t mean it’s contracting, but we’re beginning to see that growth curve bend closer to zero.” Car enthusiasts rich and poor can take heart that they’re not alone: This prognosis applies to “all ranges of the market,” he says, “no matter the budget.”
To some extent, this slowdown is to be expected. “Your average collector who buys to enjoy probably already bought something in the last three years,” Rabold says. Now “they say, ‘Maybe I just enjoy what I have.’ And rather than invest in something new, they’re investing in what’s already in their garage.” Going forward, he predicts “less volatility, a bit more slowing, and then we’re going to see performance as it was [pre-pandemic], absent some sort of large shock.”
Easy profit, in other words, is in the rearview mirror. The average price of a 1987-1991 BMW M3 E30 might have shot from around $56,000 in 2020 to about $83,000 in 2023, but another 50% hike in three years is unlikely. People who entered the market during Covid, Rabold adds, “don’t understand that what we just went through was unprecedented. It’s very unusual for cars to appreciate at 10% a month for two years.”
Wine
The primary wine market has a problem: Its customers are dying off. “Those younger than 60 are less in love with wine than those older than 60,” reads State of the US Wine Industry 2023, a highly regarded report from the now-defunct Silicon Valley Bank. “That means that we’re replacing consumers who are more committed to the category and who spend more on wine today with consumers who drink more across all the alcohol beverage categories and are less committed to wine.”
The secondary market, however, appears to be doing fine. Since 2020 the Liv-ex Fine Wine 100, an index of the top traded fine wines, has risen about 40%. “We just came out of another record year,” says Yves de Launay, head of wine in the Americas for Sotheby’s. “The first half of this year will be terrific, and the second half of this year looks quite bright.”
He attributes the wine auction market’s resilience to its being much narrower and much more expensive than the broader wine market. “The quantities are much smaller, and there’s a higher selection of wines,” he says. “These are carefully selected in terms of producers, vintages and formats. There’s an element of scarcity.”
That might be true, but the even more select wine index, the Liv-ex Fine Wine 50—which tracks prices of Bordeaux first growths, including the 10 most recent vintages of Châteaux Mouton Rothschild, Margaux and a few others—fell 0.7% during this year’s first quarter. “It’s a long-term game,” de Launay says. “Depending on the region, you need at least five years minimum to make sure you get a good return on it.”
Handbags
After years of rising prices for used purses from the likes of Chanel, Gucci, Hermès and Louis Vuitton, the mega-resale site the RealReal announced that it had begun to see a slowdown. Louis Vuitton purses suffered the most—down 20% year over year in the fourth quarter of 2022, according to the site. Gucci wasn’t far behind, down 17% in the same period.
“Instead of investing in ultraluxury classics, many consumers are looking for more affordable, trendier styles,” the site announced in its 2023 Luxury Consignment Report, citing slightly cheaper brands such as Burberry, Miu Miu and Valentino.
Yet at the height of the market, buyers remain undaunted. “We just had a sale last month that was 100% sold, which was a really phenomenal result,” says Rachel Koffsky, the international head of handbags and accessories at Christie’s. “I certainly can’t speak to other venues, but I think our success has a lot to do with the curation of our sales. We’re choosing the best of the best pieces, ones which are extremely rare and very limited.”
For that type of piece (a rare crocodile Hermès Kelly handbag, for instance), the audience, Koffsky says, keeps showing up. It’s not just Christie’s: The Sotheby’s Hong Kong handbag sale in April had a 91% sell-through rate, with 50% of sold lots going for above their high estimate.
Sports Memorabilia
Collectors are playing it safe in the field of cards and other sports ephemera, says Rally’s Petrozzo. “In the beginning of 2022, they might have had [shares in] 15 assets,” he says. “It was a mix of riskier assets and blue chip.” Now, he says, they’re going for fewer items and focusing on sure things. “It might be three to seven assets, like a Mickey Mantle card,” he says.
“Anything that’s pre-1980 sports is doing really well,” he notes. A 1933 Goudey #144 Babe Ruth baseball card entered the site in 2020 with a $77,000 valuation; currently it’s around $278,000, a 263% increase. Overall, though, the field appears to be slowing down.
A recap of the 2022 market by alternative-asset investment researcher Altan Insights Inc. showed the volume of six-figure sales fell 17% from the previous year in the fourth quarter, and fractional sports card and sports memorabilia finished 2022 down 35.9% and 26.7%, respectively. In a later report, Altan suggested 2023 could be a year when “trophy assets” continue to do well, though there may be “a reset lower for assets that no longer seem exceedingly rare or desirable.”
Watches
It hasn’t been a great few months for watch collectors, at least not for those who track the month-to-month value of their timepieces. March’s Chrono24 Watch Collection Report estimates that collectors lost an average of 5.3% on the value of their watches compared with the year before.
“As a general trend, the collections with higher-than-average values also saw higher-than-average value depreciation, as the top of the watch market was most affected by the downturn,” the report states.
But overall gains for many collectors dwarf recent declines. Watches tracked by Chrono24’s watch collection tool that were acquired within the past 10 years had an average value increase of 29%.
And Willersdorf, of BCG, suggests positive returns are in store long term for a select group of brands. She declines to name which ones, but big players such as Audemars Piguet, Patek Philippe and Rolex are strong contenders. “The expectation is the [market] remains quite strong,” she says. “It won’t be strong across everything, but it will be driven by the power brands and some more niche independent brands.”
©2023 Bloomberg L.P.
