ICYMI: Tiffany Angers Rich Clients Who Wanted to Buy a Rare Patek Watch

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2:00and for good reason, because it has a little bit of everything. It's about how the iconic jeweler Tiffany bungled the release of a coveted Nautilus timepiece, alienating some customers and fracturing its relationship with Patek Philippe. And yes, it's got so-called watch monsters. The story is the work of Jeanette Newman, Bloomberg News consumer reporter based in New York. Jeanette, normally when you want to buy something in a store, you go into the store it's got a price you pay that price you get the item not so with the limited edition patek philippe nautilus 5711 with dial in the jeweler's signature robin's egg blue why that's right and and to be fair that's that's the case with a lot of um patek philippes and other very high-end um you know luxury watches that are covered coveted the world the world over this watch was particularly coveted and particularly special.

2:57So if let's say you wanted to just go in and buy the watch, you couldn't just walk in off the street and say, you know, I love Patek Philippe. I want this very special watch. There were only 170 of them made. You would express interest in the watch and then you would be told, okay, Tiffany sales people would tell you, we'll get back to you. And that's because this watch was very highly, very highly desired. And so there were many people who were trying to get it. And it was ultimately, as we reported, the discretion of Tiffany executives who ended up getting the 170 watches. And that discretion is really where things got complicated for some of the folks who were argue, at least in lawsuits, that they were longtime customers of Tiffany and spent quite a bit of money at tiffany what did you find in your reporting so in in the reporting what i found is that and i think it would it would also be be helpful if you if you find it helpful too just to kind of situate um you know this moment so we have to go back in in time a little bit just to understand why this watch was the watch at the time and why now even a couple years later um we're talking about it i'm i'm reporting on it because it's um the sale of the watch is still having repercussions today.

4:18So this watch that was made by Batek Philippe was started, went on sale in December 2021. And if you'll remember at that time, many people were feeling flush. We had extra pandemic savings. Some people still had some money left over from the stimulus checks. A lot of people were buying luxury goods. Demand for luxury goods was going through the roof. that included luxury watches. Some said at the time there was actually a bit of a watch bubble. People who, you know, maybe hadn't been interested in watches before all of a sudden got very interested in spending their pandemic savings on these luxury watches like Patek Philippe.

4:56So at this time, Patek Philippe says, okay, actually, we're going to discontinue one of the most beloved watches in the world, their 5711 model, which is the Nautilus 5711 model. They said, we're going to discontinue it. At that time, the watch world freaked out. It was it was a huge deal that amid this kind of watch bubble, one of the biggest one of the most important watchmakers in the world says we're no longer going to sell the watch that everybody that everybody loves. And then they said, OK, so that that that caught everybody off guard. And then they caught people off guard again by saying, actually, there's going to be one final swan swan song for the 5711 line.

5:35We're going to make 170 of these very special edition watches to honor the 170 years that Patek Philippe and Tiffany had been working together. So an incredibly longstanding relationship in the luxury world. So Patek made 170 of these watches. And what was different was, as you said, the dial was in that kind of in that signature Tiffany blue, which is actually a patented color. If you go to the stores, everyone knows the Tiffany boxes are in that color. Now, Patek doesn't have that many retail stores, so it relies on Tiffany and other jewelers to sell its watches. So in the case of this Blue Dial watch, it was Tiffany that was tasked with selling the watches.

6:20And as you said, that's where things got a little bit complicated. So there was basically Tiffany, Tiffany executives realized that there was so much demand for these watches that they could encourage clients to spend between two to three million dollars on jewelry in order to even get a shot. Wow. And this is called as you as I learned reading your piece, this is called bundling. And it's something that is typically done, but there are no it's they're not real rules around it. It's kind of like understood, but not always in writing. It's typically done in high-end stores with luxury items. Explain that.

7:04Exactly. It's all very informal. I think, you know, talking to some people for this story, people would often mention, oh, right, that's kind of what you have to do if you want to get. Similarly, you can't walk off the street and just buy a Birkin bag. often what customers will say is you have to, you're encouraged to buy other goods in order to then get access to that Birkin bag. And that's, again, what some people in the industry call bundling, other people call it tying. I would say one potential difference with that is, if you walk into an Hermes store and they're potentially telling you to consider buying some other goods in order to be considered for a Birkin.

7:49That's kind of all within the confines of one store, right? One and one brand. I think the difference here is that you had Tiffany, which was selling Patek watches, encouraging its clients to buy Tiffany jewelry in order to get access to the Patek watch. So explain the alienation of some customers, these wealthy customers who expected to be able to buy this watch after spending money at Tiffany, but according to your reporting, ultimately weren't able to do that. Right. And there was definitely some frustration based on our reporting, based on sources that we that we that we talked to with with the sale with the sale of this watch.

8:31And I think, I mean, one kind of specific element that might be interesting to listeners is so there was a charity auction of the watch in December 2021. And the watch went for a staggering$6.5 million, which is about 100 times its retail value. The watch itself, obviously a lot for so many of us, but the watch itself only cost around$53 ,000 and it sold for$6.5 million. dollars. That initial sale fell through. The watch ultimately exchanged hands for$6.2 million, still a lot of money. People who were interested in the watch saw that sale and said, well, this is a no-brainer investment. If I can get access to something that costs$53 ,000 and then potentially sell it for the market is showing that there's demand of up to$6 million, well, that seems like a no-brainer investment.

9:26So what some of our sources said is that some people, again, saw that as a no-brainer investment and said, okay, well, if I'm being encouraged to spend$2 to$3 million on jewelry, that might be worth it because I think that I can resell the watch. Now, the thing about that auction is, in general, charity auctions, long-time collectors will look at charity auctions with a bit of a skeptical eye because sometimes, for example, the watchmakers themselves are involved in the bidding. So seeing that$6.5 million price as kind of a market price versus a price that's maybe more marketing oriented, I think was part of the issue according to our sources and according to our reporting.

10:16And then what happened to answer your question is people thinking the watch was worth this much. Some of them did get the watch. And then over time, over the over 2020, 2022, and into 2023, the value of the watch really fell. And now the watch sells in the secondary market for around$1.2 million. So obviously, a very, a very big drop, still a very expensive, a very expensive, very valuable watch, but not what people who were encouraged to spend money on jewelry, we're expecting for this investment. And also to be fair, and I'm sure if you have friends who buy watches, there's all kinds, right?

11:01I mean, some people buy watches, it's buy and hold, and there's some people who want to buy and sell. Other people bought the watch and never even didn't see it as a no-brainer investment or otherwise because they didn't see it as an investment, right? They saw it as I want to buy and hold this because I love this watch and I want to have it. Others, the ones who were disappointed by the decline in the price, we're seeing it as more of an investment that they could potentially flip, at least have the option to flip. Jeanette, based on your experience covering the luxury space, is this normal? Are mishaps, mishandlings like this common?

11:35I think, you know, in this story, at the end of the story, we mentioned, I spoke to an anesthesiologist who, what he told us, he told a story of how he was trying to buy some Ferraris. He had one Ferrari that he really wanted, and he bought several Ferraris in order to try to get that Ferrari, and he never got that. Ferrari declined to comment on his kind of specific experience and said, you know, it doesn't encourage that kind of behavior. This anesthesiologist said that he's come across that game in the luxury world. And honestly, the way he said it is he's kind of sick of it. So I think that is a potential risk in the luxury world that some people like to engage in this game.

12:27And I think others find it tiring. I would say, speaking to some people who sell watches on the secondary market, one of the things that they say is they find that some of their clients come to them because they just want to be able to like, what's tell me the price and then I'll buy it or I won't. I don't want to get involved in trying to spend money on X, Y, and Z that I might not even want in order to get what I actually, what I actually do want. So I do think it definitely happens in, in, in the luxury world and, you know, people can choose to continue to engage with it or, or say, you know, that's not, that's not for me.

13:04Jeanette, a great story. I I learned a ton, including maybe I should have considered a career in anesthesiology. Sounds like it, right? Considering that this anesthesiologist has bought, what, five Ferraris or something? I swear. Really, really good stuff. Check out this story. It is the most read story on the Bloomberg Terminal. The headline, you really can't beat it. Tiffany Anger's rich clients who wanted to buy a rare Patek watch.

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