Collectibles
What is a Collectible?
As the name would suggest, collectibles are items that are collected and resold for a much higher value than originally bought at. The price hike for future resells are due to popularity and/or rarity of the item (i.e. it is based on the perceived value). An item is classified as a collectible if it is less than 100 years old, and an antique otherwise. These items can be anything, ranging from cars, vinyl records, furniture, clothing, wine and well, a collectible may even be something unassuming like a toy. Anyone can invest in collectibles, but it certainly helps to have passion and great knowledge about the items you invest in as it will help you make more informed decisions.
Generally, collectibles are only items that are no longer produced as the resell market would not sustainable otherwise. Say, if the manufacturer sees their products being successfully resold at absurdly high prices, they could simply increase the supply to meet the demands. On the other hand, companies have also realised that they themselves can hike up the initial cost by manufacturing the rarity aspect, and label the product as a collectible – the marketing strategy by Supreme perfectly illustrates such practices. Overall, collectibles are not considered to be a great investment option as you may be led to believe, as the condition of the item is also of great importance.
Advantages and Disadvantages
Collectibles are an interesting alternative investment asset class that enables investors to pursue personal interests, reaping benefits beyond the collections monetary value. Collectibles can often gain capital value above the average rate of inflation and are a great way to enjoy your investment while its value appreciates.
However, collectibles are a difficult investment with many associated risks. There are many costs associated with handling a collectible which includes, but is not limited to, handling, storage, marketing and insurance of the collectible item. Little information or detail about the relevant market or buyers may further exacerbate the challenges in reselling a collectible.
Maintenance is also important to the collectibles value; collectibles in good condition will see an increase in value, but if their condition have deteriorated over time, the collectibles will likely not have much value remaining at all. Also, note that while time likely appreciates the value of the collectible, there is no guarantee that the value will increase over time. So, while they may be an interesting addition to your investment portfolio, make sure to consider the drawbacks before investing in them.
Case Study
The Swatch, which is an abbreviation for the Swiss watch, was introduced in 1983 in a high-stakes effort by the lagging Swiss watch industry to combat the quartz crisis and win back market share from Japanese competitors such as Seiko, Casio and Citizen. While the Swatch group has become one of the largest watch manufacturers in the world (highest market share at 18.3% in 2016) by acquiring other brands such as Omega, Longines and Tissot, its origins are well known for the global marketing phenomenon known as the “Swatch fever”.
Rather than a timekeeping device, Swatches were marketed as a trendy fashion statement, presented as a work of art that was released in fresh collections seasonally. Unusual designs, the use of famous artists to design special edition watches, exhibitions and auctions reframed Swatches as an art form which also contributed to their collectible status. In addition, imperfections such as misprints, faded dials or missing calendar dates were deliberately added to further create financial value for its collectors.
Furthermore, Swatch manufactured highly differentiated products where each design typically stayed on the market for a limited time only. Limited edition watches included artist-designed watches, food-themed (shaped as red chilli peppers, cucumbers, bacon and eggs), environmental-themed (1992 UN Earth Summit) and even Wall Street-themed watches that often created seasonal hype for collectors. Indeed, a Swatch Collectors Club was introduced to promote trading and auctioning of watches whilst encouraging preservation to prevent price depreciation due to usage or opened packaging. Auctions in which $80 dollar plastic Swatches were sold for up to $20,500 in 1990 were advertised on the Wall Street Journal as good investments. Although these initial auctions were a setup, real auctions (with similar results) followed, validating a real market for Swatches.