Changing Hands
The market for pre- owned luxury watches is growing, and watch brands are getting in on the act
The watch trade is big business: the global annual transaction volume of new watches is about € 35 billion. While experts are pretty much unanimous about this figure, they have different opinions on how much money is spent on second- hand watches. “From our estimation, the yearly transaction volume of pre- owned watches is almost a half of this, around € 15 billion,” says Tim Stracke, CEO of Chrono24, which is effectively the ebay of the watch world, with more than 400,000 watches currently available through its digital marketplace. “Our transaction numbers are approximately divided into one- third new watches and two- thirds pre- owned and vintage timepieces,” he adds. “We are on track to reach around € 1.3 billion in transaction volume in 2018.”
Danny Govberg, head of 105- year- old Govberg Jewelers and founder of Watchbox, an e- commerce and trading platform with brick- and- mortar locations in Hong Kong, Switzerland, the US and South Africa, quotes a February 2018 Bloomberg article in which Zurich- based Kepler Cheuvreux analyst Jon Cox reported the size of the pre- owned market “is about $ 5 billion annually, including the timepieces sold at auction”.
The exact figure, likely to be found somewhere within the € 10 billion difference between these two estimates, is less important than the fact that pre- owned is one of the fastest- growing segments in the watch industry.
Govberg reported his sales of secondhand watches growing on average by 40 percent every year for the past five years. ( In comparison, his sales of new watches have increased about 3- 5 percent in the same time frame.) Already dabbling in sales of pre- owned with tools like his Govberg app, he predicts that it will only take another five years for the secondary market to outgrow the primary one.
It’s far from alone in providing secondary- market services: many retailers of luxury timepieces, such as Govberg’s brick- and- mortar US stores, Singapore’s The Hour Glass and US watch chain Tourneau, have also offered pre- owned and trade- in services for many years. Online players like Rolex specialist Bob’s Watches and Crown & Caliber have been around for many years now; and channels for curated pre- owned luxury items like the Realreal, Grailed. com, and Collector’s Square seem to be more visible with each passing day. And even established digital retailers like Amazon are entering the fray for certified pre- owned watches – very expensive ones at that.
Richemont, owner of 12 luxury watch brands, has acquired pre- owned shopping site Watchfinder & Co, though it hasn’t yet released any postacquisition plans. In fact it has gone so quiet around what industry insiders considered a shocking announcement back in June 2018 that some have asked whether the move was designed as a response to the overproduction of recent years, which in turn has created a more active grey market for its brands.
How and why brands now certify their own pre- owned watches
“I have always thought that a strong brand is one with a strong pre- owned market and that it is the brand’s responsibility to help the secondary market, as much in fluidity as in value,” says Maximilian Büsser, founder and
owner of experimental timepiece brand MB& F. The brand offers completely refurbished and serviced timepieces no longer available from retailers, which even come with a two- year factory warranty, reassuring the buyers of these pieces about their state and provenance, and aiding sellers in finding new homes for them. “The pre- owned market is very tricky to navigate, and not only because of how badly some people treat their pieces,” says Büsser. “Over the past years a few customers have been conned into buying stolen pieces. Swiss law is clear: if the piece has been officially declared stolen, and we get it in after- sales service, we are obliged to confiscate the piece and give it to the police. Such customers therefore lost their preowned MB& Fs when they sent them in for service.”
Büsser is also careful about finding the right price for these used watches; it remains crucial for the boutique brand that secondary- market prices reflect a piece’s rarity as well as the value of refurbishing and servicing it. In June 2018, MB& F offered its first five preowned pieces on its website, at prices between the original full Swiss retail and 22 percent lower, along with the rather ominous warning: “There are hundreds of pre- owned merchants out there. The bad news is only a handful can be trusted.” Four of the five sold immediately, and MB& F now has a list of customers waiting for the next batch.
Buying pre- owned right from the brand obviously takes some of the used- car taste away from the transaction. “Brands realise that if they are open to trading in a pre- owned watch from a customer, this specific customer might be willing to do his or her next acquisition – whether new or another pre- owned watch – also with them. For companies used to manufacturing and selling new watches, this is quite a new business approach,” says Chrono24’ s Stracke.
Breitling and Audemars Piguet plan to follow suit, while FP Journe and H Moser have already put programmes into practice. Moser CEO Edouard Meylan says he has done so in order to better control the grey market. “We had a few cases of people complaining because they bought fakes or damaged watches on the grey market. We also had people asking us what we think of this or that model available on a parallel platform. Before we would simply say that there is no guarantee and we would explain the risks. Today we can guide them to a more secure platform: our own.”
Why is the grey market a problem?
Watch brands’ distaste for the grey market is no secret. But it’s not the unauthorised transaction of new watches per se that is the problem. Like other grey markets, you have some honest people trying to do good business and you have some crooks.
“People love discounts, but once everybody gets a discount it does not feel special any more. That’s what we learned from 2015- 16 when the grey market was full of watches at very low prices”
Unfortunately, it is much easier to be dishonest with goods that come from unauthorised channels. For every customer who has come away with a perfectly good luxury watch at a sensational price, you could hear of two with woeful stories of lying and cheating. This unfortunately casts a cloud over the entire watch industry by association.
“Is the grey market a problem?” Govberg says. “Yes, when it compromises the value of new watches, cannibalising and devaluing sales through the primary channel.”
Stracke adds: “From our point of view the grey market is shrinking. Of course, there are dealers that sell overstock from authorised dealers or even brands. Currently big manufactures realise that the business model behind the grey market only provides short- term help. “People love discounts, but once everybody gets a discount it does not feel special any more. That’s what we learned from 2015- 16 when the grey market was full of watches at very low prices. We also realised that people stop buying particular brands if the discounts on these brands become too high. In the end, luxury watch buyers want price stability once they own a watch.”
Trust is what will determine whether these business models succeed. And trust only comes through good business practices over extended periods of time, meaning that time will ultimately prove whether this new model is sustainable. “We believe that added conversation about and activity in the pre- owned category will instil a sense of confidence when working with a trusted pre- owned platform,” Govberg says. “A healthy, liquid secondary market is an encouragement for collectors to activate the value stored in their watches and use the liquidity to buy new watches more frequently.”