SPECIAL REPORT PRE-OWNED LUXURY WATCHES AND THE SECONDARY MARKET - Amazon AWS
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SPECIAL REPORT
PRE-OWNED LUXURY
WATCHES AND THE
SECONDARY MARKET
VOLUME 04
PRE-OWNED LUXURY WATCHES AND THE SECONDARY MARKET AACHRONEXT
CHRONEXT/ /WATCHPRO
WATCHPRO SPECIAL
SPECIALREPORT
REPORT
CERTIFIED PRE-OWNED
MARKET SURGES
WE MAY ALL HAVE HAD ENOUGH OF GRAPHS AND GRAPHICS PREDICTING THE FUTURE TRAJECTORY OF THE PANDEMIC OVER THE
PAST 18 MONTHS, BUT FORECASTING CAN BE INSIGHTFUL AND A STUDY FROM MCKINSEY & COMPANY FROM EARLIER THIS YEAR HAS
THE WATCH INDUSTRY WORRIED. IN IT, THE MARKET FOR NEW WATCHES IS PREDICTED TO GROW IN VALUE BY AS LITTLE AS 1% PER
ANNUM; ADDING JUST $3 BILLION IN RETAIL TURNOVER. NO WONDER EVEN THE SWISS WATCHMAKING GIANTS ARE FINALLY GETTING
As we reach what we hope is the end phase of the pandemic, it is a good time to reflect on how the entire watch
INTERESTED IN CERTIFIED PRE-OWNED, WHICH IS PREDICTED TO GROW FROM A RETAIL VALUE OF $19 BILLION IN 2019 TO OVER $30
industry has been affected, what changes will be permanent and which will be quickly reversed.
BILLION IN 2025. WHAT IS CAUSING THIS SURGE IN CPO DEMAND? WATCHPRO AND CHRONEXT INVESTIGATE.
The most important adjustment was driven by customers who, locked in their homes for months on end, became
A
ever more confident in researching and buying watches online. report published earlier this Growth of the pre-owned watch market is expected to far outpace
year by Business of Fashion that of the first-hand market, with online sales leading the way
Welcoming these customers with open arms are businesses like CHRONEXT, which were born and raised online and including research by
and have little legacy brick and mortar business to protect. We have seen traffic to our online store increase since McKinsey & Company made
the beginning of the pandemic, and we have continued to grow our audience even though most people are now grim reading for watch manufacturers USD billion; share of sales by channel (%)
back to more normal lives. and their retail partners in the primary
market because there was almost no + 4-5% p.a.
Offline Sales
Even for new watch purchases through authorised dealers, the journey towards purchasing a high value growth predicted in the total value of Online Sales 85-90
timepiece begins online, and almost every customer will visit several sources for news, information, pictures, sales for new timepieces from 2019 to
2025. 67
videos and comparisons between models they are considering. + 1-3% p.a.
From a revenue at retail value of $49
52-59 77%
Certified pre-owned specialists are an important part of this journey, not least because customers gain billion in 2019, McKinsey & Co forecasts 49
growth to between just $52 billion to $59 + 8-10% p.a.
confidence from knowing how valuable luxury watches can be even after several years of loving ownership. 88%
billion; only 1% to 3% growth per year over 29-32
This is another reason why watch enthusiasts are so much more comfortable spending considerable sums for six years. Online sales of new watches will
95% 89%
18 55%
prestigious watches online. This trend is set to continue. rise from only 5% of the market in 2019 to a
70% 23%
still modest 11% in 2025, the report suggests. 45%
One thing that I do not think has changed is the desire of some customers to visit beautiful jewellery and watch New watches are not the only sales that
5% 11% 30%
12%
stores to try things on and get advice. Great retailers do a fantastic job of turning the shopping experience into a 2019 2025F 2019 2025F 2019 2025F
matter these days. Add in pre-owned and
memorable event, and I hope this service never goes away. the total retail value of the entire watch First-hand market Pre-owned market First-hand and
Pre-owned market
market at retail rises to $67 billion in 2019,
Authorised dealers in the primary market and certified pre-owned players in the secondary market are part of the with new watches accounting for 73% of the Note: All market valuation and channel share of sales figures are apprpximates
Source: McKinsey analysis, expert interviews
same ecosystem, and the old tensions between the two worlds have all-but disappeared. That might explain why total and second hand the other 27%.
we at CHRONEXT have attracted such incredibly talented and experienced executives to our board of directors in Fast forward to 2025 and McKinsey
reckons pre-owned will have grown at a of them started life. It is second nature to expected to account for 45% of pre-owned
recent months. more healthy 8-10% per annum, increasing them while authorised dealers of the biggest sales by that time.
I am delighted to be surrounded with such amazing minds at CHRONEXT. The ability of exceptionally skilled people the total value of sales from an estimated brands are having to manage a tricky You could be forgiven for questioning
$18 billion in 2019 to between $29 billion and transition from lavish physical showrooms the accuracy of so called experts and their
to transform a company like ours is another constant that is unaffected by economic downturns or a crisis like the
$32 billion in 2025. By then, second hand will in expensive prime locations to digital sales modelling after the farcically pessimistic
pandemic, and it gives me a surge of adrenalin every day to know that I am part of such an incredible team. account for more than one third of the total and marketing. predictions of Britain’s SAGE boffins and
watch market. Combining new and pre-owned watch the CDC scientists in America and, barring
Philipp Man, Co-Founder and CEO, CHRONEXT
Pre-owned specialists are also best-placed sales, McKinsey predicts that online sales another major economic shock between
today to take advantage of rising online amounted to 12% of sales in 2019, but this now and 2025, it would be reasonable
www.chronext.co.uk sales. Why? Because online is where most will climb to 23% by 2025. Ecommerce is to think both the primary and secondary
24 WATCHPRO / SEPTEMBER 2021 / watchpro.com watchpro.com / SEPTEMBER 2021 / WATCHPRO 25
PRE-OWNED LUXURY WATCHES AND THE SECONDARY MARKET AACHRONEXT
CHRONEXT/ /WATCHPRO
WATCHPRO SPECIAL
SPECIALREPORT
REPORT
by private equity giant General Atlantic with the company and Jacob Fonnesbech Aqraou authentication. This is an exciting time to
participation from Aglaé Ventures. Aglaé as chairman bring experience, knowledge join CHRONEXT and I am looking forward
Ventures is a technology-focused venture and valuable networking connections to to helping Philipp and the team become the
capital firm based in Paris, New York and San CHRONEXT. premier luxury watch destination.”
Francisco that is backed by Groupe Arnault, Mr Fonnesbech Aqraou has been a serial An interesting view shared by all the major
the controlling shareholder of LVMH. investor and advisor in European technology businesses in the pre-owned space is that we
Hodinkee raised $40 million at the start of businesses for the past five years following are really only at the beginning of a journey.
this year and a month later acquired Crown 13 years at eBay, where he rose to become Platform players like eBay and Chrono24 are
& Caliber for an undisclosed sum. senior vice president for eBay marketplaces likely to be slugging it out for years in what
CHRONEXT and Chrono24 have both in EMEA. Along with his new role with both see as a winner-takes-all market. There
announced significant appointments to their CHRONEXT, he remains deputy chairman is no clear market leader among companies
boards this year that not only bring expertise at TeamViewer, and chairman of Wallapop, that buy and sell their own inventory. The
to their organisations, but are also likely to Phase One and Capture One. likes of CHRONEXT, Watchfinder, Watchbox,
open up strategic opportunities in different Watchmaster, Xupes, Bob’s Watches
parts of the world and with various potential STAR RECRUITS and Crown & Caliber, which buy, service,
partners. CHRONEXT also recruited Hamdi Chatti authenticate and sell prestige watches, are all
Chrono24 hired its first chief financial to its board at the beginning of the year. Mr strong in their home markets, but none yet
officer, Stephan Kniewasser, at the end of last Chatti is a luxury specialist, having spent has a dominant global share.
year. His 25 year career has taken him from over 25 years in leadership positions with CHRONEXT’s CEO Philipp Man certainly
the banking and finance sector into digital Richemont and LVMH brands including has ambition to be the first global
of vintage watch specialist Analogue pure plays including a two year spell as Cartier, Piaget and Montblanc, Harry Winston superpower, but concedes there is a long
Shift in the United States in September CFO and managing director at Teamviewer. and LVMH Jewellery and Watches. He was way to go, not least because the lion’s share
last year, the group’s pre-owned sales Chrono24 was keen to share news that chairman of Damas Jewellery, one of the of pre-owned watch transactions is still taking
barely register amid sales of $1.3 billion Mr Kniewasser laid the groundwork for an Middle East’s largest jewellers, until the end place in the physical world through myriad
in its last financial year. IPO while at Teamviewer that valued the of last year and he remains chairman of small traders.
The likes of CHRONEXT, business at $5.78 billion and is now worth Gübelin.
Watchfinder, Watchbox and around $10 billion. “With Stephan Kniewasser, The fact that these superstars of retail MARKET LEADERSHIP
Watchmaster are convinced that it is we have found a strategic professional to and luxury are happy to have their names “I would not say there are online market
only a matter of time before luxury fill our new CFO position. After increasing attached to a pre-owned operator like leaders yet in the UK and USA, for the simple
watches are sold and resold many our sales by over 50% last year, we look CHRONEXT would have been unthinkable reason that 95% of sales [for new and pre-
times over their lifetimes in the same forward to tackling our next set of ambitious five years ago. Now it feels like the start of owned watches], according to McKinsey, are
way that an average family car has goals with him,” says Chrono24 co-CEO Tim a new phase of growth and sophistication still offline. Ultimately, we do not believe the
multiple owners. Stracke. for the entire sector. As Ms Vitale says of her online certified pre-owned business will be a
A Watchfinder study recently CHRONEXT’s hiring spree for its board of new employer: “Successful luxury brands winner-takes-all market,” he tells WATCHPRO.
found that there are watches with an directors has been at another level this year, are defined by a clear value proposition to “There may be a ‘winner’ that takes more,”
estimated value of around $60 billion and is reminiscent of the way Real Madrid both customers and partners. I was attracted he continues, “but the transition from offline
Above: market will grow much faster than last two years, according to chief gathering dust and all-but forgotten in assembled a team of the best players in to CHRONEXT by the clearly differentiated to online, particularly for the pre-owned
CHRONEXT’s McKinsey predicts. executive Philipp Man. Swiss Watch houses in the United States. America the world that came to be known as the market offering of rigorous quality assurance, market where ecommerce is expected to
extended board Certainly the largest players on Expo, a pre-owned specialist in accounts for just over 10% of the Galácticos that dominated European football in-house refurbishment and guaranteed account for 45% of sales within five years,
includes former both sides of the Atlantic are reporting Atlanta, Georgia, had a record year global market for new watch sales, for a decade.
Richemont CEO record sales for both pre-owned in 2020 and will beat it again this suggesting there are $600 billion In just the past month, CHRONEXT has
Norbert Platt as and new luxury watches this year. year, the company’s CEO Eugene worth of timepieces that could be announced the appointment of Facebook’s
an advisor; Jacob Bucherer and Watches of Switzerland Tutunikov reports. Xupes in the UK is given a second, third or fourth life with former chief marketing officer Gary Briggs
Fonnesbech Aqraou Group seem to be constrained only about to move into larger premises pre-owned traders profiting every and Daniella Vitale, a Tiffany & Co. chief
as chairman; former by supply issues not any sign that that will give it the capacity to handle time. brand officer who previously headed
Facebook chief there is a ceiling on demand. The an expected tripling of turnover next This may explain why so much Barney’s New York for a decade, rising to
marketing officer primary market is being driven by year. Specialist watch marketplace investment is pouring into the pre- CEO and president, and held the same role at
Gary Briggs; luxury rapidly rising average transaction Chrono24 says sales rose by 50% last owned sector, and why some big Gucci North America for the ten years prior
specialist Hamdi values, and these are more than year, further evidence of a dramatic names from the primary market are to that.
Chatti; and Barney’s compensating for falling volumes. If shift towards shopping online for joining the boards of some of the CHRONEXT’s appointments appear
Tiffany and Gucci the Swiss can make the right watches prestige timepieces during the leading players. designed to not only strengthen the
veteran Daniella in the correct quantities, new unit pandemic. The sector is attracting both company’s digital marketing and brand
Vitale sales should soar. In a recent conversation with cash and human capital. Chrono24 building capabilities, but also to push more
Opposite: Pre-owned also has challenges Watches of Switzerland Group CEO revealed it had completed a fresh aggressively into the United States where
CHRONEXT’s securing the most desirable Brian Duffy, he suggested that the size funding round of €100 million in Mr Briggs and Ms Vitale continue to live and
inspection, watches, but that has not prevented of the pre-owned market has been August that the company says will work.
authentication and CHRONEXT from notching sales exaggerated. But he would say that, be invested in accelerating its global The appointments of Nobert Platt, a
servicing workshop. growth of 47% on average for the wouldn’t he? Despite the acquisition growth trajectory. The round was led former CEO of Richemont, as an advisor to
26 WATCHPRO / SEPTEMBER 2021 / watchpro.com watchpro.com / SEPTEMBER 2021 / WATCHPRO 27
PRE-OWNED LUXURY WATCHES AND THE SECONDARY MARKET A CHRONEXT / WATCHPRO SPECIAL REPORT
The global watch market is poised for modest growth from 2019 to 2025 with Watchbox co-founder Danny Govberg over the years to come.”
the Asian market and the luxury watch segments driving overall growth says the business is less about retail, and “What we are seeing is more than
more about offering advice on buying and just a few one-off [M&A] moves, but
Market value, USD billion selling watches with its best customers in it is too early to talk about it as a
CAGA
2019 2025F (2019-2025F) the same way that Morgan Stanley advises significant consolidation of the market.
its high net worth clients on balancing the Overall, it is just the beginning and I
Total watch market1 49 52-59 1-3% assets in their portfolios. think we will see a lot more of it. We
Mr McKenzie at Xupes monitors every expect to be a driver and we expect
Geographic region
Asia 24 27-30 2-4% transaction, and says repeat business to see many more transactions. There
Europe 16 16-18 0-2% accounts for around 30% of trades, a figure will be a lot more capital coming into
Americas 6 6-7 0-2% that the company is nudging up by 2% every the market,” Mr Man predicts.
Other 3 3-4 0-1%
year. For consumers, talk of
CHRONEXT has reached what it believes consolidation, mergers, acquisitions
Ultra-Luxury (>$30,000) 8 9-10 2-3% is an industry-leading repeat purchases rate and KPIs is white noise. For them, the
Price position
Luxury ($3,601-$30,000) 30 33-38 2-4% of 30% within 36 months of initial purchase. emergence of large, sophisticated
Premium ($180-$3,600) 11 10-11
“That is an important factor in a business and trusted players is all about choice,
-2-0%
where people do not typically buy and sell availability and price.
very often. We want to make buying and Over 18 months since the
1. Represents watches priced at $180 and above (premium watches to ultra-luxury watches) in the first-handmarket, excludes
smartwatches selling online as easy and simple as possible, pandemic began, the supply of the
Note: All market valuation figures are approximates so that it drives the whole concept of most desirable watches is more
Source: McKinsey analysis, expert interviews
circularity. Buyers become sellers and sellers constrained than ever because of
become buyers. This is what powers the soaring demand and production
eternal watch cycle,” Mr Man says poetically. shortfalls brought about when
suggests we are still pretty much at day Launching a company that sells both “We are working hard to improve the service factories were forced to close last Watches of Switzerland CEO Brian even better if demand is greater than
one in our evolution. I am not so concerned owned and third-party inventory from for our VIP customers. We want to make our year. The list of impossible to buy Duffy says that the grey market has supply,” he tells WATCHPRO.
if one player is a little bit bigger in the UK manufacturers, retailers and private suppliers service as convenient as possible for them, unicorn watches used to be limited almost evaporated this year because “It takes a number of years to
and another is a bit bigger in the United is complicated enough, and it does not get not necessarily for the highest ticket sales, to a few steel sports watches from demand is matching or exceeding create a brand-new watch, so you
States. There is still such a high degree of any easier as the business scales. Grow too but to increase transaction volume,” he adds. Patek Philippe, Rolex and Audemars demand for watches from so many have to make intelligent forecasts
fragmentation.” quickly, customer service can suffer and Piguet, but now you can add watches brands. about global demand, and you rarely
Norbert Platt, the former Richemont CEO mistakes can be made with the potential MERGERS & ACQUISITIONS from major independents including CHRONEXT agrees, but not entirely get it totally right. Things can change
now advising CHRONEXT, agrees there are to tarnish a reputation for years. Trust is If rapid growth is difficult while maintaining F. P. Journe, Philippe Dufour, Kari because oversupply is ending. “I – just look at COVID or the downturn
protracted battles ahead for market share, a priceless commodity when it comes to levels of customer service and trust, it Voutillainen and many more to the think of the grey market as a place in China – which caused Richemont,
and is encouraging the company to focus on luxury pre-owned watches. seems inevitable that companies will look to list. The original unicorns are also where products have flooded in particularly Cartier, to buy back
building an impregnable fortress in Europe UK-based Xupes was founded in 2009, amass market share through mergers and going wild, with examples like the sale without any controls. They are watches from jewellers. Not every
before making forays around the world. “As and its most recently published accounts acquisitions. Until recently, most acquisitions of a factory sealed olive green Patek sold in an unsuitable environment brand has the financial power to do
CEO of Richemont for six years, I’ve handled show its turnover was nudging towards of pre-owned watch specialists have been Philippe Nautilus for almost $500,000 with unverified photography, no so, which leads to a local oversupply
a lot of brands. One thing I learned is: if £10 million 2019. The company’s founder made by businesses in the primary market, at an Antiquorum auction adding fuel authenticity or guarantees. This of stock that can be sold to other
you are not strong in your home market, and CEO, Joe McKenzie says growth has Richemont’s purchase of Watchfinder in to the fire. market is shrinking, not purely territories at a decent price. That is
whether that is Switzerland or Europe, you been deliberately held back because he did 2018 being the first and biggest example. A study of secondary market prices because of the supply issue, but what feeds the grey market,” Mr Platt
should not even try to conquer the whole not want a rush to lead to compromises More recently Watches of Switzerland Group by WATCHPRO in July found that because customers are becoming adds.
world. It would not be intelligent; it would be in quality that could damage trust. “We bought Analogue Shift and Hodinkee bought prices for Rolex’s entry level Oyster more discerning about the level of With the pre-owned watch market
escapism. You do not have the knowledge have chosen not to scale too fast in order Crown & Caliber. Perpetual watches have rocketed service they want. They know there already worth $18 billion in the pre-
and resources, both human and financial, to maintain customers service,” he insists. There have been acquisitions among since the collection was upgraded are players out there like CHRONEXT pandemic year of 2019, and with
to do it. That is why I support CHRONEXT’s “The pre-owned watch business is very pre-owned players. In June, Germany’s and expanded in September last that can be trusted and have a high the major players reporting record
goal to become a dominant player in its complicated and very specialised,” he adds. Watchmaster expanded its reach into France year. For those that are frustrated level of customer service,” Mr Man sales in 2020 and into 2021, there
own markets first, and to then expand in a With trust, a pre-owned operation starts with the purchase of Paris-based Montres at interminable waiting lists, Rolex insists. is no doubt the sector has matured
concentric way,” he urges. “The United States to benefit from the circularity of its model. Modernes et de Collection (MMC). “Like us, did not help by creating a massive and scaled. There will be billionaire
and China are of course important. They are A customer buys a watch and is delighted MMC is 100% specialised in certified pre- number of references in different SUPPLY & DEMAND players in the market in the coming Above:
huge markets, but not all at the same time with the quality of the piece, its price and the owned (CPO) luxury watches,” Watchmaster sizes and various dial colours, which Norbert Platt, who oversaw a years. Whether those valuations More and more
and not all now.” process of buying it. That may well lead to CEO Tim-Hendrik Meyer said at the time. means demand exceeds supply for massive buy-back of watches, come from a major player like brands and models
Mr Man seems happy to take that advice. a second or third purchase from the same “We are very glad that our famous French every one of them. Prices on the particularly for Cartier, when he was CHRONEXT or Chrono24 does not are surging in value
“In the short term, our major focus will be dealer and — importantly — he or she may counterpart is now part of the Watchmaster secondary market show the 41mm CEO of Richemont, believes there really matter, the value is very real. on the secondary
on our core European markets, but over a also want to trade-in a watch at the same family. This will enable us to extend our Oyster Perpetual with an aquamarine will always be mismatches between For now, CHRONEXT is committed market, which
longer timeframe, there are ways we can time. Keeping these customers coming back presence in France as well as our overall blue dial (often called a Tiffany dial) supply and demand, so new watches to remaining independent, and is making the
move more strategically into the US and also for more buying and selling is the number physical retail footprint. We are planning is the most sought after, with resale will continue to leak onto the grey Mr Man says its plan is to be the purchase of new
Asia. We do not want to spread ourselves one goal of every successful pre-owned on leveraging the decades of experience in prices of £13,000 for a watch with market. “There is no doubt that hunter rather than the hunted when watches a much
too thin, and the potential in the European player, and repeat business is likely to be offline retail which MMC brings to the table in a recommended retail price of just ideally you want to aim for demand it comes to potential mergers or more attractive
market is still huge,” he says. their number one KPI. order to open additional boutiques in Europe £4,700 (a 177% mark-up). to exactly match supply. In fact, it is acquisitions. proposition.
28 WATCHPRO / SEPTEMBER 2021 / watchpro.com watchpro.com / SEPTEMBER 2021 / WATCHPRO 29
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