Do people buy watches online? For watch brands and traditional retailers, heavily invested in prime real-estate around the world from London’s Mayfair to Tokyo’s Ginza, the answer has traditionally been that a watch is something you need to handle, try on and experience, and that no-one can sell you a watch like a well-trained member of staff in a pristine boutique.
It’s an old-school mentality, but this is largely an old-school industry; even though many major brands have had functional e-stores for a decade or more, the received wisdom is that their overall contribution is small. Analysts agree. Rene Weber, a watch industry specialist from Zurich bank Vontobel, put the total market for online watch sales at no more than 5 per cent of the global total.
So why, then, did the Richemont group, one of the world’s largest luxury conglomerates, spend an estimated €200m (£171m) on acquiring the digital-first company Watchfinder in June 2018? Watchfinder, founded in 2002, buys and sells upmarket pre-owned watches online and via seven boutiques, as well as operating a customer service centre. Why, also, are venture capitalists investing tens or hundreds of millions in sites such as Chrono24, Chronext and Watchbox, helping them staff up from a few dozen to hundreds of employees and opening offices around the world?
It all has to do with the booming market for pre-owned watches, a sector enjoying double-digit growth and dominated by disruptive startups that are not only beating established players at their own game but benefiting from their missteps. As Philipp Man, CEO of Chronext – which raised $34m in its latest round of funding, and plans to open offices in Toronto and Melbourne to add to its nine existing locations – says: “Brands advertise their products on the notion that they are durable and timeless. You can’t have all these claims and do nothing about the pre-owned market – it’s completely illogical.”
Many factors have contributed to the success of the pre-owned market; an oversupply of stock in the face of sudden market constrictions over the past five years led to a flood of grey-market watches as retailers offloaded their inventory. A boost in the cachet of vintage watches brought hundreds of private sellers into the market, looking to cash in on rising values, and improvements in secure payment processing have improved trust online.
The business models adopted vary. The likes of Chronext and Watchfinder buy and sell watches, authenticating and servicing them (now with the approval of Switzerland’s major brands), and take responsibility for shipping. Chrono24, which bills itself as the largest online watch marketplace, with more than 430,000 watches for sale at any one time, and 2018 sales of more than €1.3bn, acts as a middleman to connect sellers – private and commercial, including some manufacturers – with buyers, holding payments in escrow until orders arrive and taking a cut (around 6.5 per cent) of each transaction. There’s a greater sense of caveat emptor, but the firm has invested heavily in customer service (accounting for roughly 30 per cent of employees) to build a trusted platform, and its goals are lofty. “Today, we assume that more than one out of three watch lovers worldwide uses our services,” says CEO Tim Stracke. “Our long-term goal is to know every single watch lover on the planet, and to also know every single watch on the planet. Thanks to surveys and data we’ve collected, we estimate the purchasing power of our customers at between €15bn and €20bn.”
The global annual watch market is estimated at roughly €50bn, and while the Richemont group already accounts for a significant slice of that, by buying Watchfinder it has signalled its intention to make more of this growing opportunity.
Commenting on the acquisition in June 2018, Johann Rupert, chairman of Richemont, said: “Sixteen years ago, Watchfinder’s founders foresaw the need for an online marketplace for premium pre-owned timepieces. We believe there are substantial opportunities to help grow the company further. Today, Watchfinder operates both as an online and offline business in a complementary, growing and still relatively unstructured segment of the industry.”
“With Yoox Net-a-Porter and Watchfinder, Richemont has a clear online strategy, and the platform to take Watchfinder to a global level,” says Weber. Richemont has begun a trade-in programme through London’s IWC boutique, with Watchfinder the outlet for part-exchanged watches, and that is expected to expand across the group, along with Watchfinder’s expansion into European markets both physically and digitally.
Far from it being seen as a threat, Richemont’s purchase of Watchfinder has been welcomed by both Chrono24’s Stracke and Man at Chronext, the latter saying it had de-stigmatised the pre-owned market. Their enthusiasm is understandable. As more players enter the pre-owned sector (as several major brands are rumoured to be doing; Man claims that “within 36 months we will see more than half of the top-ten brands actively doing it in some way”), they will look to the established players for expertise.
Crucially, companies such as Chronext and Chrono24 are acquiring something even more valuable than billions in sales: they have the kind of customer data and insights that bricks-and-mortar businesses only dream of. “We have a feature where users can upload their current watch collection,” says Stracke. “They tell us when they bought a watch, how much they paid for it, and we use that data to offer tailor-made services.” As well as being a marketplace, Chrono24 holds exclusive collector events in key cities.
At Chronext, the insights are more developed. “We have an algorithm that can price any watch within five seconds, condition and authenticity allowing,” says Man. “Offering an accurate price is harder than you think, and with this system we let our partner retailers benefit from six years of sales data to get the right price. It lets us see trends and seasonality across brands and models as well – for example, the price of Cartier watches increases a lot at Christmas.”
If the major watch brands are about to enter this market – Audemars Piguet has said it is actively looking to do so, and others will follow – they have some catching up to do, and may yet follow Richemont in buying their way in. Watchfinder, Chronext and others have succeeded where many traditional brands have thus far been ponderous to build strong engagement with audiences online.
“The pre-owned market is destined to be heavily biased towards online sales,” says Man. “Look at the demographic of users; they are the first set of early adopters: buyers who are young, understand the products better and are savvy about price comparisons.” These relationships may yet prove to be the pre-owned market’s most valuable commodity.
This article was originally published by WIRED UK
