Lower prices, side-stepping that first hit of depreciation on a brand-new watch, or obtaining timepieces that have gone out of production: These are some local watch collectors’ oft-cited reasons for embracing the pre-owned timepiece market. Sales director Paul Cheong, who has been collecting timepieces for some 15 years (and appears in the collectors’ feature elsewhere in this magazine), often scours websites for older pieces that you won’t see on retail shelves. He shares: “I don’t believe in paying a premium for watches. Also, today, you won’t be able to find many of my watches new, such as those by Gerald Genta and Daniel Roth.”
Cheong is not alone. In the Trends Report 2018 published by the Fondation de la Haute Horlogerie, financial consultancy Kepler Cheuvreux estimated the global market for second-hand watches to be worth US$5 billion (S$6.8 billion) a year. Size aside, this segment has posted annual growth rates of 5 per cent, outperforming the market for new watches.
BRANDS WANT IN
These tantalising figures have not gone unnoticed by industry chiefs, several of whom have recently made statements about their plans to enter the pre-owned watch game. These include Audemars Piguet, MB&F, Richard Mille and Breitling, although Richemont Group – the conglomerate behind brands like Jaeger-LeCoultre and Cartier – also made its intentions clear when it acquired Watchfinder, a UK-based pre-owned watch retailer, this June. No longer are brands content with watching from the sidelines.
For Audemars Piguet CEO Francois-Henry Bennahmias, the main reason for moving the brand into the pre-owned market is to minimise leaving money on the table. He is keen to cut out the middleman for the business, and engage with clients directly through various channels. Says Bennahmias: “I want to be there when you buy your AP watch, and help you sell it off when you want to trade it in for another one. Why would you go to an auction house when you can come to us? These auction houses will come to us (for information on the watches) anyway, and charge you for it. No, it’s about time we recapture this business, which could be 10 times bigger than the one for new watches.”
While Audemars Piguet does not have firm plans yet, it has begun experimenting with different ideas, such as trade-in programmes, and does not rule out opening boutiques selling pre-owned timepieces within the next three years. MB&F founder and CEO Maximilian Busser shares that his brand is building a pre-owned department that will curate out-of-production timepieces by buying them back, refurbishing them, and reselling them.
A FLOURISHING WILD WEST
Brands’ interest in entering the second-hand fray is noteworthy – especially when one considers that, for the longest time, most have shunned the pre-owned market for their timepieces, preferring to concentrate on selling new products. With a couple of exceptions: Vacheron Constantin, for example, actively acquires select vintage watches that it restores. Those timepieces are then offered for sale, with a full warranty, in the brand’s Les Collectionneurs collection as a curated selection. Cartier, on the other hand, supports its vintage and pre-owned timepieces with a restoration service at its workshop in downtown Geneva, albeit on a limited basis, given the cost of such work. Otherwise, this segment of the industry has been left wide open to private dealers offline and online, Internet platforms such as Carousell and eBay, and auction houses – each, of course, with their own pros and cons. Consider auction houses, for instance: Once limited to just vintage timepieces, auctions are increasingly shifting towards modern ones, with some lots going under the hammer just a few years after they were purchased brand new.
Experts put every lot under scrutiny here, so the provenance of each watch on auction is more rigorously ascertained, as compared to one being flipped by an unknown seller in an online marketplace. On the flip side, auction houses charge various fees and premiums that translate into additional costs for both buyer and seller.
Largely left to its own devices, the pre-owned segment of the watch market has flourished for various reasons.
For a start, buying and owning pre-owned luxury watches is no longer taboo; buying and selling second-hand timepieces is now seen as a perfectly viable way to own multiple timepieces. Additionally, the secondary market is often the only way to obtain out-of-production timepieces, which sometimes go for more than they did brand new.
Transaction and information costs have also gone down significantly, on the back of rapidly developing e-commerce and Internet trading technologies. The adage of “buying the seller” still applies, whether one is dealing with a business or individual, but it’s far easier now to look up a seller’s transaction history to gauge their reputation.
BEYOND IMMEDIATE GAINS
Immediate-profit motive aside, there is one big difference between what drives existing pre-owned watch dealers, and brands: For the latter, controlling its pre-owned market is also about building and protecting the value of its name and its watches.
Busser considers the performance of a brand’s pre-owned watches to be a sign of its strength. “If you sell 50,000 new pieces a year, but an existing client must sell his watch at 70 per cent off retail price on the pre-owned market, then your brand isn’t a strong one,” declares Busser. MB&F timepieces routinely hammer for over their retail prices, thanks to their limited production and strict adherence to it – unlike some brands that reissue popular models or references, a discontinued MB&F product remains so forever.
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Even so, Busser still sees the need to exert greater control over the performance of his pre-owned products. “Of course, different pieces will have different degrees of desirability over the years, but this is something we want to work on and support, and probably at a loss. But that’s fine – this is part of brand-building and not money-making.”
Jean-Claude Biver, head of watchmaking at LVMH – which owns brands like Tag Heuer and Zenith – sees the pre-owned market as an indirect determinant of new watches’ success. Biver reveals that Tag Heuer has set up a restoration department for its vintage watches, with a team inside responsible for authenticating and certifying them, should owners request it. “It protects the vintage market and hence the history and legacy of the brand,” says Biver, who added that “the more collectors are interested in our brand’s history, the more young people will be interested in the brand’s future”.
THE WAY FORWARD
With the various brands adapting different strategies, the jury is still out on how the second-hand market will evolve – if at all. For watch buyers, this will almost certainly be a good thing, as increased competition leads to more choices and keener prices. On the other side of the fence, a brand that successfully diversifies into the pre-owned business will enjoy an additional revenue source, with potential synergies between its new and pre-owned watch businesses.
This may spell trouble for pre-owned watch retailers. Direct competition from brands may not simply erode their business, but also render them redundant. After all, a pre-owned Breitling timepiece that’s been officially certified by Breitling itself does look more attractive than one from a third-party retailer. To adapt, these retailers will need to differentiate themselves, whether in terms of pricing or other services.
Although it’s a common observation that the watch industry changes at a glacial pace, it’s also true that the demonstration effect is strong among the players. Should just a few major brands find success with a tweaked business model involving their preowned timepieces, many others may quickly follow. When that happens, a sea change will be upon us.