Not much changed in the first two centuries of life at London’s venerable auction house Bonhams. People would put their valuable items up for sale; potential buyers would crowd into the sale room, and the gavel would crack down when a final price was reached. All that has changed with the rise of online auctions, which have taken Bonhams global and turned the businesses into a primary player in the secondary market. Jonathan Darracott, global head of watches at Bonhams, has overseen dramatic growth in prestigious watch sales over the past few years, and sees no sign of it slowing down.
This month’s UK edition of WatchPro magazine takes an in-depth look at the secondary market for watches, investigating Chrono24, a technology and marketplace entrepreneur whose platform never touches watches, and Bob’s Watches, a collector who turned into a multi-million pound second hand Rolex dealer.
Both Chrono24 and Bobswatches.com are less than 10 years old. Bonhams, by contrast, began life in 1793, 100 years earlier than even the most historic watches houses were created.
The global ecosystem for the trading in new, nearly new and vintage luxury watches has become increasingly sophisticated for the businesses operating in that world, but a great deal easier for consumers who can now search for watches from Thailand to Tijuana from the comfort of their sofas.
Despite its 225 year history, Bonhams has not been slow to move with the times, and now does more than half of all sales over the internet. “Our auctions are based in London, but our sales are global. People come to physical auctions less and less and bid online more. We might have 600-700 people registered for a sale, but in the room we might have 40 people. In the olden days there would have been people flowing out into the corridors,” Jonathan Darracott, Bonhams’ global head of watches, told WatchPro during a preview lunch for its latest auction. “15 years ago, it was either the telephone or people sitting in the room. 50-60% of sales are via the internet today from anywhere in the world,” he adds.
Bonhams is roughly neck-and-neck with Sotheby’s when it comes to the annual value of sales through its watch auctions. Christie’s is larger, and Phillips is the clear market leader by value, thanks mainly to its focus on blockbuster sales of the world’s most sought after pieces.
Bonhams would love to be setting world records, as Phillips did last year with the sale of Paul Newman’s Rolex Daytona for over $17 million, but Mr Darracott insists that these eye-watering deals are not always the most lucrative for an auction house because of the marketing cost and horse trading to get the rarest watches onto the books. “The middle market is actually very profitable. The deals you have to do to get the extraordinary items are very cut throat. You could sell a watch for $17 million and make absolutely nothing,” he says with only a trace of envy.
An unconfirmed rumor has it that the record-breaking Daytona was bought by Rolex, and the Swiss watchmaker was determined to ensure it became the world’s most expensive watch ever sold at auction (an honor normally held by Patek Philippe). Owning that honor is a considerable marketing coup for a watch brand, because it stimulates demand for other vintage and pre-owned pieces, and this has a positive effect on new watch sales. After all, who would not want to buy a new watch that might one day be worth millions?
This relationship between auction prices and new watch sales is an intriguing characteristic of the global watch market, which is why the current boom in auction prices is great news for authorized dealers of the strongest brands. The effect is most clearly seen in the market for Rolex and Patek Philippe, but other brands are starting to heat up as well. “The whole market has moved up a notch. We are seeing demand for the likes of Longines and Zenith all the way up to the premier brands like Rolex and Patek Philippe,” Mr Darracott says.
The number of people that are now happy to look at second hand watches is rising as volume and sophistication of information on the Internet increases. There is a growing feeling that vintage watches are an asset class that is worth investing in, although the complexity of understanding whether a rare treatment of a dial, a logo, a crown or a bracelet clasp make a watch more or less valuable makes it a market where only true experts should play for profits. For less experienced watch enthusiasts, Mr Darracott says they should shop for pleasure rather than as an investment, and suggests they focus on understanding what qualities of a watch increase its rarity.
A Rolex Cosmograph Daytona that was sold by Bonhams in June is a good example. The watch is described as Oyster Sotto, because the word Oyster — a Rolex family of watches — appears on the dial below the word Cosmograph when it normally sits above. So what would normally read as a Rolex Oyster Cosmograph is instead a Rolex Cosmograph Oyster. That nuance prompted a pre-sale estimate of £500,000 from Bonhams. “We know that there were only 20 of those dials made, so it is extremely rare,” Mr Darracott described ahead of the auction.
In an era when there are so many ways for watch enthusiasts, collectors or professional dealers to sell their watches, auction houses continue to thrive and grow. That’s because they offer a more sophisticated service to sellers, and a high level of trust to buyers. Mr Darracott concedes that the likes of Chrono24, Watchfinder and others do compete to list the best pieces, but their business models are vastly different. “We do affect each other, but all those groups that are aiming for the slightly easier market where getting a new Submariner or Daytona is the name of the game. They don’t make much profit from those sales, but they know what their customers want,” he suggests.
Chrono24 does not buy any of the watches that are listed on its global trading platform. It charges professional dealers to appear on the site, connects them to a global audience, and takes a cut of any sales that are made.
Other online businesses such as Watchbox, Bobswatches.com and Watchfinder do buy stock, which increases their exposure if they pay the wrong price. The risk to an auction house like Bonhams is somewhere between the two. The company does not buy the watches that it sells at auction, but it does stake its reputation on getting pre-sale estimates right, and it does invest heavily in marketing to make sure owners keep getting the best prices for the watches they sell.
Using an auction is also less risky for a seller because they can set their own guide price, and if the watch does not sell, no harm is done. “We can provide a platform for somebody who believes their watch is worth £150,000 and see if it sells. If you are a pre-owned dealer, you do not want to take a punt on buying a watch at £150,000 that might not sell,” Mr Darracott explains. “We are in the same market, but our models are different. Occasionally, we have been in a position where we have recommended to a client to put a watch into auction at £5000 to £7000, and they have told us they’d been offered £7000 cash by Watchfinder. In that instance they would probably go with Watchfinder,” he concedes.
Intriguingly, Mr Darracott reveals that Bonhams might in the future work with other secondary market players like Chrono24, Watchbox or Watchfinder. Asked where there are any business arrangements with these platform businesses today, he replies enigmatically: “No. It could and might happen in the future, and I would not say we have not had conversations.”
There is certainly an opportunity for collaboration that could help both parties in any formal arrangement. “They are able to source pieces that we are not able to source ourselves, while we can give them positive direction on pricing. They could give us pieces for auction. For example, they might be sitting on 40 Audemars Piguet Royal Oaks. They know they’ll be able to sell 20 in the next 6 months and be looking for a way to move the other 20. We would be able to offer them a platform for that. So it could be an interesting symbiotic relationship,” Mr Darracott suggests.
For now, Bonhams will focus on its day job of encouraging private owners to trust the auction house with the sale of their precious timepieces, and market those watches to a growing global audience. “Unlike some of the other auction houses, we predominately deal in watches from private sellers. The things that we sell, even at the top end, are from individuals rather than dealers or brokers. That often means it is fresh to the market, rather than something that is being resold several times. That is probably where we differ the most from Christies, Sotheby’s and Phillips. Very little of our trade is business to business. The auction world has players who work with items coming in from dealers or runners who specifically go out and look for pieces for auction,” Mr Darracott describes.