There was an expectation amid the turmoil of the pandemic that a flurry of mergers and acquisitions would follow as the strongest retailers gobbled up weaker players.
It has not turned out that way.
As I described a few weeks ago, giants like Bucherer and Watches of Switzerland Group are struggling to find acquisition targets.
And Bucherer USA bought Leeds & Son, a prestigious watch and jewelry retailer anchored by Rolex and Patek Philippe in Palm Desert, California, in late 2022.
Since then, nothing.
In fact, the acquisition of Leeds & Son has shown the risk of these acquisitions because, less than a year after the deal was completed, Patek Philippe has been withdrawn from the store.
Meanwhile, family-owned jewelers, flush with cash after booming business over the past two years, are investing in new and bigger showrooms rather than cashing-out.
Instead of retail groups acquiring independents with crown jewel brands like Rolex and Patek Philippe these days, I would argue their sights should be trained on major pre-owned watch specialists.
We have already seen a couple of deals: Watches of Switzerland Group bought Analog Shift in 2020 and Hodinkee gobbled up Crown & Caliber in 2021.
But nothing since, despite pre-owned dealers suffering a year from hell since prices of the most traded watches started plunging in March of last year.
This not only seized trading to the extent that barely a watch was bought or sold for nine months of last year, but the value of inventory for these trading operations tanked.
Smaller, opportunistic traders gave up, but medium-to-large outfits remain and have a lot to offer primary retailers right now.
First, they have knowledge of the secondary market that authorized dealers will take years to learn.
Secondly, they have inventory. Imagine a retailer who is about to join the Rolex Certified Pre-Owned Program getting their hands on hundreds of used Rolex watches that can then be serviced, refurbished, authenticated by Rolex and put on sale at 50% above what they paid for them.
Thirdly, and related to the second point, large pre-owned specialists have experienced service centers of their own. They might not yet be accredited by Rolex, but in the hands of a Bucherer, Watches of Switzerland, Ben Bridge, Reeds or London Jewelers, that could quickly change.
There is a crippling shortage of watchmakers, lower level technicians and people with the expertise to authenticate with precision.
An acquisition of the right pre-owned specialist could solve that problem at a stroke.
Integrating primary and secondary market operations is far from easy; just ask Richemont about the challenges it has overcome with Watchfinder, but it might be a way to hit the ground running with Rolex CPO.
And, after an incredibly challenging 18 months, there may be a lot more secondary market business owners willing to sell than there have been primary authorized dealers.