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This practice is unsustainable, in my opinion, and it will take the entire industry to do something about it.
Before getting to the solution, we must first identify the problem, which is rooted in confusion over what pre-owned actually means in the luxury watch world.
To the unacquainted, pre-owned means a product that has been owned and worn in at least some manner. But many pre-owned watches have not been owned and worn by somebody, but are unsold closeout inventory that a watch brand directly or some dealer was not able to sell to consumers in the first place.
With too much potential value existing in these products for them to be dismantled (or destroyed) – more than a few watch inventory holders choose to covertly enter the items back into the market under the guise that they are used watches.
Selling pre-owned alongside new does not necessarily pose a serious risk to an otherwise healthy market for luxury watches, but 2019 has so many headwinds, retailers and brands would be wise to stick to their day jobs of finding customers for the latest models.
The sale of new watches after all is what allows the actual watch industry to pay its bills and for future pre-owned watches to enter the market. What happens when the market for pre-owned watches exceeds the volume (or value) of new watches. There are already shortage of many popular new watches but pre-owned watches almost by definition could be unlimited in their quantities. No doubt there will be winners in the form of strong pre-owned watch retailers if that market continues to grow – but how will that translate into overall watch market health?
On a quick side note, the market for serviced and refinished used watches is likely only to get more popular and valuable as it becomes safer and more efficient. The lifecycle of luxury watches will extend beyond one or two customers to three, four, or perhaps more customers for some popular pieces which are kept in good condition. Retailers are particularly excited because if they get cherry stock of pre-owned watches they can theoretically make a margin on the same wrist watch multiple times.
Returning to the topic of the sale of pre-owned watches as they are commonly defined, I believe that the market can maintain the façade that many unsold new watches become “pre-owned” watches for only so long before it is shattered through eventual transparency.
Retailers nevertheless love selling pre-owned watches because they are not subject to strict brand pricing rules and regulations.
Which brings me to the first potential solution to the problem. Retailers are more excited about the sale of pre-owned watches because they sell more easily given that retailers can choose to adjust the price to what they feel the market will bear. Such an option doesn’t exist with a static retail price enforced (or to be legal ‘recommended’ by the brands).
The sale of new watches does come with better profit margins, but that doesn’t matter if the customer is only a click away from a cheaper price for the same product (and thus don’t buy at retail price at all).
The difficulty retailers have in selling brand new watches is directly responsible for their increased attention to investing in pre-owned. The availability of used watches should also be organic and thus minimal when compared to the availability of new watches at retail prices.
Too many used watches in the market results in sagging consumer confidence (in among other things, retail price legitimacy) and thus a wholesale decrease in the sale of most new watches. Aside from watches that are actually being treated more like unregulated financial instruments by speculative dealers, the market for brand new watches is notably soft right now which I feel helps confirm my position.
Watch brands have the power to reverse the discounting paradigm as the market knows it if they so choose. With discipline and coordination, watch brands can adjust their policies to allow retailers the discretion to discount prices in store while strictly forbidding the publication of discounted prices for new watches online.
All of this naturally must coincide with a decrease in the availability of unsold gray market inventory on the internet where people can price shop from around the globe.
If the watch industry is smart it will treat the availability of a good-condition, well-priced pre-owned watch as the rarity such offers probably should be.
The sale of pre-owned watches should not come close to or exceed the availability of new pieces. No sustainable business model I know of stipulates that consumers can be perpetually deceived into thinking they are getting a good deal on a pre-owned watch that is actually just a steeply discounted new watch. This predictable pre-owned bubble burst is yet another reason why an industry unprepared to effectively sell new watches concerns me.
Models for effectively selling brand new watches in today’s rapid, finicky, and unforgiving consumer environment exist, but no brand has it entirely figured out. Only recently has the luxury watch industry started to take the internet seriously as an official sales point for a lot of products. Several years will need to go by until more established models have been determined to be effective for the sale of new watches online. It isn’t that no one is purchasing new watches online (hardly). Rather, traditional watch brands have been unable to move enough volume via e-commerce to convince anyone that traditional retail is no long relevant.
A benefit to watch brands and retailers will be investment into experimenting with marketing and advertising practices designed to sell new watches online as effectively as many of them sell pre-owned ones. Forces from different sides of the industry will need to come together like never before in order to clean up the market for new watches online, but market sustainability followed by actual growth may reasonably come as a result of actually driving consumers to new watches before anything else.