American start-up Eleven James wants to bring luxury watches to the masses by renting them to customers paying a monthly subscription. The company’s chief executive, Olivier Reza, is heir to the Reza jewellery fortune and a board member of Sotheby’s, so his ambition is far from out of kilter to his ability to make it happen. Rob Corder caught up with the entrepreneur at this year’s SIHH, to discover whether his business could be as disruptive to the traditional watch industry as iTunes was to the music industry.
We don’t own things in the gig economy; we rent them, share them, lend them, swap them. We don’t have fixed 9-5 jobs, we are freelancers that set our own hours. To millennials, this is second nature. They cannot afford to buy stuff in the traditional way, nor do they want to. So, rather than booking hotels and owning cars, they rent flats on Airbnb and hire a few hours in a Zipcar. They work a couple of days a week as Uber drivers and make a bit of extra money hiring out spare rooms or carpooling on the way to their primary job. The next opportunity or experience is just a click away on a mobile phone app.
None of this sounds remotely connected to the world of luxury watches today, but an American start-up called Eleven James is aiming to change that. The premise for the business is that luxury items such as watches should be enjoyed by far more people in the world than the tiny number who can blow the proceeds of an inheritance, dotcom IPO or banker’s bonus on a six figure Patek Philippe.
The company’s founder and CEO, Olivier Reza, believes that fine watches should be worn, appreciated and played with by a new generation that is prepared to pay a monthly subscription that entitles them to borrow four luxury timepieces per year.
There are clear attractions to this, in theory. Very few people will ever strap on a prestige watch in their lifetimes. With Eleven James, people can wear several luxury timepieces per year for a monthly subscription of just $150. At this entry level subscription price, customers will receive a different watch every three months from a pool of watches including Rolex, IWC, Tudor and Baume & Mercier. Granted, the models available in the $150 per month category are either pre-owned or uncomplicated steel models such as an IWC Portofino Chronograph, but this is still a $5000 watch. You would have to save up for three years at that rate before buying one.
Move up to a $300 subscription and the watches double in value as well to the likes of Jaeger-LeCoultre, Piaget and Blancpain. The top tier at $500 includes watches from A. Lange. & Söhne and Vacheron Constantin. That’s close to $25,000 worth of watch.
The idea sounds so attractive, you wonder why it isn’t being done by several businesses across the world. However, the barrier to entry is the upfront capital requirement and complexity of the business model. Mr Reza thinks that the hardest task ahead of him is getting from zero to 10,000 subscribers, but surely the biggest challenge is raising the money to buy enough watches to ensure everybody is delighted with the watches they receive with their subscription?
Eleven James has to own the watches in order to get the idea off the ground and Mr Reza says he needs over 1000 watches at the three price tiers. They also need to be checked, serviced, cleaned and insured. He will not say how much this has cost so far, but it is clearly a colossal sum.
Thankfully, Mr Reza has access to his own money, family money and no doubt money from a circle of friends and business acquaintances. You see Mr Reza is son of the late Alexandre Reza, described in certain circles as the greatest gem collector of the 20th century and founder of the eponymous jewellery brand and boutique that once served the world’s billionaires from its flagship on Place Vendôme in Paris as well as outposts in Geneva, Monaco and Cannes. Olivier Reza took over as president and creative director of Reza in 2009 after a decade in New York as managing director of mergers and acquisitions for investment banking firm Lazard Freres & Co.
He also sits on the board of directors at Sotheby’s.
For a man born with a diamond-encrusted spoon in his mouth, Mr Reza is refreshingly down-to-earth when WatchPro meets him at this year’s SIHH in Geneva. In fact, he seems frustrated that the prestigious watch brands surrounding us at the exhibition are giving him the cold shoulder because Eleven James is not seen as sufficiently luxurious to warrant their attention.
“Being a startup, the company did not have the financial resources to make the whole experience high touch, luxury, but we are getting there,” he says. “It will be important for the brands to recognise that all we are doing is adding a twist — a big twist — but doing it in a luxury way. The brands need to see that the masses are adopting this model,” he adds.
Eleven James is at the beginning of its journey, and currently going through a funding round to raise $20 million to pay for its inventory, technology platforms, marketing and key people. Mr Reza expects it to take up to three years to turn a profit, but by that stage the marginal cost of adding customers will drop so profits should rise.
“Scale is very important and very difficult. Going from one to 10,000 members is going to be the hardest for various reasons. First of all, you have to put the capital up front to buy good enough watches. We already own thousands of watches. Secondly, we need to build up the technology to make sure that the utilisation of the watches and the systems that manage the watches provides a good enough experience to satisfy customers. Thirdly, you need to invest in the marketing and explaining what we are doing, and convincing people that it is better,” Mr Reza explains.
The company is making this investment because Mr Reza thinks that the market for luxury watches is ripe for disruption because so few people can afford to be part of it, and those than can are given little choice over what they buy. “The discovery, the transparency, the understanding is really in the hands of the brands; the big players. People end up, not a victim, but channelled one way or another without really being in control of the whole experience,” he suggests.
The subscription service offered by Eleven James is different, although it is some way from giving customers perfect transparency and choice. Right now, a subscriber is asked to choose from a small number of watches in their price band. For example, I chose the ‘curated’ option and there is a handful of watches proposed from which I select my favourite and least favourite. The favourite is guaranteed to be in my annual subscription, my least favourite will not.
The significant development is the dramatically lower cost of entry into the fine watch world, and the offer of experiencing four luxury watches in a year, instead of a very small number in a lifetime.
“You have some people that are happy with just one choice in their lifetime, but many consumers are not convinced and not satisfied with the current situation where they wait a very long time before making a decision because of the capital requirement. They think about it, they learn, they often make a choice that is safe, rather than to their own taste. I ask, is this really luxury? Or is luxury the ability to enjoy it all?” Mr Reza asks. “I see what we offer is closer to true luxury. At the end of the day luxury is about being able to have whatever you want, whenever you want. It is about being able to play with something, to experience it, to change it when you want,” he answers.
For Eleven James to succeed, people will need to accept that ownership does not matter. Mr Reza accepts this is true, but says that attitudes are shifting in many markets. “There is a current mind set, engrained in several generations, which is that the only way you collect is through ownership. That was the mind set for people with a vinyl record collection or a movie collection. The new generation wants experiences more than it wants to own things. The older generation was bought up with the concept of ownership, and the belief that by owning, they have achieved permanence that luxury gives; a sense of belonging and being part of a community that lives in luxury. As we prove and deliver on our value proposition, the permanence will reside in the membership, and being a member of Eleven James will be that promise,” he explains. “A change in attitudes and approach is needed. I am not underestimating the scale of that shift, but for me there are just so many beautiful things to see, so many beautiful watches; why limit your experience of them through ownership to a few or even one?” he questions.