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CHRONEXT & WATCHPRO SECONDARY MARKET SPECIAL REPORT, Volume 3 — Thinking global and acting local

CHRONEXT SPECIAL REPORT

There is a common misconception that secondary market luxury watch operations like CHRONEXT need only build one ecommerce platform for the entire world and customers will all shop for the same watches in the same way. The reality is that there are significant differences between countries — not least language, sales taxes and currency issues — and major logistical, financial and legal issues to master. In this third volume of our Secondary Market Special Reports, we look at some of those differences and provide valuable lessons on the hottest watches that retailers in the primary market can heed.

Analysis of the most popular watch brands and collections by two of Europe’s leading secondary market specialists, CHRONEXT and Watchfinder & Co., reveals interesting variations between countries that authorised dealers and pre-owned operations can learn from.

The leading brands when it comes to online searches and sales are not surprising from either German-headquartered CHRONEXT or Richemont-owned Watchfinder, based in the UK, but there are significant differences when it comes to the models with the greatest pulling power.

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Philipp Man.

Unsurprisingly, CHRONEXT reports that Rolex is the bestselling brand in four out of five of its main markets: Germany, UK, Austria and France and the Datejust is the most popular collection.

Only Switzerland bucks this result, with Breitling the top selling brand and Omega’s Seamaster the favourite individual collection. “The Rolex Datejust is the most popular model. One of the reasons for this popularity is the timeless design and the various options for individual preferences,” suggests Philipp Man, CEO and co-founder of CHRONEXT.

Availability of brand new watches might also be influencing demand. Searching CHRONEXT in mid-December revealed 99 Rolex Datejust 41mm watches listed of which 95 are brand new and unworn.

Using the same search for Rolex Submariners, there are 64 on sale, but only nine are new and unworn. This matters, because new and unworn watches account for around two-thirds of watch sales on CHRONEXT in Germany (72%), UK (67%), Switzerland (75% and France (63%).

Rolex’s Daytona, a bellwether of the secondary market because red hot demand has pushed prices to around double what authorised dealers are recommended to charge, ranks surprisingly low for CHRONEXT sales.

It falls outside the top 10 collections in Germany, Switzerland and Austria, and ranks only sixth in the UK and fifth in France. There are 58 Daytona’s listed with CHRONEXT, 23 of which are new. If we narrow the search to the most popular stainless steel models, the number of watches listed drops to six, with only two of them unworn.

We expect that the share of CPO as well as the total amount of sold CPO-luxury watches will continue to increase at an even faster pace in the years to come
— Philipp Man

Watchfinder has not provided analysis of its sales, but has supplied WatchPro with data on the number of searches customers make for watch brands and individual collections.

The business model is also different to CHRONEXT’s. While CHRONEXT checks and issues a warranty for every watch before it is shipped to a customer or handed over personally in one of its worldwide lounges, even those on consignment, Watchfinder buys every watch it sells, subjects them to multiple checks in its workshop, repairs and polishes them if necessary, and tags them all as pre-owned, even if they are effectively brand new.

Click to download the full special report.

CHRONEXT’s in-house watchmaker is also able to perform multiple checks on pre-owned and vintage pieces and polishes the watches to give them a like-new finish.

The newest men’s Rolex Datejust on Watchfinder when we searched in mid-December was a 2020 41mm Oystersteel with box and papers. It is clearly new and unworn, but its manufacturer’s warranty has 4 years and 8 month’s remaining, meaning it was bought from an authorised dealer earlier this year and then sold to Watchfinder.

Out of 44 Rolex Datejusts on sale at Watchfinder, 14 are less than a year old and around half are new enough to have some of Rolex’s 5-year warranty still remaining.

Submariners are comfortably the most popular models on Watchfinder when it comes to searches by customers. It is the number one searched for model in the UK, USA, France and Germany over the 12 months to August, 2020, beating other Rolex collections by a considerable margin.

In the UK, for example, there were 60,500 average monthly searches for the Submariner while the Rolex Daytona was searched for on average 40,500 times per month and the Datejust 27,100. The only watch in the top five in the UK was the Patek Philippe Nautilus, with 14,800 monthly searches on average in the UK.

From the data supplied to WatchPro from both CHRONEXT and Watchfinder, Rolex dominates searches and sales at both companies. Patek Philippe’s Nautilus and Audemars Piguet’s Royal Oak are the only non-Rolex collections listed in the top five searches on Watchfinder in any of its major markets. Only in France, did AP’s most popular reference make the top three of searches over the past year on Watchfinder.

CHRONEXT’s business model has evolved over recent years as it has invested more in its workshop and service department to both check watches being sold on consignment, and also to service and refurbish older watches before issuing them with a new 2-year warranty.

Shifting the balance from selling brand new watches to certified pre-owned is welcomed by the watch brands because they really only want new watches sold through their authorized dealers or direct to consumers through their own stores and ecommerce.

CPO is considered more respectable, and watch maisons are more likely to work with those retailers, giving them the opportunity to have their workshops accredited, which in turn means they will have access to spare parts.

CHRONEXT’s Mr Man says the ratio of new to pre-owned watches is already tilting. “We still see an increased interest in certified pre-owned. We expect that the share of CPO as well as the total amount of sold CPO-luxury watches will continue to increase at an even faster pace in the years to come.  In Austria and France the acceptance for CPO is the highest. We expect that markets like Germany will catch up soon. United Kingdom is already on its way,” he reveals.

 

2020 was a fascinating year for the secondary market. The pandemic pushed far more customers to shop online for luxury watches and, once people are on the internet and away from the seductive embrace of a sumptuous authorized dealer’s showroom, they are just a click away from the secondary market players where they can score unicorn watches they have zero chance of finding in the official dealerships.

Those red hot watches may be selling at massive mark-ups to their recommended retail prices, but at least they are available. Or, the customer might look for a bargain and find watches that were over-supplied being offered at significant discounts.

The overwhelming majority of customers for luxury watches still choose the authorized dealer route, but there are considerable upsides to seeking out certified pre-owned specialists with top notch workshops, as Mr Man explains. “There is often a price advantage. A CPO watch is always the better deal in terms of price, and no one will see that it’s a used watch. Unlike other items of daily use, a watch can be restored to its original mint condition decades after it was made,” he suggests.

“There is a better selection,” Mr Man continues. “The CPO market provides access to an almost infinite selection of references, since many watches are no longer produced in certain variants.

“And watches advertised are always available, unlike the listings on an authorized dealers’ site where watches with intolerable waiting lists are displayed. CPO watches are always immediately available, meaning customers can skip the wait. Especially for the very popular Rolex sports watches, availability in the traditional retail market continues to be an issue. Luxury watch lovers search for direct availability and an uncomplicated buying experience. This is why more and more buyers turn to the online market as the best place to find the luxury watch they were looking for. Waiting lists and long term pre-orders are no option for them,” he concludes.

 

Navigating the terminology of secondary market

 

There is a whole lexicon of terms growing around the secondary market, and some of these terms mean different things to different retailers, making it incredibly confusing for customers without an intimate knowledge of the sector.

For example, what are the differences between the grey, secondary, certified pre-owned and vintage markets?

The easiest to define is the secondary market, because it simply means any watch being bought and sold outside of authorised dealer channels. This includes traditional auction houses, individuals trading watches in a café and multi-million dollar operations like CHRONEXT, Watchbox and Bob’s Watches.

Grey market is more of a pejorative term for the way watches from authorised dealers find their way into the secondary market. The most common method is that these authorized dealers simply set up accounts with marketplaces like eBay, Amazon and Chrono24 to shift watches that they cannot sell at the full retail prices insisted on by the manufacturers. It is also fed by flippers who develop relationships with authorized dealers in order to buy stock at a discount and then sell it on.

This has a corrosive effect on the primary market because the internet makes it easy to compare the prices dictated by brands and their authorized dealers with prices on marketplaces where, if global supply of a particular model exceeds demand, the price will be depressed by market forces.

Certified pre-owned (CPO) is a term with a murky definition. Some manufacturers are keen to bolster the value of their second hand watches by checking them and issuing their own warranties.

This has proved to be extremely difficult for the largest manufacturers so it is more commonly being done by low volume independent watchmakers.

Today, CPO is used more broadly by secondary market specialists to describe modern second hand watches that have been checked in their workshops and issued with a warranty. That warranty is not typically backed by the manufacturer, but it amounts to the same protection for the customer.

Vintage is the description applied to older watches, normally over 20 years’ old, but they are often sold in excellent, sometimes mint, condition because the best pre-owned operations can service, repair and refurbish watches many decades old and give them another lease of life. A high quality watch, even 50 years old, can be restored to perfect working order, which is why they can be sold with warranties by pre-owned specialists.

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Rob Corder

The author Rob Corder