I have spent a great deal of time studying the secondary watch market this year because it is having such a profound impact on the primary watch business.
The biggest players in this market have come out of the shadows, and are now being taken extremely seriously by the major Swiss watchmakers.
I was in Germany this week visiting the headquarters of Chrono24, which says it is the biggest specialist marketplace in the world for watches.
Its CEO Tim Stracke says that the platform now sees transactions worth around $1.2 billion per year. It has around 2500 active professional dealers that use the site, and over 10,000 private sellers from over 100 countries.
Mr Stracke told me how he used to phone, e-mail and even send letters hand-written with fountain pen to the leaders of the major luxury watch brands over many years, and never heard back from any of them.
Now they call him, and travel frequently to meet his team.
Having always been seen as a key protagonist in the grey market side of the watch business, Chrono24 is now seen as part of the solution.
Watchfinder in the UK is another example of a business peddling watches from over-stocked retailers alongside pieces being traded by the public. Now it is owned by Richemont.
Watchbox, which is part-owned by Philadelphia jeweler Govberg, just hired Swiss watch industry veteran Patrik Hoffmann as its executive vice president of the company’s Swiss division, Herbert Gautschi as vice president of business operations, and Susanne Hurni as the division’s vice president of marketing.
The world’s major auction houses are doing gangbuster business with vintage watches; bestowing their reputation-enhancing patronage on the second hand market.
This end of the industry just got very serious.
There are many reasons why venerable Swiss watch companies are suddenly engaging with secondary market players, but among the most interesting is the way that the pre-owned platforms affect prices for new watches.
Mr Stracke at Chrono24 described just two simple ways in which his platform can affect prices. First, the marketplace creates the purest form of capitalism where customer demand rapidly moves prices. When expensive yellow gold is less popular than base metal steel, the price of steel watches can rise higher than watches that should be more expensive in gold. Retailers and watchmakers have to immediately react to this as they consider production and stocking levels of different models.
Prices can also be actively changed by the secondary players, and if this is done by a business with the reach of Chrono24 or Watchfinder, it affects the entire global market. For example, if these businesses were to raise the price of an unworn Hublot Big Bang to a point above that being charged by authorized dealers, demand would increase across the primary and secondary market, and build a floor under that price because it would suddenly become an investment-grade asset.
Watch brands can, if they choose, manipulate this phenomenon as well. For example, rumor has it (a rumor that Revolution magazine published last year) that the world record price paid for Paul Newman’s Rolex Daytona last year, was achieved because Rolex itself kept bidding until the price reached $17.8 million. At a stroke, the Daytona became the most expensive watch ever sold at auction, a record that Patek Philippe had held for most of the past 20 years.
That record price has made Daytonas the most desirable watches on the planet, with fantastic prices to match.
This is an emerging story that is unfolding at increasing speed and explains why former pariahs like Chrono24 and Chronext are now being spoken to by the most important people in the watchmaking world. It also adds to my sense that the Richemont purchase of Watchfinder was a very smart move indeed.