2018 will forever be the year when the secondary market for prestige timepieces got serious. The numbers are impossible to ignore. Swiss watchmakers will export product worth just over $20 billion at wholesale prices in 2018; still far larger than the $5 billion expected in global sales of pre-owned, vintage and grey market watches, but the secondary market is growing at a staggering pace compared to the traditional primary watch retail sector. Ebay says its sales of luxury watches are already worth more than $1 billion, making it the biggest secondary market player, and a new authentication service aims to address the platform’s Achilles heel, a lack of trust in the authenticity and provenance of thousands of watches listed for sale. James Hendy, senior director of eBay Authenticate is the man charged with cleaning up the image of the company’s watch offering, and has terrifyingly ambitious plans, as WatchPro’s Rob Corder discovered in this wide-ranging conversation.
The secondary market for luxury watches used to be simple. A punter would walk into a local jeweler, second hand specialist or pawn shop and hope to get a fair price for their pre-owned timepiece. The dealer might check, service, repair and clean the watch before putting it back on sale with a margin added or offload it to somebody else who might have a customer for it. The only other buying and selling was within groups of collectors that liked to keep their portfolio turning over.
The global market was tiny for these types of transactions until the Internet changed everything and created secondary market platforms that could connect people from all over the world looking to buy or sell watches.
Ebay is, of course, the pioneer and global giant of this new way of trading, and now sells luxury watches worth over $1 billion per year. The biggest part of turnover comes from professional pre-owned watch retailers or grey market dealers selling to consumers, but there is also a lively trade in consumer-to-consumer transactions.
It has now been 23 years since Ebay was created, but it still has challenges when it comes to luxury watches being bought and sold on its platform because the company never touches the watches, so it has no way of ensuring they are in the condition described, genuine and not stolen. The only comfort a customer can get that a watch is exactly as described is by investigating the reputation of the Ebay seller. For example, a ‘Top Rated Plus’ seller means watches will be from experienced sellers with the highest buyer ratings.
From September this year, Ebay has been going one better with a new service called Ebay Authenticate, which adds additional layers of vetting for a select group of sellers. James Hendy, senior director of Ebay Authenticate, is the architect of the scheme, and tells WatchPro how its launch this year will be followed by a program of improvements and expansion in the coming 12-18 months. “The phase that we launched in September has eight of our top sellers that have been through a vetting process where a third party organisation meets them, looks at their facilities, examines their watch service department, and takes watches away to have them independently verified. The authentication team monitors a percentage of their listings over a three month period and continues to monitor their listings as they go up on a daily basis. They can do spot checks to see if there are any issues.
“Phase two will allow sellers to sell their luxury watches quickly and transparently through a new eBay Luxury Watch Program in which they will receive an instant quote and subsequent offer to buy their watch prior to listing. This new service, whilst standard in the watch industry, is new to eBay and with its customer to customer inventory accounting for around 30% of its watch inventory, it will provide sellers with a convenient and compelling alternative to selling the item themselves.
“Phase three will launch in the third quarter of 2019. I can’t talk about what exactly it will look like, but it will extend what we are doing for the top watch sellers on eBay to other sellers,” Mr Hendy describes.
Around 20% of sales on eBay today are made by people that are top seller-rated, have been on the platform for 10 years and have their own dotcom sites. “These are the first sellers we will work with, but we also need to extend the benefits of authentication to everybody. That is what the later phases attempt to do,” Mr Hendy adds.
The authentication service that launched in September with 7,000 watches listed from four approved sellers has already grown to more than double that size and now has over 16,000 pieces available.
In October, one of Ebay Authenticate’s dealers sold a gold Patek Philippe Complications Calatrava for over $85,000; not the sort of deal that would be done if there was any lack of trust.
One of the first four dealers to join the Ebay Authenticate scheme was Watchbox, run by Danny Govberg who also runs Govberg Jewelers in Philadelphia. Watchbox says it has inventory of luxury pre-owned watches worth around $60 million, so it brings a massive volume of authenticated product to the Ebay platform.
Mr Govberg is a fan of Ebay Authenticate and the vision of Mr Hendy. “Ebay is innovative, smart and thinking about this the right way. Ebay’s head of authentication, James Hendy, has vision for what the customer wants. He has vision for what is changing out there,” Mr Govberg says.
Think of life within Ebay and you picture Silicon Valley geeks with noses pressed against computer screens for 18 hours per day. But Mr Hendy is not from that world at all. The British executive has spent most of his career in the centuries-old world of watch auctions. “I spent many years working in London and New York with Bonhams and Sotheby’s. I made the choice to move from a 250 year-old company to a 23 year-old company to look at what authentication would look like to eBay. We know that eBay is this huge monster; we know it has its challenges, but when you look at the ever-changing landscape, there is so much more that eBay could be doing,” he reveals.
Working with just a handful of authenticated dealers may ensure the new service is reliable and trustworthy, but it does feel like it misses the mark when it comes to what Ebay is really known for, which is millions of individuals or micro-businesses buying and selling. “We have been testing different ways that we can ignite the jewel in the crown for eBay, which is the consumer-to-consumer transactions. We need to help customers come onto eBay and shop with confidence, even if they do not know the seller and that seller is not a huge dealer with an amazing track record. If we are able to do that, and ignite the authentication and trust across all inventory, that will be a game changer,” Mr Hendy suggests.
Dealers wanting to join the Ebay Authenticate program will need to be top-rated sellers, which means zero issues in terms of counterfeit returns, and positive feedback in the high 90 percents from customers. Right now this includes Watchbox, Jomashop, Swiss Watch Expo, and Govberg, but they do not have to be on the scale of Govberg to participate. “We have some terrific sellers that may only transact ten to 20 items per month, but they are all $30,000+. We have one seller who in the last three months has sold a Patek Philippe for $500,000 and backed it up with two more for $120,000 and $180,000. Govberg is one of our big US sellers, and they have a 100% feedback score, which is pretty much unheard of. All of the top sellers we are working with are in the 98-100% rating area,” explains Mr Hendy.
Authenticated inventory that customers instantly trust is key, and this could come from authorized dealers of the biggest brands taking trade-ins that then go through their certified service centres. Torneau, for example, which is now owned by Bucherer, would have instant credibility in the United States. Using Ebay as a platform would give the retailer access to a massive global audience for its pre-owned stock.
“I truly believe that the authentication plays that we roll out next year in the various phases will be transformative for what is already the world’s biggest platform. We will enable more people to benefit from the scale that eBay brings; 170 million active buyers across the world is a huge opportunity,” Mr Hendy says. “I believe that when eBay becomes seen as a safer and more trusted place, we will bring in new buyers that are currently periphery to the luxury watch business and really drive demand,” he adds.