Pre-owned watches


“The second-hand market is the new China”

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January 2019


“The second-hand market is the new China”

As additional evidence of the growth of the pre-owned watch market (thanks largely to the internet), several Swiss watch manufacturers, including Zenith and Raymond Weil, have signed an official partnership with the American online platform True Facet, a pre-owned specialist. It is now raising a new $10 million round of funding.

O

n the website of the watch dealer True Facet, you can see side by side the price of a new Raymond Weil timepiece and that of the same model in a second-hand version, sometimes 50% or even 60% lower. Is this another dodgy site where the origin and actual condition of the watch are not guaranteed? Far from it! In fact, the Swiss watchmaker gives direct approval to sales of its second-hand models, which it has serviced itself.

Raymond Weil, Frédérique Constant, Zenith, Fendi, Fabergé, Ernst Benz and Stoic (the latest project from watchmaker Peter Speake-Marin) have already partnered with True Facet, which claims to be the first platform in the secondary market to offer pre-owned watches, certified by the brands. This phenomenon would probably have been unimaginable ten years ago! But faced with booming online sales of secondhand watches, brands are realising that it is just as much in their interests to take a piece of the cake, by getting involved in this market themselves.

“The second-hand market is the new China”

Some provide this service themselves, as MB&F has done since last year; others have chosen to join forces with platforms like True Facet. We have already seen the service centres of secondary market companies such as Watchfinder (since acquired by Richemont) securing the approval of watch brands. But here the operation is taking a step further, since the brands are directly involved in sales of their older products, at a lower price than their more recent references – a concession that is also a sign of the power of this new market.

“The grey market could kill the industry”

In addition to its official partner brands, True Facet continues to sell second-hand models from Cartier, Rolex, Breitling, TAG Heuer and Omega, via an authentication and warranty process managed by the platform itself, without the direct endorsement of these brands. The co-founder of the New York-based company, Tirath Kamdar, nevertheless hopes to quickly convince more watch companies to partner with him. As TechCrunch reports, True Facet is about to close a new round of funding of $10 million.

But isn’t he playing both poacher and gamekeeper, since he operates in both the certified and non-certified markets?

“We have actually always wanted to help brands avoid the grey market, which has the potential to kill the industry,” he responds. “The timing is in our favour, because watchmakers are now trying to regain control of the secondary market.”

In his view, the industry is paying the price for its refusal to manage production volumes, with most of the oversupplies ending up on the grey market. “Brands are reluctant to reduce their volumes according to actual economic activity, resulting in an ever-increasing imbalance between sell-in to retailers and stores and sell-out to end customers. In this respect, the export figures for Swiss watches can be misleading. This creates negative chain effects, including a form of rivalry between brands and their retailers that is counterproductive. And it ultimately leads to buy-outs to correct this strategy: last year the Richemont group had to buy back several hundred million dollars of inventory to clean up the market.”

“The second-hand market is the new China”
Tirath Kamdar, co-founder of True Facet

A high-tech company above all

Faced with this phenomenon, the cofounder of True Facet believes he offers a clever solution for brands that do not want to decrease production. “Even if they reduce the quantities, there are still watches that will not sell as well as anticipated, or that will not immediately find their audience.”

To convince the brands, Tirath Kamdar puts forward several arguments. He begins with the new online shopping habits, which benefit the second-hand watch market first and foremost. “For future generations, buying and reselling watches online will become an increasingly familiar behaviour. Brands must recognise its impact,” he says. “Some younger customers no longer consider entering a watch store at all. Yet they can be truly passionate about watches!” Another argument is that the company, which defines itself primarily as active in new technologies (it is supported by several Silicon Valley venture capital funds), collects data on its users that can be valuable for brands, which often lack direct feedback when working with retailers.

“Our SEO is very powerful, we are better referenced than some of the brands themselves,” says Tirath Kamdar. “If we count all the watches that are traded without any tracking of the transactions, I think that the secondary market is already larger in the United States than the new one,” he continues. These figures are difficult to confirm. By combining transactions carried out via online watch sales giants such as eBay, Chrono24 (which has also formed partnerships with brands, but on new products) or Watchfinder (Richemont), Frank Müller, an expert with German consulting firm The Bridge To Luxury, estimates the value of the global secondary market at over €4 billion. But here again, this does not take account of private transactions whether online or offline, sales on less known sites, or the countless watch exchanges around the world!

“For future generations, buying and reselling watches online will become an increasingly familiar gesture. Brands must measure the impact.”

In the face of the industry’s “Chinese obsession”, which has held sway since the beginning of the millennium, Tirath Kamdar hopes to restore the American market to its true worth. His company generates more than 90% of its sales in the US, and it’s undoubtedly the most active country in the second-hand watch market. “The rise of the Chinese market created a completely different way of selling watches for Swiss brands,” he says. “When it slowed down, watchmakers began to look for the next emerging market... But there is no new China. Or maybe the new China is the second-hand market!”

“The second-hand market is the new China”
Stoic, the new watchmaking project of Peter Speake-Marin, has recently announced its partnership with True Facet

The new value of the brick-and-mortar store

What role will physical points of sale play, if the secondary market, dominated by online sales, really gains in power? The American retail network is already under tremendous pressure from the internet. Retail behemoth Kmart is about to close its doors, unable to compete with online sales.

Paradoxically, one of True Facet’s latest ventures is a partnership with a physical retailer, Stephen Silver, based in Silicon Valley. The retailer is now devoting part of his store to the sale of second-hand watches.

Tirath Kamdar explains it as follows: “The weakening of the physical network of watch stores has created a vacuum in strategic locations. For instance, Audemars Piguet and Richard Mille (which has decided from now on to operate only through its network of own-brand stores) have cancelled their partnerships and are no longer distributed in Silicon Valley, which is now our third strongest market in the world.”

A little like what we are seeing with online giant Amazon, which is powering ahead with its network of physical stores, it is likely that the future of the secondary watch market will also include a re-evaluation of good old bricks and mortar.