11. time-business


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Chronext: “Towards a small number of global platforms”

SECONDARY MARKET

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July 2019


Chronext: “Towards a small number of global platforms”

In a rapidly changing landscape, Chronext is a key player in online watch sales. The German e-commerce company now wants to build trust with the main watch brands, which remain suspicious about digital actors. We met its co-founder Philipp Man.

W

e continue our series about the main e-commerce platforms in the watch industry, each of which has developed its own specific angle. Chrono24 is the giant among global marketplaces (read here). WatchBox, launched by watch entrepreneur and retailer Danny Govberg, owns the watches it sells (here). True Facet is mainly active on the American market (here). Watchfinder has its own authorised service centres – and has been bought by Richemont (here). They are all in the process of forging partnerships with authorised brands and retailers, not without some difficulty and resistance.

In terms of modus operandi, Chronext is halfway between several of its competitors. It owns some of the watches available for sale, and all timepieces go through its premises. It offers both new and second-hand watches.

To better understand how it works, and learn more about its ambitions, we met its young co-founder, Philipp Man.

Philipp Man, co-founder of Chronext
Philipp Man, co-founder of Chronext

When and how did Chronext start?

My colleague Ludwig Wurlitzer and I launched Chronext in 2013. At the time, we were two students in London, and we started from our kitchen... The idea was to create a trusted platform for the sale of watches online, by combining the inventory of specialised dealers and watch brands. We implemented a type of auction system: for any watch, we would determine the best reseller based on criteria such as proximity and price. All timepieces offered for sale go through our watch workshop, where they are inspected and authenticated, and if necessary refurbished.

Can you share key figures about the company today?

We ship watches to 130 countries and collaborate with more than 1,000 dealers, which together account for annual transactions in excess of €1 billion. We have 16 regional offices and a team of 170 people. In addition to online delivery, it is possible to pick up the watches from our physical “lounges”, from London to Toronto.

Who owns most of the stocks available for sale: yourself or your partners?

For the time being, our partners. Currently, our own inventory represents only a small and very focused proportion of the total watches on offer. But our share is growing because pre-owned watches, which constitute the bulk of our own stock, are gaining in popularity. Dealers mainly offer new models. In the near term, we are aiming for a 50/50 new/pre-owned watch split.

Do private individuals also sell watches on the platform?

Yes, they represent about 30% of sales volume. They can choose to consign the watch with us on the platform or sell to us as a company.

The headquarters of Chronext in Cologne, Germany
The headquarters of Chronext in Cologne, Germany

Where are your main markets?

The top three are Germany, the United Kingdom and Hong Kong, where we are experiencing strongly growing demand. For the coming year, our two priorities will clearly be to develop in the US and the Middle East and expand our efforts in Asia.

How do you price the watches?

We have a pricing engine algorithm based on 15 years of historical data. Four of our team are dedicated full-time to constantly improving and developing our automated pricing systems further. We apply this price to the models we own and suggest prices to private resellers. Retailers are free to set their own prices, but monitoring is in place via an allocation system for watch offerings, which we implemented.

The secondary market is evolving rapidly, with buyouts such as Watchfinder by Richemont. Nevertheless, the “grey market” label remains strong.

I actually think more and more brands understand that online selling is a very real phenomenon and is here to stay. At first we were not on the radar of the brands at all. Then we were greeted with a degree of fear, and finally now we have strong cooperation. As a result, we now work directly with 15 brands.

Which ones?

I can’t reveal that. But I’ve noted that the mindset of most brands is changing. What we really want is to become the partner of established brands when it comes to pre-owned. The ideal scenario for us would be to become like authorised retailers, but specifically for second hand.

However, you sell both pre-owned and new watches: doesn’t this blur the lines and make it more likely for you to be associated with the grey market?

For a very long time, anything that was not authorised or official was considered “grey”. The term is not clearly defined. However, what is clear is that the industry has serious distribution challenges. To resolve them, a real understanding of actual stocks and prices is required. Brands are angry about discounts on online sales, and yet retailers do exactly the same thing in physical stores. Only, because it’s not public, they don’t have a problem with it... How can the industry get a better grip on inventory movements? The best solution would be a platform that welcomes both brands and retailers, pre-owned and new timepieces. And a price parity between the store and the website that is good for the brand.

Ludwig Wurlitzer (Founder and CPO) and Philipp Man (Founder and CEO)
Ludwig Wurlitzer (Founder and CPO) and Philipp Man (Founder and CEO)

What added value can you bring to the brands?

We can tell them where their inventory is, at what price their models are really sold and what type of buyers they have. We can help them sell both their new and older output. We also act as a facilitator when they approach the pre-owned market. Today, online distribution is a jungle, without price controls, without guarantees and with standards of presentation that are far below the aesthetic standards of luxury brands. With our experience, we can offer packaging that meets their expectations, guarantees of authenticity, a proven customer network and valuable experience.

There’s also resistance from established retailers. Recently, the major German distributor Wempe cancelled its contract with Nomos following their partnership with Chronext and Chrono24.

Different retailers have different points of view. There will always be friction when a market changes profoundly and new players like us emerge. But, just as the fashion market has Farfetch and Net-A-Porter, I am certain that we will end up with a small number of large global platforms for watchmaking, via a consolidation of the sector around players who control stocks and data. We intend to be one of them. I am very positive about the recent spirit in the watch industry and the strong signals and negotiations we are having with some of the largest luxury groups and watch brands.