Richemont enters the second-hand watch market

Watch brands could easily have gone into standby these past two years, waiting for markets to revive and inventory glut to disappear. And yet the last six months have revealed that, far from lying idle, many have been laying the groundwork ready to bounce back – and not just with “tamer” products. This is particularly true of Richemont whose recent announcements are slotting together to show a group redeploying for the new market context. Anyone even half-interested in the watch business knows that the make-or-break factors are distribution and capturing new audiences. And what has Richemont announced these past weeks? A €2.7 billion takeover of Yoox Net-à-Porter (YNAP) following a bid on the Milan Stock Exchange and, latest to date, the takeover of Watchfinder for an undisclosed sum. Given the growing might of e-commerce in watch sales, acquisition of YNAP makes Richemont a dominant player in luxury e-tailing, including watches. The second deal puts the group in a strong position on the pre-owned watch market, which is likely to heat up as millennials continue to drive growth of second-hand sales.

Exponential growth

Richemont has spent close to €500 million on inventory buyback in the past two years, and for some the Watchfinder takeover is an opportunistic deal which, considering it adds no more than a fraction to the half a billion already invested, will enable the group to offload these watches relatively painlessly (Vontobel Bank has put a figure of around €110 million on the transaction, which should be weighed against Richemont’s €5.2 billion of net cash). Furthermore, specialist platforms such as these, which deal only in certified pre-owned timepieces, are seen as the best weapon against the grey market. Except that Richemont doesn’t operate with such short-sighted vision. Watchfinder is an established name when it comes to researching, buying and selling premium second-hand watches and its acquisition gives the luxury group an early lead in this expanding marketplace.

Established in the United Kingdom in 2002, Watchfinder has seen its business grow significantly in recent years, as demand for second-hand watches ignites. Indeed, sales of pre-owned watches are expected to eventually exceed new watch sales. By way of a reminder, Swiss watch exports totalled CHF 20 billion in 2017 (that’s more or less CHF 50 billion at retail prices). Watchfinder’s sales grew from €14 million in 2012 to €96 million for the year ending March 31st 2017, after raising €7 million in 2014 to support its expansion. According to co-founder and managing director Stuart Hennell, the company, which has a workforce of 200 people and seven brick-and-mortar stores across the UK, is currently trading with turnover of around €150 million. Watchfinder also employs qualified watchmakers in its own accredited service centre. They ensure that each item is in top condition before it goes up for sale on the site, which stocks around 4,000 pieces at any one time across 50 of the most prestigious brands. A first in pre-owned retailing, this service gave customers all-important reassurance as to what they were buying – a major asset when developing this type of business model online.

Where cars go...

The planets have aligned for the second-hand timepiece market. First of all, mechanical watch enthusiasts – and they are the bread and butter of sales – are legion, although purchasing habits have changed with the younger generation of fans. A watch may be built to last a lifetime, this doesn’t mean we have to hold on to it ad vitam aeternam. Reliable mechanisms make watches highly exchangeable goods that can be bought and resold as the mood takes us, without breaking the bank and possibly even with a small profit thrown in. Watches that have “seen action” smack of authenticity too, and this ties in with the hot-as-ever trend for vintage. A comparison can be made with the automotive market, already a source of inspiration for a number of watch brands that are imagining similar service packages. And if we extend this comparison to the second-hand market, the similarities are plain to see: there were 320,000 new-car registrations in Switzerland in 2016 versus the 870,000 used cars that changed hands in the same year.

Watchfinder isn’t the only one surfing the wave. Think Germany’s Chrono24 and its inventory of 375,000 pre-owned watches proposed in 98 countries, and annual transactions well in excess of $1 billion. Then there’s WatchBox, a US company that has grown by an average of 40% a year since launching in 2012. Current revenue is north of $200 million and the company doesn’t intend to stop there. Last year it received a $100 million investment from Singapore-based CMIA Capital Partners to accelerate its growth. In March, it announced a global content partnership with Revolution Media. A month later it opened its Swiss division, appointing Patrick Hoffmann (ex-CEO of Ulysse Nardin) and Susanne Hurni (formerly head of marketing and communications also at Ulysse Nardin) alongside Herbert Gautschi.

While platforms continue to make strides, the brands themselves are still hanging back. François-Henry Bennahmias, at the helm of Audemars Piguet, and Jean-Claude Biver, who heads the Watch division at LVMH, have still to put words into action, as does Oris. Not so Richemont. The group is clearly determined to position itself on a hugely promising market worth (depending what you read) anything from $5 to 15 billion. With Watchfinder under its belt, the group not only acquires a new distribution channel; it also positions itself in one of the most buoyant segments – as a retailer of its rivals’ watches!