It’s a rapidly expanding market, even in regions such as Asia where the idea of buying a second-hand watch would previously have been met with disdain. As with customer service, the numbers cannot be ignored. “Every year approximately $50 billion in new watches is sold at retail,” says Danny Govberg, co-founder and CEO of WatchBox, the leading seller of certified pre-owned watches. “This means that ten years from now, there will be $500 billion in potentially saleable pre-owned watches.” No worries about supply, then, and as demand takes off, particularly among young shoppers who take an increasingly circumspect view of the market’s distortions, the indications are that the pre-owned market is set to thrive. With annual growth currently estimated at between 5% and 10%, the secondary market is expected to meet the market for new watches in the very near future.
Who sets the price?
One of those distortions, the result of the slide in sales experienced by some brands, has been a build-up of inventory. Manufacturers have bought back part of this unsold stock, at a cost of millions, to be destroyed or recycled. Inevitably, some of it ends up fuelling the grey market. The matter hasn’t escaped James Dowling, a renowned collector and expert who shared his experience during a Dubai Watch Week discussion: “The situation today reminds me of what happened around the time of the quartz crisis. Electronic watches certainly played a part in the enormous difficulties that plagued the Swiss watch industry over a decade, but there is another rarely mentioned factor we should take into account, and that is President Richard Nixon’s decision in 1971 to end the Bretton Woods system of fixed exchange rates and let the dollar float. Overnight, Swiss watches became unaffordable in the United States, a crucial market for brands. This is exactly what’s happening today. Watches no longer have a fixed price. It’s the market, not the manufacturer, that sets the price!”.
It's now the market, not the manufacturer, that sets the price.
This is certainly true for second-hand watches, where market forces dominate. Certain players have used this to their advantage and positioned themselves as “regulators”, reassuring buyers and sellers in a market awash with counterfeits, and which many still find hard to distinguish from the grey market. Some platforms, it’s true, still play at Pontius Pilate, washing their hands of any responsibility in the counterfeit trade, but their business model is clearly under threat from new arrivals whose tenants are transparency, quality and authentication. WatchBox is one of them, and its success is proof it has earned the watch-buying public’s trust. The business started out as a mobile phone app for the family-owned Govberg Jewelers, founded in Philadelphia in 1916 and now helmed by Danny Govberg. Launched in 2015, it already gave customers the opportunity to buy, sell or trade-in their personal watch. The service proved so popular that Govberg launched it two years later as a separate entity – WatchBox – whose potential investors were quick to spot. WatchBox now employs a 230-strong workforce, is backed by more than $100 million in capital and owns inventory to a value of $80 million, according to figures provided by Danny Govberg. In two years to end October, WatchBox sold 45,000 watches. Revenue for 2019 is on track to reach $200 million. “Not a day goes by when we don’t sell a watch for $100,000,” Mr Govberg says.
An independent voice
“We’re successful because we provide quality educational content and because we’ve created a platform for a clientele that was already there but lacked structure,” comments investor and WatchBox co-founder Justin Reis. “We’ve made things easier for all these enthusiasts thanks to this online connectivity.” In addition to its online marketplace and content, WatchBox has physical outposts in Hong Kong, Switzerland, South Africa and Singapore. The latest development to date, at a cost of around $10 million, has taken it to Dubai, in partnership with Ahmed Seddiqi & Sons, organiser of Dubai Watch Week. The first step in this joint venture is the recent opening of a WatchBox flagship store in the Dubai International Financial Centre. This will be followed by spaces inside some of Ahmed Seddiqi & Sons’ 51 locations.
This physical presence shouldn’t be underestimated in a region where, according to Mohammed Abdulmagied Seddiqi, people still prefer to make their purchases in stores rather than online. This from the chief commercial officer of a group that recently opened, in Dubai, the biggest Rolex showroom in the world. The brand with the coronet was at Dubai Watch Week – its first participation in an event in the Middle East – with a stand on a par with its status as the world’s largest watch brand. Danny Govberg has represented the brand in the United States for 30 years. “That we are on such good terms with brands and our partnership with the Seddiqis, the Middle East’s leading retailer, show that we are not the enemy. Anything but. These good relations are also because we support the value of watches on the pre-owned market. We have nothing to gain from undercutting prices. We’re here to propose an inventory worthy of the name, to create a standard through authentic watches with a two-year warranty, and to become an independent voice providing information to the watch world. This is exactly what enthusiasts want.”