A FLOURISHING WILD WEST

Brands’ interest in entering the second-hand fray is noteworthy – especially when one considers that, for the longest time, most have shunned the pre-owned market for their timepieces, preferring to concentrate on selling new products. With a couple of exceptions: Vacheron Constantin, for example, actively acquires select vintage watches that it restores. Those timepieces are then offered for sale, with a full warranty, in the brand’s Les Collectionneurs collection as a curated selection. Cartier, on the other hand, supports its vintage and pre-owned timepieces with a restoration service at its workshop in downtown Geneva, albeit on a limited basis, given the cost of such work. Otherwise, this segment of the industry has been left wide open to private dealers offline and online, Internet platforms such as Carousell and eBay, and auction houses – each, of course, with their own pros and cons. Consider auction houses, for instance: Once limited to just vintage timepieces, auctions are increasingly shifting towards modern ones, with some lots going under the hammer just a few years after they were purchased brand new.

Experts put every lot under scrutiny here, so the provenance of each watch on auction is more rigorously ascertained, as compared to one being flipped by an unknown seller in an online marketplace. On the flip side, auction houses charge various fees and premiums that translate into additional costs for both buyer and seller.

Largely left to its own devices, the pre-owned segment of the watch market has flourished for various reasons.

For a start, buying and owning pre-owned luxury watches is no longer taboo; buying and selling second-hand timepieces is now seen as a perfectly viable way to own multiple timepieces. Additionally, the secondary market is often the only way to obtain out-of-production timepieces, which sometimes go for more than they did brand new.

Transaction and information costs have also gone down significantly, on the back of rapidly developing e-commerce and Internet trading technologies. The adage of “buying the seller” still applies, whether one is dealing with a business or individual, but it’s far easier now to look up a seller’s transaction history to gauge their reputation.

BEYOND IMMEDIATE GAINS

Immediate-profit motive aside, there is one big difference between what drives existing pre-owned watch dealers, and brands: For the latter, controlling its pre-owned market is also about building and protecting the value of its name and its watches.

Busser considers the performance of a brand’s pre-owned watches to be a sign of its strength. “If you sell 50,000 new pieces a year, but an existing client must sell his watch at 70 per cent off retail price on the pre-owned market, then your brand isn’t a strong one,” declares Busser. MB&F timepieces routinely hammer for over their retail prices, thanks to their limited production and strict adherence to it – unlike some brands that reissue popular models or references, a discontinued MB&F product remains so forever.

Even so, Busser still sees the need to exert greater control over the performance of his pre-owned products. “Of course, different pieces will have different degrees of desirability over the years, but this is something we want to work on and support, and probably at a loss. But that’s fine – this is part of brand-building and not money-making.”

Jean-Claude Biver, head of watchmaking at LVMH – which owns brands like Tag Heuer and Zenith – sees the pre-owned market as an indirect determinant of new watches’ success. Biver reveals that Tag Heuer has set up a restoration department for its vintage watches, with a team inside responsible for authenticating and certifying them, should owners request it. “It protects the vintage market and hence the history and legacy of the brand,” says Biver, who added that “the more collectors are interested in our brand’s history, the more young people will be interested in the brand’s future”.

THE WAY FORWARD

With the various brands adapting different strategies, the jury is still out on how the second-hand market will evolve – if at all. For watch buyers, this will almost certainly be a good thing, as increased competition leads to more choices and keener prices. On the other side of the fence, a brand that successfully diversifies into the pre-owned business will enjoy an additional revenue source, with potential synergies between its new and pre-owned watch businesses.

This may spell trouble for pre-owned watch retailers. Direct competition from brands may not simply erode their business, but also render them redundant. After all, a pre-owned Breitling timepiece that’s been officially certified by Breitling itself does look more attractive than one from a third-party retailer. To adapt, these retailers will need to differentiate themselves, whether in terms of pricing or other services.

Although it’s a common observation that the watch industry changes at a glacial pace, it’s also true that the demonstration effect is strong among the players. Should just a few major brands find success with a tweaked business model involving their preowned timepieces, many others may quickly follow. When that happens, a sea change will be upon us.