As little as five years ago, the pre-owned, or second-hand, luxury watch market was underserved, poorly integrated and often mistrusted.
But, with second-hand boutiques springing up around the UK and one pre-owned retailer preparing to offer lifetime warranties on its watches, what was once the luxury watch market’s unsightly underbelly is showing signs of maturity and rapid growth. The sector is showing signs of a sharp rise in sales.
Already this year, Watches of Switzerland has opened a specialist pre-owned boutique in Glasgow, and Watchfinder has established a first bricks-and-mortar outlet in London’s Royal Exchange to anchor the online business that it began in 2002.
When Watchfinder started trading, the average pre-owned watch sale was £800. That has risen to £3,000 today, and the company sells about 600 watches a month. In 2012-13, it turned over £16.5m, and its lifetime turnover is fast approaching £85m.
Historically, the business has expanded by about 20 per cent every year, but with the establishment of its first showroom, it has reported a 100 per cent rise in sales in the first quarter of 2013, with sales projections for the year rising steeply to £26m.
“There’s been a maturing of the pre-owned market, like cars 30 years ago,” says Stuart Hennell, Watchfinder’s managing director. “The impression of a pre-owned watch dealer was not the most attractive – it was seen as maybe a little bit grubby. Ten years ago, no one was selling [second-hand] watches with warranties. Everything was sold as seen and there was very little interest in the customer down the line if something went wrong. We’ve done a lot of work changing people’s perceptions. We want to give customers the impression and experience they get when they’re buying a new one.”
Growth in the sector means there are about 50 serious companies in the UK pre-owned market today. Watches of Switzerland – part of Aurum Group, which was acquired by the US private equity house Apollo in December – plans to open five further pre-owned boutiques, and will launch an ecommerce platform for its pre-owned collection later this month.
“Our Glasgow boutique is the first of a number of opportunities,” says Justin Stead, Aurum Group’s chief executive. “We’ll combine it with an aggressive online expansion under the Watches of Switzerland ‘vintage’ brand.”
Some argue that growth in the sector is due to unprecedentedly high prices for new watches over the past decade. According to Danny Pizzigoni, who co-founded the Watch Club shop in London’s Royal Arcade in 1996, a watch loses an average 20 per cent of its value in the first six months. In a troubled financial climate, this makes a pre-owned watch a more attractive proposition. “The pre-owned industry has grown in the UK simply because of the financial situation,” says Mr Pizzigoni. “People are thinking they can buy a brand new rose gold Daytona for £25,000, or they can come to us and buy one that’s six months old, still with a year-and-a-half warranty from Rolex left on it, and pay £18,500.”
Mr Pizzigoni also says that the habits of collectors have changed. The trend today, he says, is to liquidate watch assets before investing in new pieces, where once collectors could afford to go on buying without disposing of existing items.
With no independent body monitoring the pre-owned industry, there are no official figures indicating its size but, in the UK alone, it is believed to be worth hundreds of millions of pounds
Watchfinder now operates a 4,000 sq ft servicing centre in Maidstone, where all its watches are inspected and serviced or refurbished as required before being presented for sale. Mr Hennell believes this facility will enable him to introduce a lifetime warranty, a previously unheard of product, even in the new watch market, where warranties have only recently extended beyond two years.
“Confidence in the product is paramount, and there’s no better statement of confidence than a lifetime warranty,” says Mr Hennell. “We also think this product will make customers very loyal – if a customer has a lifetime warranty on a watch, I’d be very surprised if they look elsewhere to sell that watch before discussing it with us. It’s about generating long-term relationships.”
Those of a more conservative bent will wonder whether such a policy is manageable. “It’s perfectly achievable,” says Mr Hennell. “If you look after your watch properly and get it serviced, and you send it back to us and we can keep it in perfect working order, I don’t see any reason why we can’t look after your watch for life.”
Not everyone is convinced, however. “As after-sales service has improved, the gap between owning a new and a pre-owned watch has grown considerably,” says Bill Prince, deputy editor of GQ magazine and editor of GQ Watch.
“Once upon a time, you took your chances with both, but a new piece will always win out in my book for boasting the most up-to-date movement and the certain knowledge that only its maker has been inside before purchase.”
And what of the brands? Any thoughts that uncontrolled second-hand sales of its watches might be bad for business are swiftly cast off by Mark Hearn, Patek Philippe’s UK managing director. “Pre-owned watch sales generally help the sales of new watches because they allow consumers to experience high-end watch brands very often at a reduced entry price level,” he says. “This fuels an appreciation for the value of the product that stimulates future …sales.”
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