Luxury watch shortage drives growth of $20 billion secondhand market as start-ups rush to cash in

A rush of firms are vying to turn out to be the eBay of high-end horology — together with the storied on-line market itself.

Demand for high-end watches exploded throughout the Covid-19 pandemic. However the Huge 4 watch manufacturers — Rolex, Patek Philippe, Audemars Piguet and Richard Mille — are holding agency on the restricted manufacturing runs that make their timepieces so uncommon. The result’s an internet growth within the enterprise of shopping for, promoting and flipping pre-owned and classic watches and a rising variety of start-ups competing to turn out to be the dominant digital market.

McKinsey estimates that pre-owned watch gross sales hit $18 billion in 2019, and will high $30 billion by 2025. Pre-owned watch gross sales will likely be about half the dimensions of the marketplace for new, retail watches by 2025, up from a few third at the moment, in response to the consulting agency.

“The pre-owned watch market continues to be very very similar to the Wild West,” mentioned Toby Bateman, CEO of Hodinkee, a well-liked watch collector web site. “There are a whole lot of watch-selling platforms. And prospects do not essentially know who they’re shopping for the watch from. They cannot assure that it’s genuine. They cannot assure that it isn’t a Frankenwatch. They usually cannot assure that the watch is working correctly.”

On Tuesday, Hodinkee launched its pre-owned watch store, right here it is going to purchase and promote watches produced after 1990. The corporate — which raised $40 million in December from the likes of NFL quarterback Tom Brady, singer John Mayer, Apple alum Tony Fadell and investor Peter Chernin — goals to be the “world’s preeminent model for all issues watches.”

Hodinkee’s pre-owned store will begin with an assortment of 250 pre-owned watches and provide authentication and refurbishing from its state-of-the-art watch facility in Atlanta. Bateman mentioned Hodinkee’s benefit over its rising listing of rivals is its experience and historical past as a trusted identify in watches.

Nonetheless, rivals are attracting investor consideration. Germany-based Chrono24 lately raised 100 million euros ($116 million) from traders together with Basic Atlantic and LVMH CEO Bernard Arnault’s Aglae Ventures. The funding valued Chrono24 at greater than $1 billion, making it the primary “unicorn” within the section. The corporate mentioned it carries about 500,000 watches from greater than 3,000 retailers and over 30,000 non-public sellers.

In the meantime, Switzerland-based Chronext was planning to lift about $270 million in an preliminary public providing, which might have valued the corporate at greater than $1 billion. But Chronext mentioned final week it was suspending its debut as a result of “opposed market situations for high-growth firms.”

Chronext has put collectively a star-studded board — together with former Facebook advertising and marketing chief Gary Briggs and former Barneys New York CEO Daniella Vitale — and goals to develop within the U.S. and Asia.

Corporations like Watchfinder, WatchBox and Watchmaster are additionally increasing and pushing for market share. Even eBay is taking intention on the Rolex crowd, launching an authenticity assure program and concentrating on higher-end watch collectors.

The query is how lengthy can the present watch growth proceed, and whether or not there are sufficient on-line gross sales to go round. The Huge 4 watch manufacturers that drive many of the high-end gathering are all privately owned and have maintained their low manufacturing numbers regardless of large demand, with a purpose to protect their storied high quality and exclusivity. In accordance with a report from Morgan Stanley, Rolex bought 810,000 watches final yr, whereas Patek bought 53,000 watches, Audemars 40,000 and Richard Mille 4,300.

Demand is anticipated to proceed to outstrip provide, at the very least within the close to time period. With chrome steel sports activities watches and different common fashions all however unattainable to purchase at retail, with lengthy ready lists and scarce allocations, costs within the secondary market are rising. A Patek Philippe Ref. 5711 Inexperienced Dial, which retails for $35,000, auctioned in July for $490,000. Values for the Audemars Piguet Royal Oak 15500ST (blue dial) have practically tripled since 2017, to greater than $55,000, whereas the worth of the Rolex Day-Date 40 is up 76% since 2017 to over $50,000, in response to Chronext.

Trade executives say hovering international wealth, pushed by shares and crypto, together with a proliferation of on-line watch collector and data websites have spawned an entire new era of younger collectors shopping for and promoting watches on-line. Social media has additionally powered gross sales, as extra collectors wish to flash their Swiss standing symbols on Instagram and TikTok. For watch patrons and sellers, start-ups and on-line marketplaces, it stays to be seen what number of of these new merchants will stick round if pre-owned costs and demand falls.

“There are much more folks at the moment that think about themselves to be collectors and lovers than there have been even just some years in the past,” Bateman mentioned.

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