Is Rolex's certified pre-owned plan a ‘positive development’ for the watch industry?
Leave it to Rolex to shock the watch industry.
The undisputed king of the high-end timepiece business, Rolex surprised the world of watch dealers, collectors, and amateur Ebay watch flippers by launching its own Rolex-backed certified pre-owned (CPO) program.
Rolex had stayed clear of the pre-owned game up until now, so its entrance into this lucrative market is a somewhat surprising one, given that the market for brand new Rolex watches is robust, with long customer waiting lists. Also, the second hand market for Rolex is still relatively strong, with several watches selling for more money than when new despite recent price weakness.
Rolex's move into pre-owned comes as prices in the secondary market for highly sought after, high-end watches like the Rolex Daytona, Patek Philippe Nautilus, and the Audemars Piguet Royal Oak slid17% in the past 6 months to pre-boom levels.
Rolex said the program will let retailers and authorized dealers (ADs) in the brand’s “official distribution network” sell pre-owned models that are certified authentic and come with new two-year international warranties.
This basically means the watches will be certified and guaranteed by Rolex itself, which the Swiss watchmaker said will “bring added value to the existing supply of pre-owned Rolex watches.” Rolex said watches that are three years old or older will qualify for certification, and in the beginning only Bucherer boutiques in six European countries (Switzerland, Austria, Germany, France, Denmark and the U.K.) will offer these services starting this month.
“I am still surprised it actually happened, I think it’s a massive undertaking with all kinds of logistic challenges but I do think it’s a positive development for the pre-owned secondary market,” said Paul Altieri, founder and CEO of Bob’s Watches, a pre-owned watch dealer. “It will be interesting to see how this huge project unfolds and how prices are determined."
For others like Eric Wind, a noted collector and owner of high-end pre-owned retailer Wind Vintage located in Palm Beach, Florida, the move wasn’t out of the blue.
“Rolex starting the certified pre-owned program has been an open secret for quite some time - it absolutely was not a surprise,” Wind said in an interview with Yahoo Finance.
Wind believes the move into pre-owned is designed to help Rolex authorized dealers and boost the brand. “It helps Rolex retailers have something else to have in the shelves and cabinets to sell since new Rolex watches are essentially always sold out, and it also helps to legitimize the secondary market for Rolex watches,” he said.
The retail effect - authorized or not
Despite the recent slip in pre-owned prices for highly coveted models, earnings at watch retailers like Watches of Switzerland (WOSG.L) have been robust, even with global economic headwinds. Though Watches of Switzerland sells new watches (and is a Rolex authorized dealer), the retailer offers a large collection of pre-owned watches as well. The ability to potentially offer certified pre-owned Rolex models could offer another enhanced revenue stream in this market. (Watches of Switzerland declined to comment on this story at this time.)
There has been some concern among collectors and industry veterans that Rolex entering the pre-owned market would crush the values of those buying and selling Rolex watches that are ostensibly not certified pre-owned. The fear is that there might be a two-tiered system of values for watches in both classes.
At least in the near term, experts like Wind and Altieri believe those fears are overblown, as bigger dealers have been operating in this space for years and are setting prices that other retailers use for guidance. Some retailers have their own version of a CPO program for second-hand watches, which can boost values.
“I don't believe there will be a two-tiered structure for pre-owned Rolex watches, at least not for some time,” Wind said. “The secondary market is very established and I don't think customers are trained to want certified pre-owned at this time since it has not rolled out yet. It is possible that in a few years some customers will prefer to buy a watch with that certified pre-owned tag for modern pre-owned watches.”
Altieri also said the entrance of Rolex into the pre-owned market won’t hurt the business prospects of non-authorized dealers. “Well, having Rolex embrace and get involved with the market for second hand watches is a terrific endorsement for what we have been doing for over 10 years,” he said.
Altieri, though, added: “We do not have any immediate plans to become an authorized dealer, but I would never say never.”
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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