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The Grey Market Is Dead! Long Live Certified Pre-Owned!

With the help of Georges Kern, François-Paul Journe, Bucherer’s Patrick Graf, we take a look at how the Certified Pre-Owned market is causing grey market dealers to lose sleep.

By Benjamin Teisseire

Certified Pre-owned has been a buzzword these last few years. Its principle tackles some significant issues in the watch industry: secondary market, excess inventory disposal, and more. But with the explosion of e-commerce, the industry has created a dangerous Wild-West-like marketplace of which brands need to control. Let's take a more in-depth look with help from a few of our friends in the industry.

Perennial products and appeal

In an interview, Breitling’s CEO Georges Kern, emphasized bluntly, “Mechanical watchmaking's priceless luck is to produce perennial products. A timekeeper does not become obsolete like a popular smartphone.”

What Kern means is that, if well maintained, watches can last a lifetime or even be passed down to the next generation. It’s what makes watch collecting so appealing. Moreover, as the general standard of living increases, more potential consumers enter the market, eager to flaunt their good taste.

It is a blessing for all brands. However, for some collectors, the suggested retail prices of today often remain the ultimate hindrance to acquiring another new timepiece. Naturally, a secondary/grey market satisfies these cost concerns and creates a solution which helps collectors quire their next watch at a lower cost outside of a brand boutique.

An additional byproduct of this secondary market is the supply of today’s top models (usually at a premium) to those collectors who tire of waiting on their retailer’s list and crave the latest mechanical beauties at any price. With the internet, selling and buying options have multiplied. But so have the various e-commerce platforms for watches. Coupled with the fact that when supply exceeds the demand, problems arise.

Birth of the grey market

Distribution’s role is to make the latter two meet. When there is unbalance, a parallel (grey) market emerges. The dumping of unsold inventory by brands through such channels is usually a public secret. But it’s clear; the grey market stems from these overabundant stocks.

For François-Paul Journe, who pioneered the reselling of his timekeepers in 2016 by creating his own Patrimoine Service, “the grey market is born from most brand’s over-production. As long as it persists, it will exist. With our limited output (of 900 pieces per year), there is no issue.”

Recently, brands have embraced their ever-growing production. Unsold watch inventory can be dizzying… and loads more come in every year. Until recently, stocks were discreetly disposed of by retailers, distributors or even brands directly on the markets mentioned above. With the explosion of e-commerce, this grey market has become difficult to hide, and discounts have sky-rocketed. As excess volume increase, the impact on brand image starts to be felt. Richemont's buyback of close to 1 billion Swiss francs worth of product over these past two years is indisputable evidence of the magnitude of the issue. At the end of the day, the game was getting very risky for brand image and perceived value by the end consumers.

Some order in a gigantic market

According to analysts from Kepler Chevreux in Zurich, the current secondary market amounts to around 5 billion USD. By contrast, today’s luxury watch market accounts for approx. 47 billion USD (2017 FHS numbers of export price multiplied by 2.5 to represent MSRP). Adding up the large volumes dispatched by brands since the explosion of the craze for mechanical watches more than 20 years ago, this valuation seems largely underestimated.

Based on FHS numbers since 2000, it can be deduced that the market for available Swiss mechanical timepieces could reach more than 400 billion USD! No wonder current projections see the Certified Pre-owned demand outweighing the new market within five years. One understands why the brands finally got concerned about it.

Richemont’s recent takeover of Watchfinder, a pre-owned watch specialist, is a clear sign that groups show a strong will to put some order in this horological wild west which was becoming uncontrollable. As Georges Kern underlines, “It is urgent that the secondary market structures itself. Today it is still dominated by the grey market, where consumers have no guarantee on what they buy. Brands have the opportunity to create a clear and transparent channel in which overstocks can be sold safely.”

Patrick Hoffmann, executive vice-president in Switzerland for WatchBox, certified resale specialist founded in 2017, specifies, “It is not a new kind of business. The automobile industry has been doing it for decades! The watchmaking industry challenge is to become transparent, so the final consumer realizes the true value of the products.” The same logic can apply to other major certified specialists, like True Facet or Crown & Caliber: the timepieces offered are certified, sometimes even by the brand directly, all in full transparency.

A Win - Win - Win situation

Tackling this market will enable brands to regain control over the discounts offered hence monitoring better the residual value assigned to their name. It will also work as a reassurance for the mechanical watch lovers who will then be more inclined to pay more to have a certification of authenticity and a double warranty of origin and functionality. Finally, it will comfort the collectors on the lower depreciation of their growing collection of beautiful timepieces. Everybody wins here.

Isn’t there a risk of cannibalizing new watch sales?

Patrick Graf, Chief Commercial Officer of Bucherer’s watch division, provides a clear vision of the issue, “There are different ways to look at CPO. Of course, there is always a risk of selling a pre-owned watch instead of a new one. But at the same time, there is also the opportunity to sell a new watch to someone who initially thought to buy a pre-owned watch. We have learned with the acquisition of Tourneau - who is one of the leading retailers in trading certified pre-owned watches – that the opportunities are much bigger than the threats of cannibalizing new sales. “ 

Georges Kern wholeheartedly agrees, “Is a BMW with 50,000km in competition with a new BMW? The answer is in the question.” In the end, the certified pre-owned market will actually stabilize the brand’s rating, increasing their perceived value in the mind of the buyers of new models and facilitating the brands and their retailer’s work.

But what about competition with retailers?

Breitling’s Kern muses, “On the contrary! We want to pursue a true omnichannel strategy: it means we will keep working with retailers, create our own e-commerce and collaborate with online platforms like Mr. Porter. In the end, the consumer does not really care where he buys his Breitling. We have to offer him a multitude of access to the brand.”

At the head of one of the largest watch retailers in the world, Bucherer’s young CCO further explained, “It depends who is operating the CPO business. For many years the authorized retailers and even some of the brands ignored this business for different reasons. This will change in the near future, and therefore the question of the competition will change as well.” 

Indeed, retailers need to re-invent their business model and the CPO, in collaboration with the brands themselves, opens up new opportunities in total transparency. A welcome change once again.

The always outspoken F.P. Journe has a slightly different view, “Our goal is more to offer a true new service, as did Jean Todt with Ferrari and its ‘classic cars.' Refurbishing with original factory parts and certifying directly from the brand. Our Patrimoine Service only buys models that are not in the current catalog. Our approach is that of collectible timepieces, so our retailers are not really concerned.”


From an easy solution at the beginning, the grey market became a growing threat. As Patrick Graf puts it, “The fact that authorized retailers and even the brands start investing into CPO concepts and collaborations will have a huge impact on the grey market business. It will probably not eliminate the grey market, but it will definitely reduce the numbers sold through unauthorized retail channels.”

A real opportunity starts appearing. Nonetheless, for the residual value of timepieces to stabilize - or even increase - the demand has to be superior to the offer. Patek Philippe, Audemars Piguet, and François-Paul Journe understood this a long time ago. And no matter the quantities produced. Rolex and its yearly production of close to one million pieces is perfect proof of this as their resale price are often on par or above the initial public price. It is the brand’s responsibility to ensure that the perceived value of their precious timekeepers lasts: through their intrinsic quality, and through their scarcity, and through the authenticity of the pieces on the secondary market.

Let's rejoice that more new watches, some never really worn, or certified second-hand pieces with the price adjusted according to actual demand are going to be available to buy with all the necessary warranty and authenticity.

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