Specialist
Former executive at Chronext AG
Agenda
- TAM expectations by market and channel segmentation, discussing key drivers and customer adoption trends
- Marketplace vs retail model – sourcing strategies and prevailing operating models
- Watchfinder vs Chrono24 vs Chronext – competitive strengths and threat of luxury brands moving into the pre-owned market
- Unit economics analysis and medium-to-long-term profitability outlook
Questions
1.
How would you size the pre-owned luxury watch market? We could look at this in terms of total size and value in euro terms or penetration levels relative to new sales.
2.
How would you segment the EUR 2bn for the European market across the online, offline and auction channels?
3.
Could you outline historic growth rates in the European market and what you expect them to be over the next five years?
4.
What do you consider to be the key three growth drivers for the 7-10% growth rate you expect for the European market?
5.
Studies suggest the second hand or pre-owned market will outgrow the primary market. What do you think is driving this?
6.
There seems to be an interesting supply-demand dynamic in terms of the biggest growth bottleneck for the pre-owned market. Is this supply- or demand-driven?
7.
There are two models, as you’ve said – the asset-light model, or the marketplace model, where limited inventory is held by the operator, and then more of a retail operating model, where inventory is held by the pre-owned watch specialist. What are the key sourcing avenues for these models?
8.
In terms of the marketplace model, Chrono24 has stated in recent communication that roughly 80% of sales volume comes from commercial sellers, rather than individual sellers, and 20% of trading volume comes from individuals. Do you see that shifting at all in favour of individuals or more in favour of commercial sellers?
9.
How can a marketplace ensure a steady flow of inventory from both commercial and individual sellers?
10.
In terms of making sure there’s a steady flow of inventory, the marketplace model has the stock from commercial sellers. How can you influence that? What levers can you pull to maintain a steady state of supply?
11.
How can a pre-owned specialist ensure a steady flow of inventory with the retail operating model, where it actually holds the inventory?
12.
Do you think we could see a scenario where watch brands themselves would consider supplying the pre-owned market?
13.
Do you see a scenario where brands could directly supply certified pre-owned specialists such as Watchfinder, Chrono24 and Chronext in the market?
14.
What are the comparative advantages or disadvantages of the inventory-light marketplace model vs the inventory-owned retail model?
15.
What do you think is the preferred model? Which model do you think will be more successful as the market matures and why?
16.
What is the model preference on the customer side? Obviously, the marketplace model has a lot of inventory, but this can sometimes lead to too much inventory and it could be difficult to search vs the inventory-heavy model where it’s a more select, curated offering.
17.
How do you ensure pre-owned watches are genuine? How do you build that trust with the customer?
18.
Do you think customers intrinsically trust the inventory-held model more than the marketplace one?
19.
We’ve spoken about the two separate models, but we’re also seeing some pre-owned specialists moving to a hybrid model, so both marketplace and retail. What are your thoughts on this hybrid model, and do you think that’s the correct approach to addressing the market?
20.
What do you think is the optimal volume mix between the inventory-owned and inventory-light models?
21.
What’s the relevance of stores in this pre-owned market, given you said offline share was 25%? How important is that as a sales channel?
22.
What are the difficulties of a marketplace model rolling out a store concept, given the relevance of stores for consumers?
23.
What do you think is the competitive positioning across key European players such as Watchfinder, Chrono24 and Chronext, including the key USPs of each of these operators?
24.
How do Chrono24, Watchfinder and Chronext differentiate themselves in the market?
25.
Do you think suppliers or customers view Chrono24, Watchfinder and Chronext differently?
26.
What are the competitive moats of watch specialists such as Chrono24 and Chronext vs more diverse players such as Vestiaire Collective and the broader second-hand luxury market?
27.
Do you see players such as Vestiaire Collective presenting a threat to the growth profile of specialist watchmakers?
28.
What is the risk of watch brands entering the pre-owned sector with their own platforms and taking share from existing specialists, given you mentioned Audemars Piguet entering the market?
29.
What are the typical repeat purchase rates for buyers in this sector? Chronex talks about the repeat purchase rate being within 36 months of the first purchase. Would you say that’s industry standard or leading?
30.
What opportunities are there to increase the repeat purchase rate within customers?
31.
How do you think about gross margins per watch or on average, and how does that differ from the retailer market gross model? You referenced rough order values in the sector.
32.
What do you see as the key opportunities to improve contribution margins in the pre-owned model?
33.
What are the key ways to improve profitability at the operating or EBITDA level? Profitability is a challenge to a certain degree in this sector.
34.
What is the path to profitability for a player such as Chronext?
35.
Are there opportunities to increase the commission rates in the marketplace model?
36.
I think Chrono24 talks about receiving a 6.5% commission for private customers and then dealers pay between 8% and 10%. How much do you think this could increase by?
37.
What consolidation are you expecting in this sector in addition to Richemont’s acquisition of Watchfinder?
38.
What consolidation do you see if marketplaces such as Chronext merging is not an option?
39.
I know LVMH participated in a funding round for Chrono24. Could that indicate LVMH might be interested in making a third acquisition in the sector?
40.
Do you think we could see any of the other watch brands making a play for some of these pre-owned specialists, similar to Richemont’s acquisition of Watchfinder?
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