Chapter 3: Brands in the Preowned Market

An evolving trend in luxury watches involves brands taking an active role in the preowned market.  I first wrote about this topic last year when Audemars Piguet received attention for its plan to buy back its preowned watches and resell them, perhaps as an upgrade to a new watch purchase.  I shared reasons to believe that this might not be viable in the long-run.

Chapter 2 of this story unfolded in Melbourne, Australia late last year.  Vacheron Constantin recently opened a boutique in Melbourne.  Soon after that opening, timepieces from the brand's "Les Collectionneurs" effort were available for purchase. 

"Les collectionneurs d'estampes" by Honoré Daumier

Vacheron is actively buying preowned timepieces, refurbishing them, and selling them back to the community.  Regrettably there is some opacity when it comes to the sourcing and pricing of these pieces.

This week WatchPro provides us with chapter 3 of the story.  Independent brand Meccaniche Veloci (MV) is now buying back its preowned watches as part of a "trade-in" program.  MV has differentiated itself from the Vacheron effort in that they will only buy back a watch when a collector purchases a new watch.  Second, MV publicizes the prices at which they will buy the watches.  This provides us with a wonderful opportunity to assess at least one strategy for entry into the preowned market.

First, I would like to commend this brand for its bravery.  There is no hemming and hawing about watches as investments, that they could increase in value, etc etc.  Instead, for each reference, this brand publicizes the original price and the price at which they will buy back.  This is remarkably transparent.  Across all their editions I calculated a depreciation of 52%.  I'll note that the published buyback prices are concentrated on titanium models, by and large.  Owners are able to send in a picture for any model and receive an estimated buyback price.

This is a bold statement by MV.  It almost surely eliminates flippers and speculators from the buying pool. 

The MV Calibre MV8801

But given the more aggressive techniques used by some other brands to avoid flippers I think this is a very very smart move.  The potential pool of MV buyers will, going forward, almost certainly only contain people who truly love the brand.

I've also concluded that this is a very very good service for those who bought MV in the past.  In the table below I present different MV references, the buyback price offered by MV, and the secondary market environment for a reference based upon my research on recent sales.

Reference	Buyback Price	Market
Quattro Valvole   W124K435	$2,060	$1,299 (1 sold)
Due Valvole W127N283	$1,240	Unsold at $2,030
Helmet W124N458l	$2,060	Unsold at $1,632
ChronoDriver W131K257	$1,800	No Listings
CorsaCorta W129N475	$1,200	No Listings

Recent activity indicates that the preowned MV market is thin.  That is, there just aren't very many pieces out there for sale.  It does seem like the market was thicker about five years ago but, for whatever reasons, that picture has changed.  MV preowned watches are not liquid, at least when it comes to these references.  Under such circumstances it does make a lot of sense for a brand to offer a preowned buyback program.  MV is effectively acting as a "market maker."  Owners may now say "hey, I can sell mine for less than the buyback value, let me list it" so we might see product come onto the market.  And buyers will see low prices outside of the buyback program as attractive.  It also seems that MV is offering good prices based upon the one sale I was able to find (the Quattro Valvole).  The brand is offering a $760 premium over the secondary market.

A few more observations.  Let's return to the fact that these buybacks occur only when a buyer is "upgrading" to a more recent release.  Many of those releases are in a new, presumably higher margin, segment characterized by five figure prices (none of the listed buyback references had greater than a four figure price when new).  This means that MV is effectively pulling existing owners along into that segment.  It is rewriting its story and re-positioning closer to the more haute horology end of the spectrum.
Buyback is clearly a key component of MV's pivot since the entrepreneur Cesare Cerrito took over in 2015.

From this perspective the new service could be far cheaper than using marketing or other such mechanisms to achieve the same outcomes. 

The MV Moneymaker ref W10NV2MM

And, importantly, the prices of existing references will not be cut in order to sell units.  Instead, the "markdown" is hidden in the buyback.  Since luxury watches are likely Giffen goods, ie a high price increases demand, MV is able to avoid the adverse quality signal of  reducing prices.  Other brands have resorted to actually destroying unsold product in order to avoid price decreases (although MV may also destroy the buyback preowned pieces, we don't exactly know).

In summary, it is very encouraging to see an independent trying a new strategy.  In order for the Swiss luxury market to thrive and succeed such innovations are almost a necessity.  It remains to be seen if the strategy will work or require alterations.  But it will no doubt be worthwhile to read the next chapter of this story.