Authenticity and trust in the pre-owned market

Authentication is an absolute must for any retailer or marketplace competing in the luxury retail space, suggests Keith Metcalfe, Director of Luxury for eBay UK.

He has a point.

For two years leading up to the first quarter of 2022, a run on the secondary watch market led to stratospheric price rises, but the slow-down from April last year, followed by a much-needed price adjustment, led to turmoil among some smaller players who saw sales freeze up and the value of their pre-owned inventory drop sharply.

For eBay, experience and reputation meant that it is not only weathering the storm that the wider market is facing, but it actually thrived during this turbulent time, with sales consistently rising year on year by double digit percentages.

There are four interconnected reasons for this.

First, eBay has greater reach — a bigger audience — than any other marketplace on the planet, so watches keep selling.

Secondly, dealers and consumers are protected from potential problems with transactions by the Authenticity Guarantee that eBay launched back in 2020.

Thirdly, eBay has been a leader in the trade of luxury watches for decades, and experience counts when market conditions are more challenging.

Any fly-by-night flipper could make money in the two years leading up to April 2022, but it took a breadth and depth of skills to provide the buyer confidence to succeed in the tougher market since.

All of this contributed to the fourth eBay advantage, that more sellers, and better quality sellers, flocked to the platform, safe in the knowledge that their best path through choppy waters was in a flotilla of the most seaworthy vessels on the most trusted platform.

eBay UK reports that the improved seller experience and protections that come with the Authenticity Guarantee have attracted more ‘serious’ sellers.

“We’ve seen significant seller and listing growth at all price points, but by far the biggest growth in seller and listing numbers has been on watches priced at over £5000. This is all down to our increased buyer protections that have improved the conversion rate on higher value timepieces,” says Keith Metcalfe, UK Director of Luxury for eBay.

There is also more competition between these higher quality sellers, which is raising standards even further and faster. They are learning from each other, and through education programmes offered by eBay, on how to grow their operations on the platform.

Some of the biggest traders in the world, which sell directly to their customers, use eBay for its massive global reach, and also because its fees are so competitive, particularly when selling more expensive watches.

There will be a slight increase in these fees, taking effect at the beginning of March, but eBay is confident it will still be the best and most cost-effective place to buy and sell.

“We have made substantial investments in our watches category that have really benefited sellers, including our Authenticity Guarantee, and our dedicated customer service team. Even accounting for the March increase, our fees remain competitive versus other marketplaces in this category, so we’re confident that sellers will still come to us to list their watches,” Mr Metcalfe says.

There is a tiered system of fees for watches. From March 2, sellers will be charged 12.9% for sales up to £750 (up from 11.9%).

Above that level, eBay charges 12.9% for the first £750 and 3% (up from 2%) for the portion of the sale above £750. So, for a £2,000 watch, the first £750 would generate a fee of £96.75 (at £750 x 12.9%), but for the remaining £1,250 the fee would only be an additional £37.50 (£1,250 x 3%).

The higher the value of the sale, the lower the percentage fee becomes, so the fee for a £10,000 watch sale would only be £374.25, or 3.75%.

All of these factors have helped eBay grow, even through the more difficult quarters of 2022.

“Watches, even before the launch of Authenticity Guarantee, have always been a major part of our business. The double digit growth we have seen in the category since launching the service in 2021, is testament to the confidence and trust we have built with customers as a result”, Mr Metcalfe reveals. “In 2021, a watch was purchased from eBay every 28 seconds in the UK.”

It is hard to overstate how much of a game changer eBay’s Authenticity Guarantee has been since it launched, first in the United States in 2020 as a service to ensure every watch sold for over $2,000 is checked on its way between seller and buyer, and a year later in the UK, where the threshold is £1,500. In Germany the guarantee kicks in for watches sold at over €1,800.

On both sides of the Atlantic, the multi-point physical Authenticity Guarantee checks are carried out by eBay’s partner, Stoll & Co., which ensure that every watch is verified as authentic and that the item matches the details in the listings, so customers know they are getting exactly what they paid for.

Authenticity Guarantee is not just offered with watches, it also covers trainers, luxury handbags and, most recently in the US, jewellery.

Since launching what eBay internally calls ‘AG’ in the United States, the UK, Germany and Australia, more than two million items across these categories have been authenticated.

“Launching Authenticity Guarantee was a no brainer for us. When customers are purchasing high value items like watches, they need to know they have an expert team verifying the item, both in terms of quality and authenticity, so that when that item arrives at their door they are completely satisfied with their purchase. It has been a true game changer for eBay across our luxury business for both shoppers and our sellers,” Mr Metcalfe states.

Buyers and sellers in the UK have embraced the Authenticity Guarantee with the same enthusiasm. “The first year of Authenticity Guarantee on eBay.co.uk has been just as successful, surpassing our own expectations,” says Mr Metcalfe. “The programme has driven traffic and conversion through 2022, resulting in higher luxury watch sales than we’ve ever seen before. The number of sellers, along with listings, has been consistently stepping up every single week.”

eBay’s elevated service comes at a time when consumers are embracing the buying and selling of luxury pre-owned goods like never before. The circular economy, where products are reused, recycled and resold to extend their lives, is being embraced as part of a social movement to protect the planet. Disposable fashion is being judged for the environmental damage it does, while items like high quality mechanical watches are appreciated for their ability to keep ticking not for years, but for decades.

“The Rise of Resale: Luxury As Currency” — a 2022 report from BoF Insights, the data and analysis think tank of The Business of Fashion — shows just how far and fast the market for pre-owned luxury has developed in recent years. A survey completed by over 1,000 respondents in the United States found that more than a quarter had purchased a luxury second hand accessory like jewellery, watches or handbags in the past 12 months. Also,13% had sold items online.

Buying and selling online, even for casual punters, becomes a habit. And that habit also changes behaviour. A hefty 57% of people responding to the Business of Fashion survey said they believe the value of their luxury accessories will likely appreciate if they care for the condition of the items. Small wonder then that people keep their boxes and papers for the watches they buy, and ensure they are cared for.

Trust in shopping online for pre-owned goods has risen sharply in recent years, but 82% of luxury shoppers still say physical authentication is the most important service that convinces them to buy second hand.

There are opposing forces at play in the market right now. While consumers are more likely than ever to buy luxury pre-owned goods online, there has been a well-publicised correction in prices on the secondary market for the most actively traded watches, which has dampened demand.

A report on the secondary market published in February by investment bank Morgan Stanley, says that prices for the big three brands — Rolex, Audemars Piguet and Patek Philippe — which account for 70% of all sales, have continued to fall all the way into January of this year after peaking in March 2022.

However, the study notes that the market has been far less volatile for most watches. The vast majority of watches did not see prices rocket into the early months of last year, and have not plummeted since. They rose and fall a little but, because they never traded at over retail, there was no pile-in by the flippers.

So, while prices for Rolex, AP, Patek Philippe, Audemars Piguet and even Tudor fell on the secondary market, there were notable rises for TAG Heuer, Tissot, Breitling, Bulgari, A. Lange & Sohne, Blancpain, Girard-Perregaux, Jaeger-LeCoultre, Hublot and Zenith.

Aggregate the whole market and the rollercoaster in prices looked a lot more like a gentle rise and fall. For eBay, which has a huge selection of watches on sale at any one time, the picture was less gloomy than reports from the wider industry suggested.

“Contrary to the doom and gloom narrative around particular luxury watches losing value, eBay actually saw watch prices on the UK marketplace maintain strength with brands like Rolex, Omega, IWC and Tudor showing positive increases in selling price. We partly attribute this to the increased confidence that both buyers and sellers have when trading on eBay,” Mr Metcalfe reports.

It is not easy to explain what has been happening over the past year in a nutshell, but what traders have been telling WatchPro is that two markets have developed in recent years. One market was business to business — dealers selling to other dealers who were making a margin on each transaction because prices were rising relentlessly.

This market all-but seized up around the time of Watches and Wonders in Geneva last year because traders would not buy on one day if they thought the price would be cheaper the next.

Then there were consumers, who simply wanted to buy the watches they loved. They were finding great watches at attractive discounts, and happily pulled the trigger on purchases. Prices had not exploded for core collection Tudor Black Bays or Breitling Navitimers, so watch lovers were buying them on the secondary market at similar prices throughout 2021 and 2022.

That partly explains eBay’s resilience in a tough market, but there were other factors at play, including a growing cohort of enthusiasts who had caught the bug for buying and selling, and found just as much pleasure in their hobby as prices became more volatile.

Mr Metcalfe describes this type of customer, and explains that they often have eclectic tastes, but a general love of luxury and the trading process. eBay calls it the eBay multiplier effect.

“Since we have launched Authenticity Guarantee for these luxury categories, we have seen a halo effect happen. More people are coming to eBay and having a positive experience with the service which has led them to go on to purchase from other categories. The luxury watch customer for example often also likes to shop in our motors category showing the knock on effect the service is having for other parts of the business,” he reveals.

While there were two trends playing out in the secondary market for luxury watches, there were also two forces driving the wider retail market. The economy, particularly in Europe, was turning cooler as we headed towards the new year.

That dampened spending overall, but fired up people hunting for bargains. In addition, buying second hand has been rising in popularity among younger people who like the sustainability of giving a second or third life to a beautifully made luxury item like a watch or handbag.

Another report, published by eBay last year and based on a worldwide survey of almost 4,500 customers in October 2021, found growing acceptance for re-commerce and rising momentum, particularly among younger people.

Around 80% of people in the Gen Z age group had bought pre-owned items in the prior year; the figure was 78% for the slightly older millennials, 75% for Gen Xers and 70% for the baby boomers. Almost three-quarters of respondents, of any age, said that buying pre-owned had become more common in 2021. Almost half said they sold more pre-owned goods in the year of the survey compared to the years leading up to it.

Bargain hunting was the greatest motivator for buying second hand, with 73% of respondents to the eBay survey saying they chose to shop for pre-owned because it was less expensive than buying new. 37% said they went to the secondary market because they could not find the item they wanted new, a key driver for waiting list watches. Sustainability was also a factor for around one-third of people buying luxury goods and 27% of sellers.

A more recent 2022 study by Deloitte reached similar conclusions.

Asked how likely it was that somebody would buy a pre-owned watch in the next 12 months, 48% of millennials said they would purchase. This dwindled to 26% for Generation X, currently aged 43-58, and just 12% for Boomers, who are now in their sixties.

Watch brands, including the mighty Rolex, have concluded they have to become real players in the pre-owned space. Late last year, Rolex announced phase one of a programme to help its authorised dealers buy and sell watches older than three years.

Every watch aged over three years could be bought by the authorised dealer, serviced by the retailer or by Rolex, authenticated by the brand and then sent back to the retailer to be resold with a two-year international guarantee from Rolex.

The Rolex project was limited at launch to a single authorised dealer — Bucherer — and only rolled out through its European showrooms. But news about its global expansion is expected at this month’s Watches and Wonders in Geneva.

eBay wants to help brands accelerate their move into certified pre-owned watches and has the depth of experience to make it a success.

“Authentication is good for brands, buyers and sellers and we applaud any moves towards the shared goal of a more trusted and therefore sustainable market for pre-owned luxury. If brands want to grow, it’s a move they have to make if they don’t want to miss out. That being said, creating such a service is not trivial and eBay has 27 years of experience of running a marketplace so there are challenges we have met and overcome over those decades that many are only starting to experience, but need to solve in order to offer an excellent service. So we are pleased to offer up our marketplace and service to brands and sellers who want to access buyers where they shop.”

As Deloitte notes, there is a rising level of professionalism among the biggest players in the preowned sector, and this is giving consumers greater confidence to spend more, and more often.

There have been a number of studies that have predicted the market for second hand watches will grow considerably faster than for new pieces.

The most recent, by Swiss-based LuxeConsult, predicted that global sales for new watches would rise by 4% annually over the next decade, but sales of pre-owned watches would increase by 12% per year.

From a starting point of CHF 20 billion in sales for preowned watches in 2021 and CHF 46.3 billion in retail sales for new pieces, LuxeConsult calculates that the market for pre-owned will be as big as for new watches by 2033, by which time they will both be worth CHF 78 billion at retail. That report was compiled during the period when prices for the hottest watches were falling fast, but it concludes that this will be seen as a minor correction over a long time-period.

eBay UK’s Mr Metcalfe agrees. “eBay is always a good temperature check on the pricing and value of brands and watches. With scarcity and long waiting lists from the top brands within the industry, we know such items are holding their value and customers will continue to invest in timepieces as an asset class. With the added benefit of Authenticity Guarantee, we can only see the number of customers choosing to do so on eBay will grow.” he concludes.