With estimates for the size of the secondary luxury watch market ranging from $5 billion to $15 billion, it is little wonder that businesses are popping up like mushrooms with the aim of cashing-in.
Richemont’s acquisition of Watchfinder in 2017 for a rumored £250 million is an additional incentive for entrepreneurs to pile in with the hope that they could be bought.
Like any gold rush, there will be a handful of prospectors who strike it rich and thousands that lose their shirts.
And, like most nascent industries, the most successful players will gobble up some of the more successful start-ups before they grow too big to threaten.
Delray Watch is one of the disruptive start-ups gaining traction in the United States with a business that is less than two years old but is already notching annualized sales of $3.3 million, according to its founders John Pietrasz and Federico Iossa.
Just 22 months the founders sketched out a business plan to buy and sell pre-owned watches on a kitchen table. They scratched together $4000 to buy their first pieces.
Mr Pietrasz has no particular grounding in watchmaking, but had a strong technical background working in the IT departments of huge corporations like Disney and much smaller enterprises.
Mr Iossa brought watch expertise and a ready-made audience for the company thanks to hosting a popular Youtube channel called Federico Talks Watches that aims to make top end timepieces accessible to non-experts. His most popular vidoes are viewed by almost half a million people.
The pair concluded that if they could acquire the right stock of watches, employ a watchmaker to authenticate and service them, build a technology platform to buy and sell more, and promote it intelligently through digital channels including Youtube, then they had a chance of hitting it rich.
Delray Watch has made an impressive start in an increasingly competitive market. It took the decision early to buy, service, repair and authenticate all the watches it goes on to sell. While expensive up front and a slower way to expand, this model has proved to deliver better margins over the long term than businesses that sell watches on consignment or platforms that link buyers and sellers without ever seeing the watches.
Delray Watch’s website currently has 113 watches listed from 51 brands, and the company claims it is willing to buy pieces of any make. The difficulty of buying the most desirable pieces is exposed by the fact that it has just eight watches from Rolex on offer, eight from Omega and none from either Audemars Piguet or Patek Philippe.
Interestingly, there are four Roger Dubuis watches for sale, two from Franck Muller and four from Girard Perregaux, so the company is not afraid to buy pieces from top end niche brands.
“The core of our business is the buying, trading, and selling of luxury watches priced between $3,000-$6,000. Though, we do work with some higher-level pieces up to the $60,000 mark, as well as some more approachable models in the $1,000 range,” explains Mr Pietrasz.
An inventory of over 100 watches from major Swiss makers is a solid foundation for the business, and its digital reach through social media channels suggests it could grow fast.
“We were fortunate to have a head start without customer base, as my business partner Federico had a popular Youtube channel for watches at that time. We saw web traffic day one, albeit very modest. In time, and with enough patience, the customers began coming in,” Mr Pietrasz describes. “Now, we see thousands [of users] per day and 200,000 per month.”
Sales have been increasing exponentially. In 2017, the year the company was founded, turnover $200,000. In 2018, this had risen to $2 million and Mr Pietrasz forecasts revenue rising to $4 million this year.
A key to that growth has been buying watches at the right prices. After struggling early on to compete with the biggest players in the market for the most popular watches, Mr Pietrasz used his technical skills to create a proprietary system that he says allows Delray to pay more for watches than its competitors. “The algorithm essentially cross-references leads in a way that allows us to make deals before they happen. The rest is a secret,” he says.
Delray Watch is likely to need outside investment or even a new owner to reach its full potential, Mr Pietrasz suggests, and its business model does have attractions, not least the way it communicates with customers and future customers through Youtube.
“The primary method in which we engage with our customers is Youtube. Not only was our business founded on the popular video streaming platform, it is an integral part in everything our business does today. Video allows us to connect with people on a more personal and intimate level. I am a big proponent in the idea that people buy the brand or the person. When people see our casual, personal, and light-hearted videos, they develop a connection with us,” Mr Pietrasz reveals.
The videos are a far cry from the sort of super-slick, expensively-produced clips made by the major watch brands and the largest retailers of both new and pre-owned watches. Their irreverent take on what makes watches tick has attracted almost 80,000 subscribers, and most videos are seen by tens of thousands of people. The most popular have been viewed by almost half a million.
“My business partner Federico is somewhat of a wizard when it comes to Youtube. People like his on-screen personality and he really does know the ins and outs of the platform. We provide a unique perspective. The watch world can be very secretive most of the time and large players generally do not want consumers to know too much about how it works as the marketing revolves around history, romance, and interesting stories. There is almost zero transparency, except for us. We provide this transparency,” Mr Pietrasz suggests.
Interestingly, other social media channels are far less effective than Youtube when it comes to customer acquisition. Instagram has a trust problem, Mr Pietrasz believes, because it is full of people clipping pictures from other sites with no added value. Youtube is different because it is an unvarnished way to communicate, and it stimulates two-way conversations through people adding comments.
The small team of Mr Pietrasz, his business partner and Youtube star Federico, a graphic designer, an operations associate, and a master watchmaker Hans, are reaching the limits of what they can do alone and, despite turning down offers to sell the company twice in the past year, the founders recognize that the time is right for a fresh look at outside investment.
“We have decided to take the direction of a capital raise and scale the company to a much larger size. We are always welcoming new ideas and partnerships,” Mr Pietrasz pitches.
In the meantime, the company’s ambition to grow organically is undimmed. “We are currently looking for sales professionals, interns, and general watch geeks. If you are a watch geek looking to break into the industry email us at email@example.com,” Mr Pietrasz concludes.