Pre-Owned watch specialist WatchBox has merged with venerable family jewellers Govberg, Hyde Park and Radcliffe in the United States to create a $500 million powerhouse. Will the secondary and primary markets finally align and give collectors the best of both worlds? Rob Corder spoke with Danny Govberg to find out.
WATCHPRO: We are speaking just days after the creation of The 1916 Company, which brings together WatchBox with Govberg, Radcliffe and Hyde Park Jewelers. What is the story behind the deal and what are you hoping to achieve from it?
DANNY GOVBERG, CHAIRMAN THE 1916 COMPANY: We are making a big move to merge primary and secondary. To do that, we needed fundamental changes.
About a year ago, I was looking into how our businesses were viewed by friends, clients and colleagues. Pretty much everybody described WatchBox as the best pre-owned platform, but nobody was paying much attention to Govberg as a primary dealer with just a couple of stores.
The more I looked at the industry, especially when Rolex announced its Certified Pre-Owned Programme, it hit me that primary was going to meet secondary. It wasn’t going to be two distinct markets. It would be one.
As I kicked that thought around, I realized that, having done such a good job with WatchBox, we had not given as much attention to our primary business.
We were doing $300 million with WatchBox in the secondary market and only around $100 million through Govberg Jewelers.
I talked to some of the brands, particularly Rolex, and asked whether we could do more with CPO in our primary business with them.
Luca [Bernasconi] and his team were great, and explained to me what their outlook was with CPO, which at the time they were just starting to pilot with Bucherer.
I had been thinking for some time, even before that, about whether WatchBox or our primary retail stores would have a competitive advantage when it came to pre-owned Rolex in a world where watches serviced, certified and guaranteed by Rolex exist.
I came to the conclusion that primary ADs selling Certified Pre-Owned Rolex watches would set a new standard.
“WatchBox will no longer be in the Rolex business”
Danny Govberg
I got into talks with Radcliffe and Hyde Park Jewelers. We acquired Radcliffe Jewelers out of Baltimore and Delaware, and then we bought Hyde Park Jewelers in Denver, Phoenix and Newport, California. Bringing Govberg, Hyde Park and Radcliffe together balances out our primary and secondary market players.
We have leveled out the size of our new and pre-owned businesses, which complement each other, and have become more of a national player.
I did not want to be unbalanced.
Think about a pyramid. At the top you have the brands: Rolex, Patek Philippe, etc. They will always be at the top.
Next in the pyramid you have the world’s biggest retailers: The Hour Glass, Seddiqi, Bucherer, Watches of Switzerland, Cortina Watch.
The bottom inch of the pyramid was where businesses like WatchBox, Bob’s Watches, eBay, Chrono24, Luxury Bazaar were placed.
It hasn’t mattered how we have tried to position ourselves, we have always been at the bottom.
The likes of Govberg, Hyde Park and Radcliffe are all in that pyramid, but we are just small players compared to the big groups.
WatchPro: I can see how merging three primary jewelers with WatchBox increases your influence and position in that pyramid.
Danny Govberg: Right. Next I needed a single new name for the business. I did not see it working in my mind with all four companies retaining their names.
So we have changed the name to The 1916 Company, which is what we will use across everything in the United States and around the world.
The name comes from the year my grandfather founded the business, so it gives us heritage.
The new 1916 Company arrives with a lot of heritage, and over 500 employees, but we are going to be working like a start-up.
It may take us six months, but every store, lounge and website is going to be under the same name of The 1916 Company.
Now, when you think about that pyramid, we will be one of the largest Rolex jewelers in the country and a big player with all the other brands that want to work with us.
WatchBox doesn’t need to be at the bottom anymore, it is part of a major national group that brings the primary and secondary market together in our showrooms and lounges, which will be renamed from WatchBox to The 1916 Company.
WatchPro: How will you integrate the independently-owned family jewelers into that group?
Danny Govberg: The business is going to be run by John Shmerler [CEO of Radcliffe Jewelers] and Damon Gross [CEO of Hyde Park Jewelers].
We are immediately going into the Rolex CPO programme and will launch with around 1,000 Certified Pre-Owned Rolexes from day one.
These watches will be in Philadelphia and the formerly Radcliffe stores in Baltimore. They will not be in Hyde Park yet because that was the most recent acquisition.
I believe we will be the world’s largest Rolex CPO dealer immediately.
WatchPro: How have you got to 1,000 watches? Has that been WatchBox inventory going through the Rolex CPO programme and coming back to you serviced, tagged and guaranteed by Rolex?
Danny Govberg: Yes, for months we have been making sure that we are ready with the watches going through the whole Rolex program.
WatchBox will no longer be in the Rolex business.
That means we will not be on eBay, Chrono24 or any other platform. The only place people will be able to buy Rolex CPO watches will be on the Radcliffe and Govberg Jewelers websites and in their stores.
Customers will be able to buy from all over the world, but that business will no longer be under the WatchBox name.
In the months to come, we will pull everything together into one website for The 1916 Company.
When it comes to WatchBox lounges, we will rebrand them in the United States first, and then do all the international locations.
In addition, we are going to go into jewellery in a big way. Hyde Park and Radcliffe are already big in jewellery; my family has been steeped in jewellery for generations.
It took a back seat for a while, but we are going to be rolling it out to 20 locations around the world and introduce it to our 15,000 super high net worth clients.
WatchPro: Do you expect your scale, international presence and client base to make The 1916 Company an even more attractive to brands?
Danny Govberg: Hopefully we will grow even more with Rolex and some other brands on the primary side and get some more Rolex doors in the future.
We are very close with our clients — not just online click and buy traders — and we can introduce brands to them. We will be a much more attractive partner to work with now for the brands.
WatchPro: You have described the business strategy, but what will your clients experience. What will be better for them?
Danny Govberg: We are going to redefine what having fun with watch collecting can be. It won’t just be customers coming in, buying a Rolex and leaving. It will be much more community-based like a club.
We are going to be one of the biggest players in primary, with around 30 brands, and one of the biggest in secondary.
Our clients can utilize us any way they want. Buy new or pre-owned; sell watches to us; learn about jewellery through us.
We are global, so guys that know us through Hong Kong or Singapore can come to the States and enjoy what we do here.
At the same time, we take Certified Pre-Owned Rolex to the next level. We can really promote the standard.
We are opening an 8,000 square foot service centre that will be able to handle 3,000 to 4,000 watches per year. It is already operational, but will be fully up to scale next year.
WatchPro: Is that service centre accredited with all the brands you work with?
Danny Govberg: Not at the start, but I believe we will go in that direction. For now, it will just be accredited by Rolex.
WatchPro: The first few participants in the Rolex CPO programme were Bucherer, Watches of Switzerland and now some family-owned Rolex jewelers are coming on board. All them have been primary market specialists moving into pre-owned. But you already have perhaps the greatest expertise in the world for pre-owned.
Danny Govberg: From my point of view, I always wanted to set the highest standards in the secondary business. WatchBox was the highest standard in my opinion, but Bob’s Watches has its standard, eBay has authentication, Tourneau and Watchfinder reached for high standards, but by definition there was not a single standard.
From what I see now, there is no doubt that the Rolex standard is the gold standard that is backed by official Rolex jewelers, and by them as a brand. The client is going to be treated the same way whether they buy a new or a pre-owned watch.
WatchPro: Govberg Jewelers parted company with Richemont in 2019, but might its brands be back with The 1916 Company?
Danny Govberg: John Shmerler and Damon Gross are great executives with respect in the industry. They are two of the best and run top quality operations. I think Richemont will want to work with a company run by guys like that, but they make their own decisions.
WatchPro: You have certainly improved your hand. If you had a fist full of eights and nines five years ago, you are now playing with jacks, queens, kings and maybe even aces.
Danny Govberg: We have a lot of doors, we have thousands of clients who look at our videos and thousands of clients that buy and sell with us.
We will be one of the largest Rolex jewelers in the country, and a national account with a coast-to-coast presence. We are right in there at number three, four or five in the United States after Bucherer and Watches of Switzerland Group.
WatchPro: Are you investing in upgrading and refurbishing stores as you roll out the new name?
Danny Govberg: Most of the stores have already recently been expanded and upgraded. The old Hyde Park showroom in Newport, CA, is reopening after a major refurbishment.
It was totally gutted. The one in Arizona is fairly new.
Radcliffe’s location in Baltimore is going to be a 25,000 square foot store that opens in January.
The one in Delaware is brand new. Our Govberg store in Philadelphia is basically brand new and we are remodeling our other store in the suburbs, which will be a 7,500 square foot brand new showroom when it opens in the third quarter next year.
WatchPro: What does this deal tell us about the future of retail for new and pre-owned watches? I don’t think, if we had been having this conversation a year ago, you would have been talking about investing in shopping mall multi-brand showrooms as the next big thing. I thought the lounge concept was where you thought we were heading.
Danny Govberg: The lounge concept doesn’t go away. For now, we can service people in New York, Miami, Dubai, Singapore, Beijing, Hong Kong and Los Angeles. They are places where we can bring a global collector client base together to have some fun.
WatchPro: I visited your Miami and New York lounges earlier this year. Will I see significant changes next time I am there? Will they stick with pre-owned or could these locations become authorized dealers for brands represented by The 1916 Company?
Danny Govberg: They won’t be authorized dealers, but if you come into one of our lounges and we are not able to offer some of the watches that other 1916 stores can, we can advise you to visit our beautiful stores in Philadelphia, or Delaware. Our client advisers are there to help.
WatchPro: WatchBox has banks of client advisors in what look like trading floors in your offices in Philadelphia, Hong Kong and elsewhere. Are they now going to be talking to clients about all of the watch brands that The 1916 Company now represents?
Danny Govberg: That depends. We are going to see what works best and what is allowed brand-by-brand. Certain brands won’t care, but others will. We are going to abide by what brands want.
WatchPro: Having a trading floor offering every brand that The 1916 Company represents doesn’t seem very different to having a single website offering every brand and CPO alongside pre-owned.
Danny Govberg: Certified Pre-Owned Rolex can be sold through ecommerce, we can talk to clients on the phone about the watches and we can shop watches anywhere in the world.
WatchPro: Looking ahead, what are your plans once the hard work of integrating all these businesses together under one retail brand is done? Are you still in acquisition mode?
Danny Govberg: I am in digestion mode with the retail businesses. Integrating De Bethune is still a very big job and I want to make sure people appreciate that it is one of the best young independent watchmaking companies in the world.
WatchPro: How much did you feel your hand was forced to acquire and merge the WatchBox and primary retail businesses. Did you find yourself feeling Govberg and WatchBox were not correctly positioned for the current and future market?
Danny Govberg: My original feeling, if I go back years, was that primary was going to meet secondary. Why wouldn’t people want to trade in their watches and buy new ones?
Why should collectors be limited to only buying new watches? I did not agree with primary and secondary being separated like church and state.
When Rolex bought Bucherer, that was the moment I realized that the biggest player in the industry, which did not need to do this, had made a decision to say that primary is going to meet secondary.
Official Rolex jewelers are going to deal with this.
We are going to set a gold standard for pre-owned watches. We are going to make customers realize it is fine to buy a second-hand Rolex, and you are going to be treated the same way as if you are buying a new Rolex. You are even going to get a guarantee from Rolex for the pre-owned watch.
I knew I had to be part of that, but I realized that our business was too slanted towards the secondary market.
I needed to be more balanced between primary and secondary so, as long as Rolex approved my plans, I was going to change that balance [by merging Govberg, Hyde Park and Radcliffe Jewelers with WatchBox].
I want to grow the primary business and be able to say that we are the best at both primary and secondary.
In time, you will see the Bucherers and the Watches of Switzerlands of the world push forward and reach the same place with the integration of primary and secondary.
We are a little bit different because we have the most experience in pre-owned, and we specialize in the $25,000 to $1 million price range.
Most guys do not focus on the high end collectible watches. They are more in the $5,000 to $15,000 market.
WatchPro: Do you think the scale of the new 1916 business will help you secure better allocations from the big brands and smaller independents?
Danny Govberg: This puts us in a position to distribute or invest in any independent making 1,500 or fewer watches per year. If we wanted to, we could take their entire allocation, and run a CPO programme for them, on a global level.
We are going to experiment with jewelry as well. I have ideas on how jewellery and watches should work together.
WatchPro: Do you have the bandwidth to ensure your lounges around the world in places like Switzerland, Hong Kong, Dubai and Singapore are given the focus they need and remain important to the future direction?
Danny Govberg: They are very important for two reasons. First, our clients need access to us so we can help them enjoy their high-end watch collecting hobby. Secondly, these lounges give a global footprint for De Bethune.
For now, they are 1916 lounges, but if you think about a location like New York, we have created a home for De Bethune in the city.
We can have De Bethune parties in Singapore. We have a nice office in Shanghai. We are in the United States, Europe, Asia and the Middle East.
If we stock other independent watchmakers or designer jewellery, we can take those global as well in the classiest way possible.
WatchPro: The timing of this deal is interesting because we have seen prices cool and air go out of the secondary market since last year. That cooling is starting to be seen in the primary market as well, even for the powerhouses like Rolex. It is not a stretch to believe that prices for even the hottest pre-owned Rolexes will drop to below retail prices in the not-too-distant future.
Danny Govberg: Until 2008, our industry was cruising along at 35,000 feet. We crashed down to 2,000 feet in a matter of months with the financial crisis. From 2008 through to 2019, we saw the plane gradually climb back to 30,000. We hit the pandemic and we dropped to 25,000 feet, but as that eased, we took off like a rocket to 60,000 feet at Mach 2. We were no longer an airplane, we were a rocket ship.
Today, that aircraft has dropped down to 50,000 feet. It hasn’t crashed, it has just come down like a normal airplane.
What you are going to see is 35,000, maybe 38,000 feet in the coming year. Then we will cruise at around that, and try to get to 40,000 feet. I do not think we are dropping to 10,000 feet. That experience in 2008 was a once in a lifetime event.
In three to four years, primary and secondary will look more normal. A new watch costing $20,000 might sell pre-owned for $15,000, but some watches will still cost more than retail.
We will see how things develop now that the merging of primary and secondary markets has officially arrived. That was not the case a few years ago.
In the new order, Rolex and its ADs are setting a new standard. If you buy from eBay, even with its Authenticity Guarantee, the only standard it is establishing is that the watch is genuine. It is not fake.
If a customer is dealing with a Rolex AD, watches being authentic is a given. On top, they are going to be offering so much more. Nobody will be able to do that to the same level as an AD, and in the future that is going to apply to many watch brands.
WatchPro: There is a squeeze on retailers from brands that are reducing the number of doors they have and increasingly selling direct to consumer. Do you think the creation of The 1916 Company is a defense against that trend and improves your negotiating position with brands?
Danny Govberg: That is a good question. I look at the groups that have experienced life at 60,000 feet. When you are up there you can get a little giddy.
When you come back down to 35,000 feet, things are going to be different.
Multibrand retailers will need to offer amazing customer experience, have great locations, make it fun, help to maintain the secondary value of watches, promote both pre-owned and new product effectively.
If they do all these things, then they add value to the brands. If retailers are only capable of selling hot products in a hot market, then I don’t know if brands need them.
WatchPro: How big is The 1916 Company from day one?
Danny Govberg: This year we will hit turnover of $500 million. That doesn’t count Hyde Park or Radcliffe.
WatchPro: Do you aspire to be as big as a Bucherer or Watches of Switzerland?
Danny Govberg: I do not know. For the next 48 months, I am going to digest what we have. After that, I want options.
With what we have now, with our scale, our global reach, the brands we represent, being part of Rolex CPO and the secondary market expertise we bring, we have options.
If we do all of this the best way we know how, I believe it will create opportunities we do not even know about yet.
We have a lot of high net worth clients all over the world, and I want to bring options and choice to them with the best of primary, secondary, certified pre-owned and options to do other things in the future.
Those options might not have been open to me if I had not gone ahead with this transaction. I have never had so many options because I have never had so much distribution.
If we can create a high energy and expert team under one name, and that team treats clients better than they have ever been treated, then we will be giving everybody what they want.
WatchPro: Who are the owners and investors of the new 1916 Company?
Danny Govberg: It is still me, Justin Reis, Tay Liam Wee and a lot of people in the team. It is still very heavily owned by us so we are not under external pressure.
It is also important that we already make a very health profit, so we are not a company that is heavily in debt.
Let’s see how the market settles out over the next 4 years; including Rolex CPO pricing. CPO is well over current grey market pricing which makes no sense. Expecting customers to pay for CPO watches, which is 2-3 times over the retail prices for new watches only shows how little Dan Govberg respects clients. The fact that he went deep into debt and expecting his wealthy clientele to bail his company out shows how little respect he has for attracting and treating new clients. Of course the ladder game that all 3 of these Rolex AD’s have played, telling new clients that we need to buy $250,000 of unwanted jewelry and other watches to maybe have the right to buy a Rolex sports steel model is absurd. Market prices move like a pendulum, and treating new buyers as necessary evil to focus only on the wealthy clients will come back to haunt Roex and The 1916 Corporation.