Unlike many people his age, Philip Man doesn’t look at his phone to tell the time. At Geneva's SIHH luxury watch show next week, the 26-year old German entrepreneur will choose from the eight timepieces he carries. Chronext, the watch-selling website he founded and runs, offers around 28,000 high-end brands, from Rolex to Breitling. An average watch on the site sells for €5,000, or around $6,000. The priciest items on Chronext's catalogue, though, fetch well upwards of $200,000 – with or without encrusted diamonds.
Management consultancy Bain & Company estimates the global luxury watch market at about €37 billion. In an era of ultra-low interest rates, an extravagant watch can be an investment as well as a status symbol. But the industry has its share of problems too: In China, expensive watches have become a by-word for corruption, while global oversupply continues to weigh on the sector’s profitability.
For Mr. Man, those problems suggested an opportunity. In 2013, he and his partner, Ludwig Wurlitzer, now 25, founded Chronext, an online portal based in Switzerland, the traditional homeland of swanky wristwatches. Through the site, watch enthusiasts can buy and sell expensive timepieces, and even send them in for repair.
Only 3-4 percent of luxury watches are currently sold online.
Unlike competitors like Chrono24 or Montredo, Mr. Man claims Chronext does more than just sell watches. “Every watch is seen by our 18 watchmakers, and goes through a 13-step testing of authenticity and functionality,” he says.
Chronext offers a 24-month guarantee, and says it has a very low return rate, around 4 percent. The company hopes to sell up to 200 watches a day this year, taking a commission of between 13 and 30 percent on each sale. Watches on the site generally go for around 20 percent less than in traditional stores.
The firm has just raised $34 million in new funding, Handelsblatt has learned, bringing its total venture capital to $52 million. Mr. Man and Mr. Wurlitzer want to use the money to expand internationally. Key markets already include Britain, Germany, Switzerland and Austria, but now the firm is looking to the United States and Asia. Without any targeted international marketing, the company, headquartered in the town of Zug near Zurich, has already sold watches in 130 countries.
Only 3-4 percent of luxury watches are currently sold online. The two young German founders want to change that by developing sales plans for manufacturers and dealers. There is a lack of global coordination, Mr. Man says, which often leaves dealers with a short selling season. Online sales can change things, opening up markets around the world.
Chronext’s ambitious aim is to host every luxury watch dealer in the world on its platform. So far, it has attracted more than 2,000. Parallel to this, the portal is working closely with several well-known brands. Mr. Man hopes to turn a profit within two years; right now, he is concentrating on building the business, doubling transaction volume to €100 million this year, and increasing the workforce from 130 to 200.
The achievements of the past few years look rather promising for Chronext. Mr. Man recently said that the company is typically growing 20 percent month-on-month. Sales skyrocketed by 250 percent in 2016, and more than quadrupled the year before. By contrast, the Swiss watch industry is facing strong headwinds. Exports went down both in 2015 and 2016 by as much as 10 percent.
Online sales seem certain to be the industry’s future. Chronext’s customers are mostly in their late 30s and early 40s, an average of 15 years younger than your typical high-end chronograph buyer. Martijn Hamann, a partner with Chronext investor Endeit Capital, says: “The huge upheaval in traditional luxury watch sales has only just begun.” Chronext is uniquely positioned to help leading brands manage the change, he says.
Retail habits are certainly changing. The most expensive watch so far bought by smartphone was a Ulysse Nardin, for a cool $210,000. If you prefer to try on the watch before you buy, Chronext has stores in London, Munich, Cologne and Zug in Switzerland. Now Mr. Man has New York in his sights, but the store would be in trendy Soho, rather than on Fifth Avenue, the traditional location of luxury retailers, he says.
Katrin Terpitz covers companies and markets at Handelsblatt, focusing on Germany’s Mittelstand and family-owned businesses. Jean-Michel Hauteville, an editor with Handelsblatt Global, also contributed to this story. To contact the author:[email protected]