On Tuesday, WatchBox announced it had received $165 million in funding, in a round led by the Radcliff Companies and the Spruce House Partnership, joined by CMIA Capital Partners. Other investors in the pre-owned watch e-tailer include athletes Michael Jordan, Michael Strahan, and Larry Fitzgerald, and the founders of Warby Parker, Allbirds, and Harry’s.
Here, WatchBox cofounder and global CEO Justin Reis (pictured) talks about what the site will do with its newfound haul, how it’s coping with an increasingly crowded resale market, and whether the secondary watch market is due for a correction.
Last month, you announced that you were opening five U.S. stores. Will this funding be going to help with that, or do you expect additional expansion?
[The new funding is] factored into some of our expansion. There are some additional expansion initiatives we are considering. We will be investing more in technology, so we can scale and handle more customers globally.
Within the next three years, we want to open 40 locations, in the U.S. and internationally. There will be probably more than 10 locations in the United States.
Anything else do you plan to do with these new funds?
We plan to focus on Asia, and on locations that have low taxes, as our product is more fungible across those markets. We are going to continue to add programming and content. You can now download a WatchBox TV app and watch over 4,000 videos. And we are going to increase the content and education.
We keep hearing that direct-to-consumer brands are being crushed by marketing costs. How are you dealing with that?
Our investors have backed Warby Parker, Harry’s, other great consumer brands. The customer profile of people who go to WatchBox is people who like sports, they like media, they love collecting. So we can be very efficient in how we build our brand profile. I don’t think we will go through conventional methods. We want to build a following with people who have a real passion for collecting watches.
There are a lot of companies getting into the secondhand watch marketplace, including, in some instances, the brands themselves. How do you set you set yourselves apart?
The key differentiation is we are focused on a much higher price point. Our average selling price is 200% more than any of our competitors.
We are very different from marketplaces, which don’t offer the ability to both buy and sell. Thirty-five percent of the watches we sell involve a trade. By virtue of having a large diversified inventory, we give the collector a chance to either buy a watch that we have in our inventory or swap it for something else.
We are cross-border, so we are able to source inventory that is not just found in one domestic market, but we are able to source models that are maybe out of favor in one market, but may be in favor in another.
Since we started this business, we have seen this rise in secondary prices. You have this virtuous effect, with the consumer willing to invest larger amounts of money when there’s a lack of supply in the primary market. The growth of the secondary market has really strengthened the watch vertical. It’s attracted the attention of a consumer that there’s this secondary market.
With this funding, it always brings up the issue of going public. Is that something you plan?
That’s a question that we get asked often. With the type of investors that we brought in, there’s no pressure to go public. We have a very clear growth plan. Now that we have the capacity to do this growth plan, if the opportunity arises that a public market listing makes sense, we’ll look at the opportunity.
Looking for funding can take a lot of time. But now that we have closed our funding, we look forward to executing our growth plan.
There’s also talk that the secondary market prices are primed for a correction. Do you see that?
I think the premiums will be determined by two things. One is the growth of the market. The Generation Z consumer is really excited about big brands. So, new consumers will be supporting this.
The other is whether or not brands will react to demand. The brands don’t like to be dictated to by market forces, so we don’t see any supply changes. There may be a price correction. We don’t see that happening anytime soon just based on the level of activity.
You mentioned younger consumers. They are not generally thought of as watch collectors. Are they starting to become interested in it?
It’s something that is emerging. We’ve found the younger consumers are starting to enter into the space. They identify heavily with certain brands. It’s still mostly the top three or four brands, but they are paying special attention to the brand values, especially with the brands that have been around a while. They want to be part of the Patek brand, part of the Audemars Piguet brand.
We are getting new customers finding us, customers that we wouldn’t think of as buying $10,000 Patek Philippe 10 years ago. That will be a growth catalyst for our business.
Speaking of widening your consumer base, there’s a lot of talk in the industry about bringing women into watch collecting. Is that something you are looking at?
Right now, 95% of our business is male. The female category is very exciting, and, traditionally, participants in the market have diminished that area and that opportunity. It is something that we will put some efforts to grow, in the future.
When people look at the luxury market, almost all platforms are directed toward the female clients. There are very few platforms that address the male luxury category. There is such a blue-ocean opportunity to dominate that segment. But we are cognizant that there’s a great opportunity in the female sector.
Earlier this year, you acquired a majority stake in Swiss watch brand De Bethune. Could you see yourself getting involved with other brands?
We will be opportunistic. We invested in De Bethune because we’re fans of the brand, and they were looking to raise investment. There are other brands that are not just interesting but we have close relationships with.
Speaking of which, what kind of feedback do you get from brands about your site? We have always heard that they had mixed feelings about the secondhand market.
We have always treated the brands with the highest integrity. The feedback we have gotten is quite complimentary. They prefer our business model to that of a marketplace because we do touch the watch and offer a warranty. From a brand’s point of view, that is how they want their brands to be upheld.
I’m always careful to make sure to say what we’re adding is not just stores. These are collector lounges around the world. We want to build a like-minded community and center it around the wristwatch. We want to build a long-term relationship with our consumers.
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