Earlier this month, Watches of Switzerland Group (WOS) announced its acquisition of Hodinkee, marking an interesting moment in the luxury watch industry. After years on the rise, it seems that Hodinkee ultimately found itself managing too many competing challenges simultaneously, which strained its resources and tested its business model. Below are my two cents regarding what may have led to this moment.
Between its ambitious move into retail, the complex acquisition of “CrownCrown The knob on the outside of the watch that you typically use to either wind the mainspring or set the time [Learn More] & CaliberCaliber The caliber ('movement') is the heart and engine of a watch. It consists of a number of interconnected components that work together. Energy is transmitted through the gear train, to the escapement mechanism. The escapement mechanism releases this energy in a controlled manner. This drives the gear train, which ultimately rotates the hands of the watch and keeps time. [More Info]”, and the rapidly shifting dynamics of the luxury watch market – including Rolex’s entry into the certified pre-owned sector – Hodinkee was pulled in multiple directions. As a result, Hodinkee reportedly faced operational and market pressures that it could not fully overcome on its own, leading to its acquisition by Watches of Switzerland (WOS).
Hodinkee started as a small blog for watch enthusiasts but rapidly grew into a significant and influential player in the luxury watch market. In 2020, Hodinkee secured a significant investment of $40 million from a group of investors that included LVMH Luxury Ventures. This capital infusion was aimed at accelerating Hodinkee’s growth as it expanded from a digital media platform into e-commerce, insurance, and retail sales. This opened the door to the acquisition of Crown & Caliber, a pre-owned watch reseller. Based on previously published information, the latter move appeared to face severe integration issues. It turns out that writing about luxury watches, isn’t quite the same as selling luxury watches.
Moreover, the business model, reliant on high-priced luxury watches like Rolex, began to unravel when the resale prices of top-tier watches, especially Rolex, began falling sharply by mid-2022. In recent years, Rolex has taken a monumental step that likely contributed to the decline of Hodinkee’s resale business: entering the certified pre-owned (CPO) market. Rolex now officially certifies its second-hand watches through authorized dealers like Watches of Switzerland and Bucherer, adding a Rolex-backed warranty and authentication to each piece. This move is groundbreaking because Rolex, long synonymous with limited supply and market exclusivity, has now created a controlled secondary market under its own supervision. Why would you still buy a second-hand Rolex that is not CPO, if not at a heavy discount?
For Hodinkee, this development likely accelerated its downfall. As pre-owned Rolex watches likely made up a not insignificant portion of Hodinkee’s sales, the introduction of an official Rolex CPO program gave consumers a more secure, Rolex-backed alternative. Buyers who might have considered pre-owned Rolexes on Hodinkee’s platform could now turn to certified programs, which come with the promise of factory-level authenticity and a two-year warranty (features Hodinkee couldn’t match). With Rolex now entering the secondary market under its own brand control, Hodinkee potentially found itself competing with the most trusted name in the watch world on the very product that drove its revenue.
The watch market’s secondary segment is notoriously volatile. After peaking in early 2022, prices of luxury watches, including Rolex models, began to tumble. This depreciation severely impacted Hodinkee’s inventory valuation, with the company holding millions of dollars worth of pre-owned watches bought at inflated prices during the market bubble. Additionally, the macroeconomic environment shifted, with rising interest rates reducing the appeal of watches as an investment vehicle.
Note that Hodinkee is of course not the only company that will have faced this challenge, they are simply the most visible player in the market. There is no doubt that many smaller resellers with bloated inventories are facing significant difficulties as well. The resale business’s high dependency on Rolex, where demand far outstrips supply, created a dangerous scenario for resellers around the world. Rolex’s direct entry into the pre-owned market undermined platforms that relied heavily on the brand to drive revenue. The launch of Rolex’s CPO program means that secondary dealers without such factory backing could no longer justify similar premium prices.
For Watches of Switzerland, the acquisition of Hodinkee represents a digital land grab more than a retail expansion. WOS can now leverage Hodinkee’s audience to drive traffic and sales to its own (online) platforms. While Hodinkee’s direct retail operations might not have been profitable, its community, data and content are still highly valuable assets in the growing online luxury retail space. Watches of Switzerland’s acquisition should now allow Hodinkee’s digital community and content engine to thrive. This acquisition allows the brand to refocus on its editorial strength while letting WOS handle the retail side.
Although Hodinkee’s challenges have been very public, they may simply be the most visible “canary in the coal mine” for other smaller or independent players in the pre-owned and luxury watch retail space. Many such businesses, which lack diversified revenue streams or robust back-end support, could find themselves facing similar pressures as market dynamics continue to shift. Without the buffer of a broader business to fall back on, these companies may/will struggle to remain competitive in a space increasingly dominated by large-scale retailers and certified pre-owned programs from the likes of Rolex and its partners.
Interesting times ahead.
And Why Rolex Is Both King and King-Maker