People love to bash FHB at AP, but for me, this guy takes the cake. His position on CPO is preposterous, nonsensical. It reeks of snobbery and shortsightedness, "we can't soil our good name messing around in the muck with these, these FLIPPERS!" How is ALS doing as a business anyway? I actually have no idea. Anyway, good post once again.
> Finally, while this might be viewed as cannibalisation or competition between two Richemont portfolio companies (Watchfinder and ALS are both owned by Richemont)
I wouldn’t be surprised if WS had decided to (implicitly or explicitly) cede the preowned market to Watchfinder. Or, conversely, be somehow lost a battle at the level of the Richemont Group executives to manage ALS’s preowned market.
I’m not familiar with the background on Watchfinder’s acquisition, but it might limit Richemont‘s transition towards brand-aligned CPO programs like we’ve seen from AP and Rolex (and their simple ownership situations).
The problem with this approach is “watchfinder” as a brand can’t compete with ALS as a brand… when it comes to the first port of call for selling ALS WATCHES!
If you’re selling a pre-owned Lange, you can sell it through anyone- what are the odds of all sellers using Watchfinder, as opposed to (at least) enquiring with the brand CPO?
Yeah it's honestly a disappointing take from WS. earlier in the interview he said
RPS: Moving back to bricks and mortar, where in the world do you see the biggest growth opportunities for the brand moving forward?
WS: It really just depends on where the collectors are to be honest. It is hard to identify for us because we can have waiting lists on all watches, so wherever you allocate watches to, it will look like a strong market. So it’s very hard to say, but I’m a big fan of not putting all of our eggs in one basket. So our distribution strategy is about checks and balances. I don’t want to depend on one single market at any moment in time.
Wouldn't a boutique CPO experience represents a big growth opportunity for ALS? This is extremely unimaginative of him.
I enjoyed reading this thoughtful article, as usual! I was not so surprised that Lange didn't want to pursue a CPO program. The sale of pre-owned watches in the boutiques will hurt the sale of new watches, and they don't have the resource to take on this task anyway. We may see this clearly when comparing to Rolex.
As many of the Rolex watches are sold at higher than retail prices, available of such watches in the AD stores will not hurt the sales of new watches. People will prefer to buy new ones at lower prices of course, and will consider pre-owned ones when they don't have a chance to obtain the new watches. In Lange's case, most of the watches are sold at lower prices than retail at the secondary markets. Imagine the available of certified watches at the Lange boutiques, many people will go for these watches with lower prices.
When Rolex launched the CPO program, it asked its retail partners to opt-in. Some decided to participate and others have not done so yet. I asked my local Rolex boutique if they would participate in CPO, they told me no, as they were already busy selling the new watches. True, there is always a line outside the boutique waiting to get in. Basically, the work would be done by the ADs, to buy and sell the pre-owned watches, not by Rolex directly. Even in the case of Bucherer, the CPO will be handled by a company it owns financially, but not tightly integrated in terms of operations. CPO to Rolex is risk-free, as its job is to inspect/repair/certify watches with fixed fees. The retail partners take on the risks of buying used watches and selling them, the same risks as WatchBox and Crowns and Calibers (Hodinkee).
Lange doesn't any ADs any more, so, their CPO will have to be handled by their own boutiques. I don't think that they have the resources or spaces to add the pre-owned watches.
If we consider Lange as business, it is selling the new watches at full retail prices (that are increasing every year), they have a great margin. Getting into CPO will hurt the new watch sales and drive down the margin. The CPO program may be even hard to make money, and it will tie up money to buy used watches.
Just my 2 cents. Thanks for writing and have a great weekend!
Thanks for the thoughtful reply! Appreciate you taking the time, as always.
In the interview, the CEO laments the lack of supply - this would fulfil that demand. He also laments that watches are trading above retail and people selling for a profit annoys him - this would address that to a degree also.
The CPO program would preserve the customer experience and ensure people do not have to leave empty handed.
If what you’re saying is true, and they trade below retail across the board, then the CEO is making up false stories regarding another aspect of the business - which I accept, might be the case…
In which case his overall statements are contradictory!
One thing occurred to me while finishing the interview: ALS doesn't benefit from economies of scale.
RPS: But I assume you have to take into account that many, if not all, of your clients are ultra-high net worth individuals and so travel for them is not so much of a deal breaker. Is the only reason to decrease that distance so that your customers feel as though they can have a personal connection to your brand and your staff?
WS: That’s exactly the point. Again you look at our business model, everything is handcrafted, our people can work eight, maybe nine hours, but not permanently and it takes five years for us to fully train a watchmaker, so we really don’t have any economy of scale. So how do we maintain a level of closeness to our clients without having empty stores. We are working on new systems and schemes at the moment on how to bridge that gap and give them access without diluting our distribution network.
If this is true, and CPO requires sufficient watchmaking labor, then how could ALS consider CPO?
Fair point. Although the CPO needs service skills only - not making watches from scratch. So arguably easier to staff that area? Still, valid counter 👍
I think it’s worth considering that WS while CEO of ALS is not the final decision maker. He has a board he must get approval from for larger CapEx initiatives like a CPO. Richemont themselves may be the blockade and not WS. After all. ALS is not the company being traded n an exchange Richemont is. While the monies on an ALS CPO would be left pocket right pocket money in regards to Watchfinder we have to keep in mind there is an analyst from the street view advising buy/ hold/ sell on their interpretation of the Richemont Group. Rolex is privately held, it’s not subject to the scrutiny of the street. I’m not sure if any of the other Richemont maisons have a CPO, I do not believe they do. CPO for watches is relatively new, a year this month with Rolex and AP entering that arena. Both are privately held and Patek does not have a CPO. I would potentially purchase more preowned watches knowing it’s a CPO and its authenticity has been validated. A problem Rolex has that Lange currently does not. Rolex is copied, Frankensteined, faked and forged more than any other. Rolex having a CPO program is about restoring trust in their brand and name on the second hand market more than profits IMO. It helps profits too, but by improving their image in the secondary market.
I appreciate the article, just thought I would opine my two cents from my vantage point. I may be biased since I do love my ALS watches. But I tried to take an objective business look at other reasons. And WS is smart enough to not say “Richemont won’t let us”.
I actually like Lange watches, to be clear. This post was contra WS sharing sentiments regarding his vision for the brand, and explicitly stating how CPO doesn’t make sense - that’s all. Patek doesn’t do CPO but they do bolster the brand by buying important pieces at auction. Independent brands do CPO, and Lange production is more comparable with those - and fundamentally, it’s about defensive value protection and by extension, brand protection. If you listen to WS arguing against this logic, you’ll understand what made me write this. If it was indeed Richemont driving the decision, the framing would be different imho.
People love to bash FHB at AP, but for me, this guy takes the cake. His position on CPO is preposterous, nonsensical. It reeks of snobbery and shortsightedness, "we can't soil our good name messing around in the muck with these, these FLIPPERS!" How is ALS doing as a business anyway? I actually have no idea. Anyway, good post once again.
Yeah I’d agree - the interview does have an air of superiority about it - unjustified too
We all know WS is not a genius, but he manage to surprise us every time he opens his mouth
😂 savage
I believe you nailed it here:
> Finally, while this might be viewed as cannibalisation or competition between two Richemont portfolio companies (Watchfinder and ALS are both owned by Richemont)
I wouldn’t be surprised if WS had decided to (implicitly or explicitly) cede the preowned market to Watchfinder. Or, conversely, be somehow lost a battle at the level of the Richemont Group executives to manage ALS’s preowned market.
I’m not familiar with the background on Watchfinder’s acquisition, but it might limit Richemont‘s transition towards brand-aligned CPO programs like we’ve seen from AP and Rolex (and their simple ownership situations).
The problem with this approach is “watchfinder” as a brand can’t compete with ALS as a brand… when it comes to the first port of call for selling ALS WATCHES!
If you’re selling a pre-owned Lange, you can sell it through anyone- what are the odds of all sellers using Watchfinder, as opposed to (at least) enquiring with the brand CPO?
Yep you nailed it here.
Yeah it's honestly a disappointing take from WS. earlier in the interview he said
RPS: Moving back to bricks and mortar, where in the world do you see the biggest growth opportunities for the brand moving forward?
WS: It really just depends on where the collectors are to be honest. It is hard to identify for us because we can have waiting lists on all watches, so wherever you allocate watches to, it will look like a strong market. So it’s very hard to say, but I’m a big fan of not putting all of our eggs in one basket. So our distribution strategy is about checks and balances. I don’t want to depend on one single market at any moment in time.
Wouldn't a boutique CPO experience represents a big growth opportunity for ALS? This is extremely unimaginative of him.
I enjoyed reading this thoughtful article, as usual! I was not so surprised that Lange didn't want to pursue a CPO program. The sale of pre-owned watches in the boutiques will hurt the sale of new watches, and they don't have the resource to take on this task anyway. We may see this clearly when comparing to Rolex.
As many of the Rolex watches are sold at higher than retail prices, available of such watches in the AD stores will not hurt the sales of new watches. People will prefer to buy new ones at lower prices of course, and will consider pre-owned ones when they don't have a chance to obtain the new watches. In Lange's case, most of the watches are sold at lower prices than retail at the secondary markets. Imagine the available of certified watches at the Lange boutiques, many people will go for these watches with lower prices.
When Rolex launched the CPO program, it asked its retail partners to opt-in. Some decided to participate and others have not done so yet. I asked my local Rolex boutique if they would participate in CPO, they told me no, as they were already busy selling the new watches. True, there is always a line outside the boutique waiting to get in. Basically, the work would be done by the ADs, to buy and sell the pre-owned watches, not by Rolex directly. Even in the case of Bucherer, the CPO will be handled by a company it owns financially, but not tightly integrated in terms of operations. CPO to Rolex is risk-free, as its job is to inspect/repair/certify watches with fixed fees. The retail partners take on the risks of buying used watches and selling them, the same risks as WatchBox and Crowns and Calibers (Hodinkee).
Lange doesn't any ADs any more, so, their CPO will have to be handled by their own boutiques. I don't think that they have the resources or spaces to add the pre-owned watches.
If we consider Lange as business, it is selling the new watches at full retail prices (that are increasing every year), they have a great margin. Getting into CPO will hurt the new watch sales and drive down the margin. The CPO program may be even hard to make money, and it will tie up money to buy used watches.
Just my 2 cents. Thanks for writing and have a great weekend!
Thanks for the thoughtful reply! Appreciate you taking the time, as always.
In the interview, the CEO laments the lack of supply - this would fulfil that demand. He also laments that watches are trading above retail and people selling for a profit annoys him - this would address that to a degree also.
The CPO program would preserve the customer experience and ensure people do not have to leave empty handed.
If what you’re saying is true, and they trade below retail across the board, then the CEO is making up false stories regarding another aspect of the business - which I accept, might be the case…
In which case his overall statements are contradictory!
One thing occurred to me while finishing the interview: ALS doesn't benefit from economies of scale.
RPS: But I assume you have to take into account that many, if not all, of your clients are ultra-high net worth individuals and so travel for them is not so much of a deal breaker. Is the only reason to decrease that distance so that your customers feel as though they can have a personal connection to your brand and your staff?
WS: That’s exactly the point. Again you look at our business model, everything is handcrafted, our people can work eight, maybe nine hours, but not permanently and it takes five years for us to fully train a watchmaker, so we really don’t have any economy of scale. So how do we maintain a level of closeness to our clients without having empty stores. We are working on new systems and schemes at the moment on how to bridge that gap and give them access without diluting our distribution network.
If this is true, and CPO requires sufficient watchmaking labor, then how could ALS consider CPO?
Fair point. Although the CPO needs service skills only - not making watches from scratch. So arguably easier to staff that area? Still, valid counter 👍
Great point about servicing!
Forgot to add: have a great weekend too! 🥂😁
I think it’s worth considering that WS while CEO of ALS is not the final decision maker. He has a board he must get approval from for larger CapEx initiatives like a CPO. Richemont themselves may be the blockade and not WS. After all. ALS is not the company being traded n an exchange Richemont is. While the monies on an ALS CPO would be left pocket right pocket money in regards to Watchfinder we have to keep in mind there is an analyst from the street view advising buy/ hold/ sell on their interpretation of the Richemont Group. Rolex is privately held, it’s not subject to the scrutiny of the street. I’m not sure if any of the other Richemont maisons have a CPO, I do not believe they do. CPO for watches is relatively new, a year this month with Rolex and AP entering that arena. Both are privately held and Patek does not have a CPO. I would potentially purchase more preowned watches knowing it’s a CPO and its authenticity has been validated. A problem Rolex has that Lange currently does not. Rolex is copied, Frankensteined, faked and forged more than any other. Rolex having a CPO program is about restoring trust in their brand and name on the second hand market more than profits IMO. It helps profits too, but by improving their image in the secondary market.
I appreciate the article, just thought I would opine my two cents from my vantage point. I may be biased since I do love my ALS watches. But I tried to take an objective business look at other reasons. And WS is smart enough to not say “Richemont won’t let us”.
Cheers
Cheers Nathan.
Appreciate the two cents 😄
I actually like Lange watches, to be clear. This post was contra WS sharing sentiments regarding his vision for the brand, and explicitly stating how CPO doesn’t make sense - that’s all. Patek doesn’t do CPO but they do bolster the brand by buying important pieces at auction. Independent brands do CPO, and Lange production is more comparable with those - and fundamentally, it’s about defensive value protection and by extension, brand protection. If you listen to WS arguing against this logic, you’ll understand what made me write this. If it was indeed Richemont driving the decision, the framing would be different imho.