This is Openwork, a look inside the watch industry, a podcast from Collective Horology. I'm Gabe Riley, co-founder of Collective. And I'm Asher Apkin, co-founder of Collective. Collective Horology is an independent watch retailer based in Southern California. We carry a wide range of independent brands, including Arcanaut, Fierce, Nicholas Hacco, and more. To learn more about us and check out our available inventory,
visit collectivehorology.com. And today on the podcast, we're lifting the veil on selling and trading your watches. We'll cover the options available when you're ready to move on from a watch, the trade-offs of those options, as well as why there are different cost structures depending on how you sell or trade your watch.
In particular, we're going to share how dealers look at buying and trading for watches, which will hopefully demystify things and, more importantly, help the next time you approach a dealer about selling or trading your watch. Asher, have you ever sold or traded a watch to a dealer? Me? No. Yes, I have. I have many, many, many times. And I want to open this conversation up with two things.
One, we're coming out of Watches and Wonders, so there's probably a lot of people looking at their watch collection and making some choices about what might need to go in order to bring in something new. And two, one thing that we've always been very clear about here at Collective, and this is something that I feel very strongly about, is that it's okay to sell your watches. I'm going to say that again. It is okay to sell your watches.
And the reason I say that is that, one, it's your personal property, and two, 99% of the time when someone is selling a watch, they're looking to buy another watch, and that's good for everybody. So one of the things we want to do here is help give a little bit of insight from the business standpoint as to the options you have to sell and what the mechanics of that look like.
Because if you're not somebody who does sell watches on a regular basis or trade watches on a regular basis, there are a lot of questions that come up and we'd love to be able to address those and explain some of the mechanics behind them so that you can go in with eyes open and understand what makes sense for you as you make those decisions.
Yeah, that's interesting. You know, there are a lot of people who tell us, And this is shocking to me because like you, before I was even a watch dealer, I sold and traded plenty of watches and exactly it was, it was what allowed me to keep exploring in, in the hobby. We've heard from a lot of, you know, fellow collectors. We've heard from a lot of customers that they have never sold a watch, even if they're curious or thinking about it.
Just the whole process of it just feels like it's too much. And look, there are plenty of options here. We'll discuss them. The other thing we've heard from people, which I think is more interesting, I mean, not that that's not interesting, but like more, I don't know, unsettling for us to hear is there are people who feel guilty about coming back to us or another dealer and saying, hey, I have a watch I'd like to trade or sell to you or consign or I'm just ready to move on from it.
And a lot of times I've heard from people that they're worried about insulting us or making work for us, or particularly if it's a watch we've made as a collaboration, they feel like they're somehow, by moving on from the watch, they're being bad customers or disrespectful or anything like that. And I just want to say that's not the case at all. We are happy to sell a watch twice. You know, just thinking about it from a purely practical and shark-brained mentality.
If you want to sell a watch back to us, that means, to some extent, we get to make money off of it twice. And we'll talk about how that works. But please don't ever feel guilty about needing to move on from a watch. And I would also add, if you do buy from a brand that does make you feel guilty about selling a watch after you've paid them not insignificant sums of money, that's a really important input to have. Yeah.
We've all been there. So I think what it might make sense to do is chat broadly about kind of what the options are if it's time to move on from a watch. And I think the area we can give the most sort of helpful clarity on is the dealer perspective on this. So when people approach a dealer to sell or trade a watch, what's going through our mind, what we're thinking about. Because every dealer approaches it differently, and I think that's good information to have.
But I think, broadly speaking, there's probably three ways you can think about selling a watch or moving on from it. The first is to sell it direct, to sell it yourself. And there are any number of options for doing that. You can sell it on the forums. You can sell it or trade it among friends and fellow collectors. You can go through eBay or Chrono24, but essentially you're managing the sale of it. The second would be to sell or trade with the dealer.
And we'll talk a lot about that and what's going through, you know, kind of on the other side of the table when we get approached about a sale or a trade. And then the final, and this is an area, Asher, I don't think we're going to spend too much time on, but is certainly an area I think for its own pod topic would be selling through an auction house.
And I think that just like, I think we can give some helpful clarity on what's going on on the dealer side when you approach us about selling or trading a watch. I think there's a lot of clarity that people want and need around auction houses and how they work, how the process works, all that sort of stuff. So we know plenty of people in that world. I think that's going to be its own podcast conversation. So maybe we'll keep that one to the side. But why don't we start with selling direct?
And I think we can both speak from experience here, because you and I have both sold plenty of watches, either to fellow collectors, through WhatsApp groups, in person, face-to-face. We've traded watches with people. We've sold them on eBay. bay. So I guess what are the, from your perspective, when are you, when are you thinking about when you have a watch, like, okay, this is a watch or this is a circumstance where I'm going to sell
it directly versus use another channel. And how do you like to do that? Sure. So let's look at the options that one has when they're selling direct, right? In an ideal scenario, you're selling a watch to a friend or to somebody that you know, and the relationship there is one one that is fundamentally trusted. And that, I think, is the key when we're talking about.
Certainly any type of sale, but really a direct sale, which is how much do you trust the person that you are going to get into the deal with? So putting that aside, let's think about the benefit fundamentally of selling direct. Selling direct, as anyone would tell you, will almost always gross you more money than if you involve a third party, which makes sense. Because I don't know that that's particularly true. We'll get into that in a second. But you capture most of the proceeds of the sale?
Absolutely. Let's put it that way. That's a better way to put it. And really, if you look at it, there's essentially two roads to walk down. There are self-service platforms, right? So that's what we see with Chrono24 or eBay, for example, or I suppose Bezel, some of these other upstarts in the space. And then there are direct resources where you're selling to individuals that are part of a community.
And that could be your friends in a WhatsApp group. That could be a Slack channel that you're part That could be Reddit, what have you. Now, I'm going to talk a little bit just about the structure of something like eBay, Chrono24. I'm not as familiar with Bezel, but I suspect it's a similar approach, where essentially they will charge you a percentage of the sale for which they handle some degree of intermediary support, right?
So, for example, with eBay, under a certain price point, really what they're charging you for is the use of the platform, so the discovery of your watch, the credit card transaction fees that are involved in that, a shipping label if you choose to buy that from them. And I want to come back to shipping in a moment here because that's an important subtopic. And then ultimately, some degree of measure of the trustworthiness of the person that you're buying or selling to through a rating system.
Now, on average, what you're looking at there is somewhere between 5% to 12% of fees that come out in different. EBay is about 13. I think Bezel is lower. That's why I started that low. But the reason why I flagged that is built into those fees are everything I just covered, right? The cost of the transaction, the benefit of using the platform for discovery, and then some degrees of protections. EBay offers a form of an authenticity guarantee.
Chrono24 offers an escrow service. And there's all sorts of different levels of protections, if you will, that are built in to the platform. But I think the most important thing to take away from that is that in the end, whether you're selling to somebody on eBay, on Chrono, on any other platform, or even directly, in the end, you still need to be in a place where you feel like the person that you are dealing with is above board.
Because just because something goes through one of those platforms does not guarantee that there won't be some degree of shenanigans that go on. And, you know, unfortunately, both Gabe and I have been the victim of shenanigans, whether that's somebody claiming that something which is perfectly fine was running inaccurately on a time grapher, whether somebody is complaining about X, Y, or Z that was not, that was disclosed, for example, in a sale.
The challenge with a lot of these platforms is that they very much favor the buyer.
And, look, I mean, that's not to suggest that there aren't sellers out there with malintent, but if you are an above-board, honest dealer, and I don't mean that in the sense of a watch dealer, I mean just somebody who's selling, you know, that doesn't mean that the person who's buying from you won't attempt to get some extra cash on the flip side or attempt to negotiate with you after the deal is closed, which is something that we see happen, unfortunately, quite a lot.
Where if I'm customer A and I'm buying from Gabe who posted a watch as just a guy online and I pay him for it and then I suddenly have a whole lot of questions, that unfortunately puts all of the power in the hands of the buyer, which makes it very difficult to get out of a deal with somebody who is indicating that they may or may not be above board, trustworthy, or trying to go through with it.
Because many of these platforms hamstring the seller, which is to say that if the seller decides to cancel the deal, even if the client is behaving in a way that is indicative of malintent, the seller is the one who gets punished. So we often encourage people when they ask us about using those platforms, just have a little bit of a conversation with the person that you're getting into a deal with. It's less of an issue if you're selling a thousand dollar watch or something.
But if it's a significant purchase, a significant asset that you have, it can't hurt to go back and forth a little bit with that individual, look at their ratings, see if they really understand what it is that they're buying before you go through with that deal. Yeah. And I want to be a little bit more specific. I think a lot of what we're talking about in our experience here is on eBay.
And look, it's been probably a few months since I've sold a watch myself on eBay, so things can always change. As of this recording, it's what? April 17th, 2024. So things are always changing with eBay, but I think a couple of caveats, and this is just from our own experience.
Number one, I think one of the things you're alluding to in terms of, eBay really benefiting or giving the benefit of the doubt to the buyer over the seller is that That eBay, yes, it runs on trust, as you were pointing out, but the metric for trust on eBay is seller feedback scores. So think about when you're looking to buy a watch on eBay, probably the first thing you're looking at is who is the seller and what is their feedback score?
And in particular, there are buyers on eBay who will use that as leverage over the seller. So typically what will happen and what we're talking about here is you've sold a watch on eBay. Congratulations. The sale went through. Someone bought your item. They accepted an offer. They won an auction. The sale is effectively marked. It hasn't been paid, but the sale has happened.
What will then happen is a lot of times the buyer, and again, this is if you're dealing with an unsavory or unscrupulous buyer, will then approach the seller with follow-up questions. Oh, I just won this, but I have some questions about something. And they may use, so I'm going to make this up. You've listed your watch on a rubber strap, making this up.
They say oh i just wanted to confirm that the watch is shipping on a leather strap like well no the listing says it's it's rubber and they may then say oh i wanted it on on a leather strap and they may try to negotiate with you now the leverage they have there is if you say well no it is what it is they can provide bad feedback against you they can walk away from the sale then you're forced to relist it so there's all sorts of leverage they have another thing that
you and and i have both had happen to us is we've shipped buyers watches and then they'll receive the watch and tell us that something is wrong with the watch just i want to caveat the this is as individuals not as collective this is just stuff that we've experienced in the years leading individuals exactly we'll sell a watch on ebay as a collector and we'll hear from the buyer oh i just received it but something is wrong with it and of course nothing is wrong with it and
it's used as a way of trying to negotiate a discount. So you think you've sold your watch and making this up for a thousand dollars and all of a sudden the buyer approaches you and says, I'd really like to keep this watch, but something's wrong with it. It's not running well on the time grapher and they'll try to negotiate a discount. So you think you've made a thousand dollars. Roast $1,000, but they're going to ask you for a $50 discount or a $100 discount.
And you're thinking to yourself, well, I don't want to deal with a return. Then I've got to deal with the shipping back to me. Then I have to relist this. I may lose credit card fees. So be very careful just because a sale has gone through on eBay doesn't mean that you're going to collect the amount of money that you think you will. And doesn't mean that you're dealing with a buyer who's above board.
This is really unfortunate, but a lot of times these buyers know the calculus for the seller is, do I want to deal with a return and do I want to deal with negative feedback scores? Yeah. And I think that there's two things I want to get to here about preparing a watch for sale when you send it out the door and shipping it. But before we do, I do want to point out what the benefit is of an eBay or a Chrono or any of these other selling platforms. The benefit of these is the visibility.
It's discoverability. So if you're not a part of like a vibrant watch community with a buy and sell and trade group, which by the way, if you aren't, you totally should. A great one to join, for example, is the Grenado Slack, you know, where it's like nobody's policing those per se, but there is social pressure to not be a bad actor. And that's a really, really great place to do a lot of direct sales. But there is benefit for eBay, especially if you have an esoteric watch.
There's a lot of people who look for watches there. And good price discoverability as well. One thing that you and I both love to do when we're listing a watch, whether it's on eBay or anywhere else, is look at sold. You can filter on eBay by sold order. So you can see what people have actually paid and what the watch you're trying to sell at has closed at in the past.
And it's awesome for that. yeah and that's a way better indicator of what a rational selling price is than what people are asking because as we all know the watch that we physically have is worth a ton but the watch you're trying to sell me is somehow not so these are always an important important distinctions.
I want to take a moment to think about how you prepare a watch, whether you're shipping through eBay, for example, or any other platform or direct sale, because this touches a bit on what Gabe was referencing. This is the perfect segue and sort of how to protect yourself from the scenario I was describing. Exactly. And this is also good for insurance purposes. And we'll touch on that in a moment. But one of the most important things to do is to just document the packing of your watch.
So what I would suggest doing is set your iPhone, your Android up or whatever. And just record yourself the condition of the watch. If you have a time grapher, it's great to put, it's great to put the, say the shipping label that you have or something else that can't really be photoshopped in next to the time grapher showing that the watch is keeping good time, or at least is keeping the time that you represented it was keeping.
And then really videotape yourself packing the watch, putting it into the box, labeling that box, etc. That's really important for two reasons. The first, of course, is, God forbid you have an unscrupulous buyer, that is evidence enough for a lot of these platforms to prove that the watch was in a specific condition.
So make sure, for example, that you always, in your disclosure, you know, if you say there's strap change marks or what have you on the case, that you show those in the video so that it's very, very clear that the watch condition was as described. The second reason that's important is if you are insuring the watch in transit. And I want to take a moment to talk about insurance because that applies in every context of sale.
Yeah. And this is an unseen cost sort of to the seller when they're selling direct. This is probably something a lot of people aren't factoring in. And even if they are, I know you're going to hit on a touch on this, like you need to make sure you're protected because you might think you're protected with insurance and you very well may not be. Yes. Now, before we do this, I'm going to add a quick disclosure, which is we are not giving financial advice here.
We're simply talking about our experience here. So we're going to share personal experience here, but please don't take this as a, we're not advocating that you use any one insurance provider or another. We're just going to speak about what we've learned. And we're not making any guarantees or warranties about the terms that any insurer might provide you. Now, I feel like we've really arrived as a podcast. Have we done a good job there? We've given our first disclosure.
Well, man, you know, I thought like publishing the fifth podcast, you know, would cement it and make it feel official. But man, nothing is like the first disclosure. This is for educational and informational purposes only, but please proceed. Thank you. Appreciate that. Okay. Number one, most commercially available insurance products do not cover watches and jewelry. So when you go to Federal Express, for example, and they say, would you like us to insure this package?
There are two reasons why you should not do that. Number one, doesn't matter anyway, because if the package goes lost, it's not covered under Federal Express's carriage. Number two, you never, ever, ever want to let the shipping agent know what is in the box. So when you go to your friendly FedEx or UPS or what have you, and they say, hi, what's in this box? The answer is mechanical equipment. The answer is a book. The answer is literally anything other than a fine Swiss watch.
Watch that also means i highly recommend highly recommend that you package your watches at home and that you do not bring your watch to a to a ups store fedex office or what have you to have it packed not because i think most of those people are unscrupulous they're not most of the people you meet in the world like in any other situation are honest and great people.
But then there's that one chance that they aren't and we have had watches go missing in the hundreds that we've shipped as a dealer, it happens. And often it happens when it's a package where somehow in one way or another, there was a disclosure about the contents of it. Sometimes it's just bad luck, but sometimes it happens. One clarification on that, whether you're buying shipping insurance directly through FedEx, UPS, or the USPS, I don't think any of them insure jewelry or
watches. So there may be coverage that's available. And this can also be done, like say, through the eBay interface. You know, You know, you can purchase your postage and shipping through the eBay interface and you'd think, well, eBay knows that this is a watch. This was listed in the watch category on eBay and they're offering me insurance in the flow to print a label. Doesn't matter. You won't be covered. Correct. So there are providers that are specific for this sort of thing.
Many of them do require you to be a jeweler. Like there's a company called Parcel Pro, which is partially owned by UPS. Some of them do not. So there is an example of InforSure or IFS. They have been known to occasionally grant accounts to individuals. So that's important. The other thing I'll bring up is you may have a friend who owns a watch store or is a dealer and have asked them for a label in the past.
That is also uninsurable. And the reason why is that the only insurance that a dealer can provide is on a sold order with a dedicated invoice from point A to point B. So if you say to them, I need a label for $50,000, if there's no associated invoice tied to an in-stock item, it's an invalid insurance claim. So you might think that it's covered, but it's not. So what do you do in this situation? It's a little bit of a pickle.
If you can't find an insurer that will cover you, the challenge is you may have to ship uninsured. And that is a decision that you're going to have to take on. But the flip side of that is you've probably been shipping uninsured your entire life and just didn't realize it. Oh, you were and you were paying for insurance. That wasn't valid.
I just want to add one other caveat. caveat, if you do get an insurance policy, and I know some people have their personal article policy through Jewelers Mutual. They may offer a shipping rider on your policy, InforSure may offer policy for individuals. At one point, I think ParcelPro did. Maybe they don't anymore. But regardless, if you do have insurance on your shipping, make sure you follow
all of the instructions your insurance provider gives you. So they may tell you you need to double box things. They may tell you you may need to have an internal box that's also labeled. They may tell you you need to photograph and video the packing of the watch because when it comes time to make a claim, they're going to say to you, okay, great, we need the photo of the packed box and the inner box labeled and we need all this sort of stuff.
Document everything, not only for the purposes of of dealing potentially with an unscrupulous buyer. If you do have to make an insurance claim, the amount of documentation you'll need to provide is exhaustive. So just read all the terms of any policy you're given very carefully. And this goes back to my earlier point of film yourself packing the box. That it will get you so, so, so far if you need to prove what's going on.
Because, of course, as with so many insurance policies, what they're really insuring here isn't the box. It's you. And if you have proof positive that what was actually in that box is the thing that you're making a claim on, then there's a lot less of room for debate. So important thing. Now, if you are listening to all of this and going, oh, this is not the way I want to sell a watch, we get it. And that's why dealers exist. And there's a different price structure.
And I think the Uber point we're going to make here is part of the reason why you pay or you often net a little bit less than you might if you sell direct is because everything we just described is the work that you're giving and the challenge that you're giving to the dealer to manage on your behalf.
So let's talk a little bit about the different ways that you can deal with a dealer and then we're going to switch it a little bit and talk to you guys about how we as dealers Think about things in terms of purchase, consignment, or trade so that you can have a good idea in your head when you approach us or anyone else about any of those things, how we're going to evaluate it so that we can all come out of it feeling really good about the transaction.
Action yeah so they're really three options you have when selling or trading a watch to to a dealer now some dealers may do all of these things some may not but may not do do any of them but generally speaking you can sell a watch to a dealer for cash talk about how that works and how a dealer thinks about that you can trade a watch to a dealer toward another purchase or you you can have a dealer can sign your watch.
Essentially, you send them the watch, they sell it, they have a fee on that, and then when the watch is sold, you get paid out on it. So let's start with selling your watch to a dealer. I think there's really two, with all of these things, there's trade-offs. But I think the trade-off you're balancing when you sell a watch to a dealer is, number one, it's probably the fastest way to liquidity on a watch. Assuming a dealer says, yeah, I'll take that watch.
I'll give you cash for it. And assuming you want to accept that offer, you're going to have cash generally pretty quickly. Most dealers who do this will pay you by wire. So this is a way to get liquidity. Now, there's a trade-off here. And that trade-off, of course, is.
Are you going to capture the most possible value for your watch? Before we even go there, I think there's one really important thing to know before you approach any dealer, which is dealers are businesses and businesses operate on the principle of making money. So that means that they're going to buy something from you. They're buying it because they're going to sell it for more than they paid you for it, because that's how anything works, right?
And it's cost of goods sold against revenue. So what that means is if there is a watch that has a market price of $20,000 and you want to sell your watch that has that market price, a dealer is going to pay you less than $20,000, whether it's consigned, whether it's purchased in cash, or we'll talk about trade in a second, but to a lesser degree in a trade, largely because they need to make money on that deal.
So, the number one thing I want to just kick out of pace here, and forgive me if this is something that you know as a seller, is if somebody believes a market value for a watch is present, that is not what a dealer is going to pay you for. That is what selling direct may help you accomplish. And that's what we said earlier when we said you might be able to get more value out of a sale if you sell direct. It's because there's obviously no intermediary margin that's built in.
So when a dealer thinks about buying something for cash, really, they're going to think about a few things. One, and this is, of course, true about everything else. Do they know you? Are you a trustworthy source? Is the watch that they're going to get from you in good condition? Is it real? All of those things. So you may get asked a number of questions. You may be asked for photos. You may get asked for serial numbers and things like that, which is totally normal.
And in fact, I think it's a very good sign because it shows the due diligence of the dealer who is making sure that what they're buying is, in fact, what is being represented presented to them. They will then decide what margin is reasonable for that watch. Now, I'm not going to get into percentages there because that really does vary dramatically on different people's businesses.
But I think what is important varies on the state of the market because a dealer is going to be thinking about how long it's going to take them to sell or move a watch. And right now, that's obviously a factor of a watch. Some watches are easier or more difficult to sell, but it's also a factor of the selling environment. And right now we're in a selling environment where it generally really is taking dealers longer to sell watches than it did one, two, three years ago.
And so they may offer you a relatively lower percentage share of that price because they think they have to sit on it longer. And that has nothing to do with the watch. It's just the reality of the market. And to some extent, we're seeing a little bit of that going on. Yeah. Another factor that may go into it is if they have a backstock of that reference, as well as whether or not they have a buyer for that reference.
So for example, if somebody came to me with a watch that I knew I could place very, very quickly, then I'm more likely to take a smaller margin on it because it's essentially going to move through relatively fast.
If it's a watch that I don't have a buyer for or that the market is not as robust on, then a larger margin will be built in, not because I'm necessarily going to realize that margin in the end, but because I need to give myself some degree of padding to allow for the depreciation of it while it sits fits there. A way to think about this, and it pains me to say this because, you know, we often talk about watches as pieces of art and in this situation, we're talking about the market on it.
So I want to be clear when I say the next thing I'm going to say that it has to do, you know, this is purely about transaction in this comment and not a commentary on watch quality or anything to that effect. But there are definitely times where I might have to value a watch at a much lower price in cash because I know it's going to take a long time to sell.
And because I know it's going to take a long time to sell, I have to protect myself because in essence, what's happening is a transfer of liability, right? I'm taking a thing that a person has that they no longer want and they want to turn it into cash. And they're asking me to take that liability on myself, give them money for it, and then try to sell it because they don't want to for whatever reason. And that means that I have now risk, which I did not have in my business before.
I think there's two things we think about when valuing a watch that comes in for a sale, trade, or maybe to a less extent, consignment. One is, what do we think the watch is worth today? And two, what do we think the watch is going to be worth 30, 60, 90, or more days from now?
And so we have to think not only about the present value of the watch and what anything like watch charts or Chrono 24, another topic we can get into, like says the value of the watches today, but where do we reasonably think that this watch is going to to be in value in the future because we're not going to get it and sell it today. We're going to get it and sell it in a week, two weeks, maybe three months from now.
And we need to prepare for that reality. Right. Now, that's if we're buying a watch in cash. Now, another way that you can work with a dealer is through consignment. And consignment is at a much lower risk to the dealer, but it still provides you a lot of extra benefits which you wouldn't have selling privately. For example, you can issue an insured label to get the watch from you to us, and that is a legitimate insured label because we have a consignment agreement.
The percentage that we are willing to take as a margin on a consignment is fixed and lower than what we would generally take on a watch that we are buying because the risk to the business as a dealer is significantly lower. But we're still obviously motivated to sell that watch, market that watch, and handle all of the payment processing, whether it's a credit card, which is difficult for an individual to take, or a wire, for example, that makes it a lot easier.
And all of the work is still being done by the dealer, but with less risk to them. And as a result, everybody kind of wins there. The downside on that is it just takes longer to get paid. So if you have a watch that you want to sell and you're ready to move out of it and you get paid in two weeks, three weeks or a month, it's really not a major issue.
Then consignment is an awesome way to do it because you're really paying a somewhat nominal fee to a dealer to be able to handle all of the work of the sale. It just takes a little bit longer. So cash, you'll get paid faster, but you're trading liability. Consignment, you'll get paid in a little bit more time, but you'll get, generally speaking, will get paid more.
And the dealer will obviously be more motivated to take a flyer on something that they may not necessarily be willing to buy for cash because the risk is so limited to them. You may not get more, but you're going to get a larger share of the gross sale price. That's a good way to put it. That's the way. Because the market is the market. And I want to be clear, there are watches we've brought in on consignment that we've sold before we've even listed them.
And there are watches that we've brought in on consignment that have taken six months to sell. Yep. And the market can change in those six months. The market can go up. The market can go down. So- That is the trade-off. You're going to capture more of the share of the sale price of the watch, but you're going to have to wait. Yeah. And finally, before we talk about trade, I do want to talk a little bit about why there is a margin, more specifically for a dealer.
We touched on it a moment ago, which is we're a business. All businesses deserve to make money. That's why we all get into this and have it. But there's essentially two buckets that that margin goes into, right? One is overhead and operating cost. There is a cost to shipping labels. There is a cost to being insured. There's a cost to having a safe and all of the infrastructure, the security systems and all of those things that go into being a reputable dealer.
And those costs are part of what you are paying for because those protect you. Those fundamentally guarantee that if something goes belly up, that you, the individual who is trusting a dealer, will be protected. And it's, by the way, if you're working with a new dealer, it's not crazy to ask them questions about that. So you make sure that you're dealing with somebody who has a proper facility and that it's not just going into a Tupperware at the bottom of somebody's closet.
And then there's the other side of it too, which is compensation for the dealer's time. And this is a really important thing to consider. You know, there is time and effort that goes into shooting watches, marketing watches. There's literal money that goes into the advertising to support the marketing of those watches. And all of that, when added up together, is not an insignificant amount of money. So when a dealer says, this is the chunk I'm going to take, a lot of that is that.
And I would even say that even if a dealer is huge and they don't do a lot of that marketing. Part of the reason why they do that is they spent decades likely building a built-in audience, and that has costs too, and they're being paid for that. So it's important to look at that holistically, which is why I want to then touch on the third way that you can work with a dealer, which is in trade.
Now, one thing that's really important to note on a trade is in a trade situation, an individual is still or a dealer rather is still taking a watch in on a liability, but it is being mitigated by the fact that it's against a new sale. So in some circumstances, dealers may be willing to be more generous on a trade depending on the economics of the watch that they are trying to sell. I'm going to say that again, depending on the economics of the watch they are trying to sell.
So, for example, if you go to a dealer with a $50,000 watch that is a little bit difficult to sell, and you want to trade that towards a $5,000 watch that you want and then get $45,000 back in cash, that's not what I'm talking about. What I'm talking about here is saying I have a watch and I want to trade up, for example. So maybe I have a watch whose market value is reasonably, reasonably $15,000. And I'm looking at a new watch that is, let's say $25,000, right?
So there's a delta there of 10 grand. In market value. Correct. In generally speaking, a dealer is still not going to give you that full market value because remember, they still have to sell that other watch and all of the things that we just talked about still figure in there. However.
However, because there is also cash coming in against an item which is also depreciating, then most dealers will generally give you a little bit better of a deal because there's still some degree of cash flow positive that's coming in. Upside down trades, which is to say trades where cash is coming back to you in addition to another watch, sometimes work with dealers, but not all dealers like those. So I think it's important to just be open minded when you're speaking to someone.
And I can tell you one thing that, you know, when I've sold watches as an individual in early collecting, or even just when I get a phone call from somebody who wants to do a trade, I really appreciate when somebody is trying to make sure that the deal works for everybody. Body, because that's where I think you'll find a lot of folks are more willing to be flexible and be open to different values if you're being reasonable about what your expectations are.
And your expectations should always be slightly less than or reasonably less than the market value in a trade, though I think it is reasonable to expect that you would get more value on a trade than you would in a cash buy. Asher, will you allow me to play the role of both the pragmatist and the cynic. I feel like that's going to be our merch for the show, but yeah, sure. Go ahead.
So I think one thing that comes up particularly on trades, and this is what you're talking about, is we'll hear from someone who wants to trade a watch towards a purchase and they'll say, yeah, but the watch I'm... Let's go with the example you just had. The watch I'm trading to you is worth $15,000 and you're going to sell me a watch for $25,000. Why won't you just take the $10,000 in difference, the watch I'm giving you is worth 15.
Why do you have to make money off of the watch that I'm trading towards? In other words, why won't you accept that full $15,000 of value? That is true. You are giving us an asset, a thing that is on the market worth $15,000 today. Maybe we could sell it for $15,000. But it goes back to a lot of the things we're talking about. And it depends on... Well, but hang on. We're not going to sell it for $15,000, right? Just allow me to continue.
Let's say we do sell it for $15,000. I think there's two things that goes on. One, there are all the costs we just discussed, right? Exactly. So the first thing, there's multiple percentage points that go to credit card fees on that sale. Then there's all the overhead costs. There's our time. There's all that kind of stuff. But the other more shark-brained And a thought on this is, what if I can't sell this watch? What if I need to wholesale this watch?
So let's say you bring me a watch and I decide I'm going to take it on a trade because it helps me turn new inventory and make a sale to you and you're a good customer and I want to help you get into a watch. I take the watch in. It may be a watch that I don't really have a particular audience for. I want to talk about that in a second. Like every dealer has a different audience and every dealer has different watches where there is kind of built-in trust
and credibility in what they're selling. For sure. So I also have to say to myself, not only what does it cost me to sell this watch, what is this watch worth today and what could it be worth in three months? I also need to ask myself if I need to turn around and wholesale this watch, in other words, sell it to another dealer, what are they going to give me in cash for the watch? Because of course they have all these other things that we're talking about.
They need to make a living, they have expenses and things like that. So that, I think that's also part of the calculus, which is we're not necessarily going to sell ourselves every watch we take in on a trade. Some of them we may decide, you know what, there's a better dealer for this watch and therefore we're going to need to wholesale this watch and we need to think about what the wholesale price is that we'll get on the watch. Yep.
So I want to tell a little bit of a story here about one of the easiest watches we've ever had to sell that we took in. I think it was on a trade. And one of the most difficult watches we ever have to sell that we took in on a trade. One of them is a Rolex and one of them is an Urwerk. And you probably would guess that the easiest watch we ever had to sell that we took in on a trade was the Rolex, but it's not. lot. It's actually the hardest watch that we've ever taken in on a trade to sell.
And this goes back to the idea that every dealer has an audience and every dealer has credibility in different ways and in different product categories. So for us, you know, our business is really built on. Being a retailer of unusual independent watches. We've built credibility there. We have an audience there. People come to our site to look for that stuff. And we've sold plenty of new and pre-owned indie watches. One of the fastest watches that we ever had to sell was an Urwerk UR100P02.
So this is a collaboration that we did with Urwerk. It's a $60,000-ish watch pre-owned. We had one in that we took in on a trade and through total serendipity, you know, we got a call from another dealer saying he had a client looking for one. Did we have one coming in? We did and we sold it before even listing it. And by the way, thank you to that dealer for contacting us and letting us know. So that's a very unusual, very expensive, super esoteric watch that's not for everyone.
And we sold it before we even listed it.
Now, we've had a Rolex Explorer II 16570 zero in our shop for a couple months now that we took in on a trade and we took that what we don't really sell a lot of rolex and i think this this factors into it at the moment we don't sell a lot of rolex for sure sure we haven't sold a ton pre-owned but you know we we took the watch as a as a trade and the calculus there was oh well you know we're going to take this watch as a trade it's going to help us sell another watch
and it's a rolex how hard could it be to sell well it turns Turns out that a Rolex is both the easiest and most difficult watch to sell pre-owned at the same time. We have gotten no shortage of traffic on that watch listed on our website. Now you can check it out. We've got no shortage of inquiries on that watch, but it's been up there a few months and we haven't sold it.
And the reason why is we just don't have an audience for Neo Vintage Rolex and buyers Buyers of Rolex and Neo Vintage Rolex, understandably, have a lot of questions about provenance and condition. They want to buy from a dealer they trust. All of which is utterly legitimate, by the way. Totally legitimate. Now, of course, we could have made the decision to wholesale that watch, but I'm kind of keeping it up as an experiment.
I suspect, ultimately, that watch is going to sell. And here's the bet I'm going to make on that. Of course, the watch will sell, but I'm going to make a bet on that watch, Asher. I think we're going to sell that watch to an existing customer, someone who already knows us and trusts us. Because I've seen that the number one question we have on that watch is really about trust from people who are more casual, who are checking it out and getting in touch with us, which is, how do I know it's real?
How do I know I can trust you? And obviously for customers we have and we've worked with for a while, that barrier to sale isn't there. So this is a long way of saying whether you're offering to sell a watch to a dealer or not. Even consign and certainly trade, a big thing to think and keep in mind is who's the right dealer for my watch? Because you may get different valuations from some dealers. So you may have dealers that say, I'm passing on a Rolex.
You're certainly going to have dealers if you want to sell or trade who are going to say, I'm not taking an Urwerk. I just don't have an audience for it. So this is a calculus for us. And when you're thinking about selling, trading, or consigning watch, it may help to ask a couple of dealers where they think their, their price is on it. And by the way, like, that's okay. Like, let's say you call us and you offer us a certain watch and we say, thanks so much.
You know, I don't know if I really have an audience for this. You should still try other dealers who may say, oh yeah, oh yeah, I'll take that right now. And that, and that goes for us too, because they may, as we mentioned, have somebody who had said, Hey, if you ever see one of these, let me know, or, you know, or, or more dedicated and diverse audience that's specific for that.
Finally, and I think this is the other key point, when you're talking to a dealer, keep in mind the points that we brought up so that you don't scare them away at the outset by making a offer or asking for something which is so far removed from what is a rational ask that the dealer is disinclined to want to engage on it.
And one thing that I've learned over the years is the more reasonable you are and the more rational you are, the more likely a dealer is to want to have repeat business with you as a source for a watch versus if you're constantly pushing for that extra $500 or that extra this, that, or the other. Not because a dealer is being greedy and trying to just get every dollar out of you, but because they respect and appreciate the rational and reasonable conversation.
And that will pay dividends in the end if you ever find yourself with a watch that is difficult to move. For example, a dealer with whom you've had many transactions in the past will almost always be more inclined to work with you on something than if you have been unreasonable in your requests leading in. I'm going to give you one just final tip on this and thought in particular. One thing that comes up all the time is condition and the way sellers represent present condition to dealers.
So this is a very good point. Yeah. And by the way, there are sellers who get burned by this. We'll talk about there's two sides to this coin. So on the one hand, I want to let people know that when we, One of the biggest inputs to the price we're going to give you, whether it's a price we'll pay cash or the value we estimate we can sell the watch for on consignment or trade, is, of course, predicated on condition. And condition, I found, is very subjective.
We try to remove, when we're selling watches, any subjectivity from it. We use a 10-point rating system that's clearly defined. Is it the Eric Koo system? Yeah, it's a system developed by Eric Koo, and it's used by LoopThis, which is another selling platform that Eric and a number of other folks run.
So we try to take that out, but we've seen buyers represent something to us as mint that in some cases truly is mint and in some cases is very well worn or may have one or two issues in terms of condition that may seem minor to the owner, but can be preventative to sale or really have an impact on value. So you may just have one ding or dent on your case and no others, but that one One ding or dent may remove significant, significant value.
And you shouldn't feel shy, by the way, about telling a dealer about this. For example, I have in the years I've owned watches, I've had a gold watch that did have a dent. And I disclosed that to a dealer I was selling it to. He still bought it. He just bought it figuring in the time it would be a way to be repaired and the cost of that repair. So don't assume that just because there is a cosmetic challenge with your watch that it's unsellable.
That is absolutely not true. but if you don't disclose it and that comes in with the dealer then two things happen one there's a huge breach of trust now i'll preface by saying look sometimes things do happen that you didn't notice you know like maybe there's a mark you didn't see every day it's just there it's part of the air you breathe you didn't even notice exactly and and listen like we we see that that that's totally fine but
sometimes something that comes in which is pretty clear that somebody should have noticed and then it becomes really challenging this is part of the reason why we videotape everything that we open is to make sure that you don't get into a situation where a dealer says, Hey. Just so you know, there's a chip in the crystal at 11 o'clock and that's a problem because that crystal is going to cost me $300 plus $200 repair plus the depreciation. I have to lower my offer by a thousand dollars. Okay.
That's a bummer for everybody. No dealer wants to have that phone call. No buyer wants to hear that. So way better to just try and disclose everything up front. And if you don't have a loop, buy a loop. Just look at your watch under a loop. There will always be surface marks and scratches. These things naturally see wear when you breathe on them.
The more honest you can be, like if you say, hey, there's swirlies all over the polished surfaces and I get the watch and there's swirlies on the polished surfaces, cool, fine. No problem. If you say that the watch is stickered in new and then I get the watch and there's swirlies all over the polished surfaces, it's not. So I think there's a couple of things you can do here. One is take the best photos possible you can.
You don't have to be a professional photographer, but if your photos are blurry or low resolution, all that sort of stuff, we're going to have to err on the side of being conservative. We might say, oh, what looks like some dust, that could actually be a scratch and we need to price accordingly. So the best photos you can do or provide would be great.
The other thing is, if you get a price from a dealer that's somewhat conservative, sometimes the dealer will come back and say, hey, we received the watch. It's in better condition than we thought. Good news. We can list it for more. We can offer more. Yeah, so that's also true.
Final point here would be like, if you're negotiating with a dealer over the value you're getting on a trade or what you're asking for in cash, I think it's also reasonable to say to the dealer, hey, I'm going to send you the watch. Let's agree on what condition you think this is based on the photos I'm providing. And if you get it and it's in better condition, could you go higher? What would that look like? Totally reasonable. And you can't hurt to ask. So condition can cut both ways.
I know there are plenty of horror stories about people hearing from dealers that they received a watch and they're lowering their offer. No one wants that to happen. So it's very important to have as an objective and clear conversation as you can about condition early. So Asher, any other pearls of wisdom or should we leave it there? I think let's leave it there. And I would add to, and I want to end with where we started here.
Collecting is a journey. And that's going to mean that you will choose to move out of watches for whatever personal reason you may have. And it's okay. It's okay. And I want to- It's not only okay. This is part of what makes the watch industry go round. I think the market on pre-owned is probably bigger than the market on new or certainly comparable in scope. Pre-owned is just as much a part of the quote watch industry as new.
And as far as new watches go, new watches can't sell in the quantities they do unless people are moving on from what they already have. So if you need to sell a watch, that's okay. In fact, thank you. Yeah. And this, by the way, isn't a conversation about the so-called flipper topic or what have you. And I understand that it's frustrating if someone buys a watch and resells it in two weeks since a watch that you've been waiting for for a long time.
Like I get all of those things, but I really, really want to reiterate that there is a pervasive vibe sometimes in the watch industry that selling, like constant acquisition is expected, but divestment is unacceptable. And that's just a challenge. I think we as a community have the opportunity to work, to adjust for all of the reasons we just described. So don't ever feel bad if you see something that you're excited about, out, if you want to put money into your kid's college fund or whatever,
and sell a watch to do it. It's okay. Well, to the sellers, traders, and consignors, forever may you wave. Thanks for listening to Open Work. It's a podcast from Collective Horology. You can find us online at collectivehorology.com. And to get in touch with your questions, feedback, or comments, please email podcast at collectivehorology.com. Music.