The Business of Watches [007] James Lamdin Of Analog Shift On The Vintage And Pre-Owned Market And Why All Authenticity Guarantees Aren't The Same

0:09On the Business of Watches this week, a special live episode recorded at the UBS House of Craft event in New York City in October. We speak to James Lambden, the founder of Analog Shift and the vice president of vintage and pre-owned at Watches of Switzerland. It's a fascinating look at the vintage and pre-owned side of the market. Lambden tells us where we've been, where we are, and where we're going, plus plenty of thoughts and advice on the collecting journey from someone who has decades of experience in the watch space. We hope you enjoy.

1:01Indeed, and so we are here to talk about vintage and pre-owned watches, but let's, to start, Let's take a step back, maybe back to 2020, 2021. What happened to the pre-owned watch market? What drove it? And how did we get there? And how significant was that era and event for pre-owned watches? They started with some very dark times, Andy. I think we've all been there. extremely significant to answer your last part of the question first. What we were experiencing in the run-up to the COVID era was already a very dramatic increase in interest in mechanical watches at all levels for new, for pre-owned, for vintage.

1:58Publications like Hodinkee had reached untold new audiences. And the appreciation for these mechanical things was becoming far and widespread by social media and the internet in new ways. And then the pandemic happened, and people weren't traveling. They weren't eating out. They were spending a lot of time mandatorily at home. And my favorite headline from that era was from Bloomberg, and it was the return of stuff. And people spent their money on stuff, some really cool stuff. But it wasn't immediate. And in those first few months of COVID, we saw the secondary watch market and the vintage market, which are slightly different, pretty much stop.

2:53Everything stopped. And there were a couple months where nothing happened at all. What then happened was this new generation of watch enthusiasts had a lot of time on their hands to go and study and go and learn and get on social media and get on the internet and engage with something where they actually had time to focus. and it came roaring in with untold and perhaps not completely yet measured impact for sales, but primarily for new and contemporary pre-owned. Whereas vintage kind of took a slight left and it became slightly more rarefied air that was a little bit less understandable to a whole new wave of enthusiasts.

3:48And as someone who had been in the business for over a decade at the time, more than that, what was your reaction? How did you deal with all the new people? I mean, it was exciting. I remember the very earliest days of COVID being at home and getting calls or emails or Instagram messages from a lot of my colleagues in the industry. And suddenly there was this demand for new content. So we were creating Instagram Q &As and live discussions and chatroom kind of experiences through social media or on one of the variety of new tech spaces that came and left during the COVID era for sort of live hangs with your friends.

4:40and that demand was significant and the attendance was significant. And I realized very quickly that we weren't talking to the same group of indoctrinated individuals. We were talking to a much larger audience. For myself, we decided at that time to actually accept an offer from Watches of Switzerland. And Analog Shift was acquired in totality by Watches of Switzerland and became the vintage and pre-owned department for the group, which has been an incredible experience to take something that was a passion project and then expand it with incredible resources to reach yet another audience through their retail store network.

5:26And it came with a lot of challenges, but it's also resulted in exponential growth. And was it a surprise to you that this niche element, this side part of the watch industry all of a sudden became part of or in demand with a mainstream retailer like Watches of Switzerland Group? No, it's really cool stuff. You know, part of the effect in the last panel, we heard a little bit about sort of the tag along effect. You know, what's popular, what's hot. And that was probably never more prevalent in the watch industry than during and since the COVID era. This is where we really began to see new manufacturers have wait lists.

6:17We started to see the hype cycle get out of hand in some levels, in many levels, with contemporary product. So the secondary market was very robust during this time, and it also allowed secondhand dealers, analog included, to maybe tap into, to some degree, that secondhand but ultimately secondary market for new watches, as well as traditional pre-owned, as well as spreading the gospel of vintage. In retrospect, what mistakes did the vintage and pre-owned world make in dealing with that new popularity, with that new prominence, with that new profile? Or was it ready to become so much more mainstream than it had been?

7:20That's an interesting question. I think certain players in the space were better prepared than others. I recall very specifically early days of our acquisition. We did a nice brand refresh. We built a new website. And one of our long-term clients, actually several of our long-term clients reached out and said, you know, you've got a lot less vintage watches on your website now. I said, actually, we have about six times as many vintage watches as we have ever had, but we have 30 times more pre-owned newer watches. So perhaps looking at our own business, what happened visually was that we were emphasizing the newer pre-owned stuff and less the vintage.

8:12but to our i guess to our defense that's what people were asking for so what's cool about uh being a second-hand dealer being a vintage dealer is that we have we're very nimble and we can respond to changes in market demand whether it's color or style or brand or country of origin or price point much more effectively than a mono brand or a multi-brand dealer even that's working with product that is supplied by a manufacturer and you have really no say in what you get. And often you're not getting what you want because there's waiting lists. But as a pre-owned dealer, as a vintage dealer, we're very nimble.

8:50And in many ways that puts the secondary market in a better position, particularly for changing consumer demand and changing global economic situations. Indeed. And how we talked about where we were, where are we now? And what have we gained and what have we lost in this space? Well, the market remains as ever highly dynamic. And that's a word I've been using for a long time. And it still holds. It's just the reasons for that dynamic movement have changed and evolved into exciting and terrifying new ways. We're working now in a space where some of the newer enthusiasm that has come from watches is beginning to mature.

9:44Perhaps the appetite to pay very, very strong secondary market prices for everything are beginning to tone down. But people are still more engaged with mechanical watches than at any point in human history. And that's super cool. That's quite a statement. Yeah, I mean, I think it's true. I mean, I think it's true. If not, I just made it up, but it sounds good. I think what we're dealing with today with the tariff situation in this country, with other elements of international challenges in terms of distribution, responding to demand and so on and so forth remains a challenge for a lot of players in this space.

10:31Now, we're fortunate in that we have a certain level of resource and we have a certain level of distribution and tremendous ability to reach far and wide, not just to sell our product, but to acquire product. So we remain in a place where we can engage with the community and with the marketplace in perhaps more effective ways than someone who is geographically limited or financially bound to what they have in stock as a working capital. Indeed. Well, okay, let's jump to right now tariffs. What does this mean for vintage and pre-owned? I mean, is it all of a sudden a completely regional equation here?

11:19tell me I think it would be easy to sort of categorize it that way if you think alright well like if we're having challenges getting product into the United States then we are geographically limited to whatever's here and that's to a certain degree true but the reality is the nature of our business is international and we're bringing in product that originated overseas all the time. Tariffs do not work for the margins on secondary product. Hard stop. So I remain optimistic, hopeful that there's going to be a resolution to the situation that we are currently in at this moment with a 39 % tariff against Swiss goods.

12:07But again, And even if it did stay in place, while there would be certain brand or style limitations, there are a lot of watches in the United States. So if we can evolve and our marketplace can evolve to have interest in maybe some of the stuff that's already here. Shout out again back to the last panel where Tom was making fun of weirdos who like early American watches. I'm one of those weirdos. And there's a lot of early American watches in America. Now it's going to be a minute before people stop demanding a, you know, John Mayer Green Dial Daytona and start looking at a pre-war Waltham. I recognize that's a jump.

12:49That's a journey. It's more than a jump. It's a free fall. But there are watches in America, and a lot of them. It just so happens, though, most of the stuff that people are really engaged with are primarily located overseas at this time, predominantly in Asia. Is vintage and pre-owned, has it made the journey to being perceived as legitimate and on the up and up and on the same level as the primary market? or does it still, you know, have a ways to go in terms of, you know, being thought of in the same space? Yeah, another great question. I mean, I think categorically it has a long way to go.

13:41There are certainly players in the space who do a better job at providing a level of authenticity and a level of consumer security. And once they've sort of established themselves and they reach their audience, Yeah, their clientele becomes comfortable with buying a secondhand or a vintage item. But categorically, there's a tremendous difference that exists in a consumer's mind between buying a new product with a warranty from an authorized retailer than from buying some old watch from somebody they don't know or, you know, perhaps saw on the internet once. And talk about how that relationship, I mean, so, I mean, this is a digital world.

14:26the pandemic interest in watches was a digital phenomenon. But where are we going in terms of that experience of buying vintage and pre-owned? Is the trend of inevitably becoming more and more digital? Are we still on that journey or are we starting to push back? I'm going to ramble through this one a little bit, I think, Andy. So you can like nudge me back into place if I get too far into the weeds. But, you know, firstly, Analog Shift, my company, was built with an idea of a passion for analog experience. So the product itself that we carry is predominantly mechanical and analog in nature. The way we talk about it, the way we built our brand is in tribute to a non or pre-digital era, yet we operate primarily in the digital space.

15:26So there's an irony there that's not lost on me. I'll also go back even further to my first sort of engagement with the watch community. And it was also digital. For some of us in the room might remember the era of forums and there was a whole bunch of like html coding you had to learn or copy paste if you wanted to upload a photograph i was never very good at that um and of course watch collecting is a highly visual thing so if you can't put up a photo of what it is you're talking about you're like you're not winning before covid one of the coolest things that happened for the watch enthusiast was that it was beginning to come offline.

16:15Groups like Red Bar and some of the other watch collecting communities that sprung up around the world were engaging with watches in a physical sense. And then, almost at the height of its popularity, we all had to stay inside. Certain elements of that have carried forward in the collector community, but a lot of the retail side is now still predominantly being pushed digitally, whether that's on an e-commerce platform on the web, through social media, WhatsApp groups, what have you. It is my belief that what we're dealing with here is a tremendously vibrant new collector community, new enthusiast community.

16:59maybe just to make up some numbers out number my generation not by age but by experience like a thousand to one that's how many new watch enthusiasts there are that's that's quite a issue yeah and i don't think by the way aside from all of you fine people in this room at the moment i don't think all those thousand to one are going to stick around forever right part of these people came in because they were bored during covid part of them came in for an investment angle, part of them came in, got what they wanted, and we'll move on. And that's fine too. But let's say that 90%, again, another made up number, let's say 90 % of those new people who came into watch collecting, watch enthusiasm, and over the last five, six years, let's say 90 % dropped out.

17:45My generation would still be outnumbered 100 to 1. So what's going to happen in that time frame is that those 100 are probably a lot more than 100, but let's say 10%, are going to become very experienced and knowledgeable. As you move forward in your collecting journey and in your enthusiast journey for watches, you're going to demand more and more expertise and more and more authentic interaction. I do not believe that that can happen exclusively online. So I think there is a demand for a analog experience. So, I mean, because at times it has seemed lately like everybody's becoming a watch dealer.

18:32Yeah, I noticed that too. So yeah, indeed, are we seeing the consolidation, the professionalization of this side of the industry? I mean, that's the journey we're on. How far along are we? I think we're still very early days. You know, if we zoom out and look at watches as a collectible category, as an investment category, you know, if we use art, whatever that means as sort of this overarching, that's the big one. You know, somewhere down that list, you've got spirits and wine, and then you've got classic cars and then somewhere down here is watches. So it's still got a very, very long way to go before we reach the quote unquote collectibles market cap.

19:23I think we're very, very early in the journey. But to answer the first part of that, yeah, we are already seeing a consolidation. I think during the sort of core pandemic era, a lot of people became dealers. And a lot of that had to do with access and relationships and be able to get a watch that was in demand and make a few bucks or maybe a lot of bucks flipping it on the secondary. A lot of those folks have moved on and that's fine too. What is the traditional Swiss watch industry? How uniform or aligned has their reaction to the shift in interest in vintage and pre-owned watches? What is the industry itself doing?

20:16I mean, there is an extraordinary sort of difference in some brands not even acknowledging this part of the market. And yet others have moved in great ways. yeah um i would answer it this way any serious luxury brand that is not paying attention to its own heritage is blowing it you know and those that are doing it well uh some of them almost overdo it there are certain companies whose products are represented on these very walls that will never let us forget what great human achievements they were a part of but whoever could you be talking i don't know we eat that up you know watches are a totally obsolete thing a mechanical watch you know there's got to be some romance and some like history behind this so heritage marketing is great and we love it and whether it's steve mcqueen or you know it's a camera brand or a watch brand or it's a car company that's still making the same damn car they made 50 years ago.

21:28We love it. That becomes an iconic thing. Some brands have museums. Some brands buy their own watches to put in those museums. Some brands are supporting the secondary market by offering valuations or extract services. Other brands are still offering restorative repair instead of the typical Swiss repair, which the word patina in Swiss means broken. And they just take a replace everything kind of approach. But some companies have figured out that preserving the integrity of a vintage watch is more desirable to collectors who value originality and authenticity. And more still have begun to move into some degree of secondary market support for selling vintage or certifying pre-owned watches.

22:25And there's a big one that I'm sure you're about to ask me about. Indeed. What did it mean in, I guess it was late 2022, 2022 when Rolex entered the CPO market. I mean, should it be as surprising to some, I think, as it was that they were even acknowledging this part of the market? I think it should not be surprising. Rolex is a wildly impressive operation, and they pay attention to everything. Rightfully so. Rolex has a brand integrity that is of utmost importance to them. And I respect that. Some people who understand the way Rolex operates know that this was not an overnight decision. This is something they had been exploring clearly for some period of time.

23:16And they launched it. And it has been, I would say, the start of the next chapter for the pre-owned world, the pre-owned marketplace. So goes Rolex. You can be very sure others will follow. And I think there's some value to that. God help us. As an industry, we are so far behind used car business. It's absurd. And the secondary certified pre-owned car business, by the way, I used to work at a car dealership. Make this simple. You don't make a lot of money selling new cars. a dealership makes its money selling service parts financing and pre-owned the reasons rolex are doing this are not about the money it is about the customer experience and being able to stand behind their product at the uh you know primary market and secondary market but from a dealer standpoint from a marketplace standpoint it's also adding a level of consumer confidence and that's what it's all about.

24:20Why then have we seen some brands completely ignore this side of the market? Why are they, why will they not get involved? I mean, it's a, it's a big lift, you know, and I think that any brand that has decades or centuries of history, there's a huge knowledge gap between somebody who is familiar with the current product line and somebody who's familiar with the entire history of that brand's products. So the authentication part can be overwhelming. Let's also not forget that watchmakers are in pretty short supply. A lot of these companies are, you know, they want to get more watchmakers just so they can make more watches to sell, never mind repair, restore, authenticate their old stuff.

25:16So I think part of it's bandwidth, part of it's the knowledge that these companies have about their own history, and part of it is where can they develop strategic partnerships to properly represent the other side of it. And talk more about that variance in the idea of certification and how certification works. Um, because yeah, I mean, you know, certified, certified, uh, uh, vintage watches or pre-owned watches have been around forever. Yeah. Well, that's one of those areas that we in the industry would really like to clean up the terminology around, like what does original mean and what does boxes and papers mean and what What does certified mean?

26:03Certified pre-owned suggests that somebody is of knowledge, is backing this up, is doing the work to understand what it is. And I think the assumption is to a lot of consumers that that is a factory-backed certification. 99 % of the watches that you see out there with certified pre-owned badging are certified by whoever's selling them. I once had a client bring me a watch that was highly suspect. And after voicing my concerns, not to slag the dealer who sold it to him, but to just caution the client about its authenticity, he came back to me and said, oh, everything's fine. I got a certificate of authenticity.

26:49I said, well, from who? He said, the guy who sold it to me. That's, you know, there's a problem there. So there's a cognitive dissonance, I think, between the realities of the marketplace, what does the word certified indicate to the consumer versus what should it mean? And what it should mean is it's been factory certified. And whether that actually means it goes to the factory or a representative that has been approved by the manufacturer is doing that work. And that's not the case. So there is a huge difference between Rolex certified pre-owned and, you know, Bill's watch shop. I don't think I work with anybody named Bill.

27:29I think that's safe. Certified pre-owned. Sure. Absolutely. But how much does the industry, do you need to explain that more? So much. We spend a lot of our time. And this is, again, a little bit of a difference between the way analog shift has chosen to do business and what i would refer to as a path of less resistance uh which is we spend an awful lot of time educating our customers and our collector friends about where these danger spots are in collecting in general because we value i value uh full authenticity and full transparency and sometimes that means burning our clients with information they didn't know they needed to know.

28:18And that can paralyze them, by the way, in the moment. They may not buy the watch that they're getting geared up to. If you explain something to them about what original suggests versus what it should mean as a word, as a descriptor. But I've always believed that a well-educated client is going to be a better client. And I would rather give them the cold hard facts about what other people might say to them and, you know, they'll come back later. We're not saving lives. I'd rather educate people. It's an important point to make, indeed. So you started Analog Shift in 2011, 2012? 2012, we went live.

29:002012. How has it changed in terms of buying and sourcing watches? I mean, what was it like then? And what is it like now? And what kind of scale are we talking about for your business now? Yeah, it's, you know, looking back, I was doing, of course, a little bit of exploration of the dealer marketplace before I sort of formalized and launched my website. In the early days, I launched with a shoebox of watches under the desk of an apartment on the fifth floor walk up of a crack house in Harlem. It's a true story. It's not the official bio, but it's true. and those watches were procured through hustling.

29:47I was all over this town. I was on the internet. I was on eBay auctions, estate sales. These were watches that I was beating the streets to go and get. Gradually, through the brand that we built, the partnerships that we made, the reputation that we earned, more and more watches started coming to me and I was doing less and less of the procurement. Today, it's like Christmas. Every day. We're bringing in tremendous volumes. We're buying in, sometimes in a week, more than we sold before we were acquired by Watches of Switzerland in a whole year. So the growth of the analog ship brand has been well over 95 % per year for the last five years.

30:36Wow. How much more difficult is it to find? I mean, is it not more competitive, more difficult to find watches? And what are you doing these days to continue to, you know, feed that supply? Yeah, there's certainly more competition for certain product, I think is the answer. But as I was sort of saying earlier, there are areas that we're constantly trying to explore and promote that are not in the core in-demand category. So there's always something to go out and find. But yes, particularly in a world where there are terrorists, it is competitive and there's they can be fierce. Do you think you or with the help of others, do you think this industry is capable, though, of creating, you know, tastes and trends in vintage and pre-owned and pushing the consumer to a place?

31:37many have tried oh i'm getting juicy um i think it's been done i've been accused of some things there was a great tinfoil hat conspiracy years ago that myself and and some other folks were sitting around a table strumming our fingers and stroking our hairless cats and boh-ha-ha-ing our way into market manipulation and i'd love to tell you that was true it's a great image but the truth of the matter is a lot of what we're doing a lot of what hadinkie's done a lot of what of the other, you know, tastemakers in this space have done is talk about things they're truly passionate about and they've caught on.

32:14And that's great. But more often than not, it's reactionary. I would love to tell you I stockpiled these things before blowing them up, but that's not, it's not the case. There have been cases where brands have tried to get a lock on a large percentage of the available supply of something they believe is going up. But again, that's speculation. And sometimes it works and sometimes it doesn't. Do I think that we as players in this space have the ability to influence taste and design? I do, but I don't think it's through taste making and the styling on Instagram or TikTok. I think it's about interacting with the brands themselves.

32:54Again, any luxury brand that's paying any attention is paying attention to their own heritage. So there's actually now more of a straight line between the vintage market and the manufacturers themselves than there has ever been. And that is kind of exciting to me because there are opportunities that can come from that to influence new product design. And then it becomes a cyclical thing. Absolutely. Absolutely. And why do we, why do we see the trends and ebbs and flows and, you know, all of a sudden we're talking about smaller watches, we're talking about dress watches these days, it's no longer about professional Rolex or sport watches.