The Zug-based luxury watch retailer Chronext is going public on the Swiss stock exchange. There are not only monetary considerations behind this.
Philipp Man appears for the conversation as punctually as a Swiss clockwork. The 30-year-old comes from Cologne and studied in London, but has lived in Zug for nine years. "I feel comfortable here, and would like to apply for Swiss citizenship as soon as possible," he says.
He has certainly internalised Swiss virtues. In addition to punctuality, there is also his love of luxury watches. Philipp Man owns a lot of them – but above all trades in thousands of models. On the Chronext trading platform, which he founded in Zug in 2013 with his student friend Ludwig Wurlitzer, no watch costs less than a thousand francs. The most expensive is a Patek Philippe Grand Complications for CHF 385,000.
A competitive market that is growing strongly
Chronext is effectively an online shop for second-hand watches in the luxury segment. That was the business idea of Philipp Man and Ludwig Wurlitzer when the two watch lovers first thought about founding their own company in the kitchen of their London apartment. In the industry, of course, no one speaks of something being used or second-hand, but of "Certified Pre-Owned". This designation is intended to express that the seller guarantees the authenticity of the watch.
The market for used luxury watches was still in its infancy when Chronext started business, but there are now many competitors worldwide, and even long-established retailers such as Bucherer now sell "Certified Pre-Owned" watches. If market forecasts are to be believed, business will increasingly shift to the Internet. According to the consulting firm McKinsey, around 12% of the sales of premium and luxury watches took place on the Internet in 2019, and this is likely to be 23% by 2025.
Chronext believes that it has advantages in this highly competitive market through selling not only used, but also new watches, and by dovetailing an online and physical presence,. While Chronext initially attracted ridicule from traditional retailers, the company now sells goods from almost 1,500 dealers, whose names are to remain secret. Well-known top brands such as Rolex, Omega or IWC have the opportunity to place their goods with Chronext, and the platform business accounts for two-thirds of its turnover, with the rest being generated by Chronext through its own trading.
The two Chronext founders Philipp Man and Ludwig Wurlitzer
Company value expected to reach around one billion
The company generated sales of CHF 109 million with around 120 employees in 2020. This makes Chronext a small fish in the global luxury watch trade. By comparison, Bucherer, the world's largest watch and jewellery retailer, made an estimated CHF 1.6 billion in sales before the pandemic. But Chronext's annual growth rates are enormous. They are aiming for growth of 40% this year, according to Philipp Man. In 2020, the trade in new watches accounted for 76% of sales, but in the future they would like to increase the share of used watches, because these promise a higher profit margin. From the inception of the company, investors have pumped more than CHF 100 million in the company, despite Chronext never having made a profit as yet. But CEO Philipp Man makes it clear: "We could have already reported a profit if we wanted to, but we have reinvest the profits in technology and brand building." Investors will soon expect profits, however, because Chronext is now going public – in Switzerland, of course. They say:
"We are a Swiss company and as such it has always been clear that we want to be listed on the Swiss stock exchange."
The launch on the stock market, which is planned for the fourth quarter of 2021, is expected to include a capital increase of around CHF 250 million. According to insiders, the market value is likely to reach around CHF one billion. The listing on the SIX Swiss Exchange is the "natural next step" to "increase the visibility and trust in the brand, as well as the international profile of the company", says Philipp Man, who wrote a thesis on the luxury watch market at Cambridge Judge Business School. The shares are offered to private and institutional investors in Switzerland, as well as to institutional investors in certain other countries.
Zug will remain headquarters in the future
The company wants to drive its growth with the fresh money. Chronext is currently mainly active in German-speaking countries. "We want to continue to grow in Europe and also gain a foothold in the USA," says CEO Man. Chronext could use the funds from the stock market launch for acquisitions, for example.
Although most of the operational business is operated from Cologne, Zug will remain the headquarters, he affirms. Five years ago, he saidthat Ludwig Wurlitzer and he chose Zug because rents in Zurich were too expensive. A very good offer was found In Zug through acquaintances, and, after several moves, Chronext now resides at Feldpark 9 in Zug. The company also operates a "lounge" here, i.e. a kind of showroom, where interested parties can try on watches that they have seen online after making an appointment. Chronext has ten more such stores, but these "lounges" are not operated to boost sales, as Philip Man stresses:
"They bring trust. Customers see that we really exist. That's important for a technology company."
The stock market launch should also bring visibility, and will certainly help in the fight against the big players in the industry.