[Special Discussion] NX ONE x Chronos Japan Edition: Preserving the value of watches and protecting their owners

As the secondary market continues to boom, Richard Mille and its authorized dealer, NX ONE, have pioneered the full-scale rollout of CPO (certified pre-owned) watches ahead of other brands. What is the crucial difference between regular second-hand watches and CPOs? Keita Kawasaki, CEO of Exes, which operates NX ONE, and CEO of Richard Mille Japan, motor journalist Masaru Noguchi, and Masamasa Hirota, editor-in-chief of this magazine, discuss the appeal of CPO watches and their significance, comparing them to examples in the automotive market.

Premium CPO watches led by NX ONE

Masayuki Hirota:When we think of CPO, the first thing that comes to mind is certified pre-owned cars, but which manufacturer was the first to start offering this?

Masaru NoguchiIf I remember correctly, BMW was the originator of certified pre-owned cars, starting in the 1990s. It became a hot topic because authorized dealers were offering a service that had previously been handled by local used car dealerships. At the time, they advertised that they would perform 80-item inspections and provide a warranty. Furthermore, they also offered the same free service freeway and roadside assistance as new cars, so their existence gradually spread, and in the last 10 years or so, premium brands like Ferrari and Lamborghini have also started offering certified pre-owned cars. Nowadays, most manufacturers, including domestically produced cars, are handling them.

HirotaWhy has it spread so much?

(I.e.: Peace of mind and safety - although not as much as a new car, Ferrari, for example, offers a 12-month warranty and roadside assistance. The price may seem a little higher than a typical used car, but it's still a reliable product. That's why customers can buy with peace of mind. Also, with premium brands, there are many people who want a specific model from a specific era. They couldn't buy it when it was new, but now they can. For example, Ferrari's V8 mid-engine is popular, and the 458 is the last model to feature a naturally aspirated engine. Within that range, there is a special model called the 458 Speciale, which is the most comfortable naturally aspirated car and is particularly popular.

Hirota: When did you first think about developing CPO? Were you conscious of the car example when you started?

Keita Kawasaki: I think it was around 2011. Richard Mille himself suddenly told me, "Officially sell second-hand watches." At the time, I asked, "Why?" After all, we would be buying and selling the watches that people had worked so hard to sell. But Richard insisted, "It's absolutely necessary to maintain the value of the watches." Noguchi-san mentioned "peace of mind" earlier, and Richard also said, "In order to maintain value, we want to establish a system where we properly repair watches before selling them." At the time, he said, "Just like a car." But at the time, people around me kept asking me, "Why is an official brand selling second-hand watches?" As a result, we launched the business on a large scale in 2012, first in Japan. That was the "NX ONE."

(I.e.: Also, when it comes to cars, the first owner often only drives it for about a year. It's the second and third owners who really cherish it. These people have a strong attachment to a particular model of car, so they do a lot of research on the car.

Chuan﨑:Richard also spoke about wanting to secure a strong second owner. "It's important to the brand that second-hand purchases are well-cared for," he said. That's because Richard himself is a collector of old cars. In other words, he applied the same feelings that Richard had about cars to his own watch brand.

(I.e.Another important thing about CPO is what kind of inspection records - documentation - the previous owner left behind. Overseas, there are competitions for old cars such as Villa d'Este (*), and the system here is that the more documentation there is, the higher the value of the car. Even with new cars, the number of them decreases over the years due to rough handling, etc. Even if there are still a few left in 50 years, the more reliable they are, the more reliable they will be. Accident records and owners - certified pre-owned cars are an exception, but just being owned by a celebrity, for example, will increase the value. Such records will also become important in the future.

Chuan﨑: That's something I wanted to do with a watch. I've done as much as I could with the NX ONE, but I really want to take it to that level.

Hirota: It's important to preserve the history of the item, including who owned it. But first, it's important to fix it properly and give users a sense of security.

Chuan﨑: This is a very important point, but to be honest, the watch industry is far less developed than the automotive industry.

※Concorso d'Eleganza Villa d'Este

NX ONE's Fair Price for CPO Watches

Hirota: In the past, second-hand watches were the entry point for most watches, but now, with more people entering the world of watches through new purchases, I think the standards for second-hand watches have risen dramatically. I started my watch hobby over 35 years ago, and back then, most second-hand watches were in terrible condition. But people coming into the watch world through new purchases are looking for second-hand watches in good condition, even for special models like the 458 Speciale mentioned earlier, so their expectations have become stricter. In other words, there's a shift in the mindset toward well-maintained watches, with people willing to pay the money to get them. With that in mind, I think CPOs will become more valuable in the watch world in the future.

(I.e.: This is true with cars, but Japanese people tend to try to buy expensive things cheaply. Looking at European auctions, they determine the value at the time, and that's reflected in certified pre-owned cars. Looking at auctions overseas, Japanese people have a strong desire to buy the cheapest, best quality items possible, while overseas people have a culture of doing accurate research and making judgments based on precise standards. That's the crucial difference. It's an old story, but the Ferrari classic "250 GTO" was initially almost completely unappreciated, but when Nick Mason of Pink Floyd owned one and declared, "There's no car as good as this!", the price immediately skyrocketed. In other words, it seems that up until then, it hadn't been driven by someone wealthy who could drive it properly, and things like that can change the price and value.

Chuan﨑: This is the opposite of what we just said, but the used watch market skyrocketed from the year before last to last year, and then crashed all at once. At that time, we didn't want the market to get any more hyped, so as a retailer of certified pre-owned Richard Mille watches, we assessed the value of the watches and set prices accordingly, without being influenced by the used market. This was to convey the message that we're not in the business of pursuing profits. For example, the RM 35-03 was selling for nearly three times the price, which is unreasonable no matter how you look at it. That's why we have to firmly grasp and protect value. For models that have been on the market for about a year, we can simply set a reasonable price when selling them. Instead, for early Richard Mille models, we continued to offer fair prices, even if the value increases. In fact, customers have told us that the NX ONE's prices are the most trustworthy, and we emphasize that our raison d'être for the NX ONE is to firmly grasp and accurately assess price.

Hirota: In terms of increasing value, when Jérôme Lambert, currently head of the Richemont Group's watch division, became CEO of Jaeger-LeCoultre, the first thing he did was boost second-hand prices. However, while extremely old and rare pieces can command extremely high prices, it's difficult to control prices for more recent models. With that in mind, the NX ONE has been managed well, and I think that's actually what many manufacturers would like to do.

The peace of mind and reliability of CPO watches comes from official manufacturer maintenance.

Chuan﨑: On the other hand, Richard Mille often appears at auctions, and in order to support these auctions, we need to have a solid certified used watch system, which is why we believe that repairs and maintenance are so important.

Hirota: Proper repair is something that applies to both watches and cars.

(I.e.: Both are mechanical things.

Chuan﨑: That's why I think there's a sense of security in buying from a certified pre-owned center run by an authorized dealer of the brand. Security and trust are important, and a place where customers can safely sell their watches is important for the brand. This is also very important for Richard Mille.

Hirota: I think the reason why many watch manufacturers are interested in CPO now is because of trade-ins.

Chuan﨑However, where do you sell the watches that you trade in? You can't do it if you don't have the space.

Hirota: This is a really difficult problem, isn't it? And you have to control the value. But when it comes to watches, it's clearly a premium product - like a Ferrari or Lamborghini in terms of cars - and in that sense, the NX ONE is clearly a pioneer on a global scale.

Chuan﨑: When we first started CPO, people around us said a lot of things, but we never had any negative comments from our customers. In fact, we received positive feedback. This means that if we think about our customers, it's a business that we absolutely have to do - but it's not good to call it a "business," it's more like a manufacturer's "duty."

Hirota: That's certainly true. It's about connecting value.

Chuan﨑：In order to maintain value, it is the manufacturer's responsibility to provide repair services even for parallel imports. The next step is to strictly adhere to the CPO.

Hirota: In Japan in particular, the environment is harsh for both watches and cars. That's why they won't perform to their full potential unless they're properly repaired. With used watches that are poorly handled, the gaskets deteriorate and moisture gets in, ruining the mechanism. In that respect, I feel that Richard Mille watches are repaired really well.

Chuan﨑: To be honest, it's a lot of work (laughs). Depending on the model, we have to send it to Switzerland, so it takes time. I've heard that some second-hand shops just buy the items and sell them as is, but the concept of the NX ONE is to perform regular maintenance before selling it. It's tough when you think about profits, but we'll keep doing it. That's CPO, after all. That's why you can buy with confidence, and in fact, we have a backlog of CPO orders.

Hirota: Especially in the case of Richard Mille, the precision of the parts is so high that it is impossible to repair it at a local second-hand shop.

Chuan﨑:You could choose to buy a certified used item.

Hirota: It's still okay in Japan, but second-hand stores overseas are really terrible. They're like, "It's OK because they've just repaired it and it's working." Of course, Japan isn't at the same level as certified second-hand stores, and it might not be good enough by Kawasaki's standards. It's said that in the long run, the global second-hand market will become even larger than the new market, and Japan is actually the market that is seen as a success story. When you look at the second-hand market, it seems that the quality of Japanese second-hand goods is one of the criteria.

Chuan﨑: I'm sure it's the same with cars. Richard Mille himself said, "Japanese owners' cars are expensive."

(I.e.：Japanese people take good care of their cars. However, the road conditions in Japan are not good. There are too many stop-and-go traffics, especially in urban areas, so the condition of the engine varies.

Hirota: When it comes to watches, second-hand products in Japan are in relatively good condition, so it makes sense that NX ONE, which deals in premium brands, was able to establish itself in Japan.In fact, many other manufacturers have seen its success, so I think CPO will clearly become more widespread.

Chuan﨑：In the end, it all depends on the manufacturer's way of thinking. In Japan, manufacturers are still not directly managing their products, but rather it is still an environment where distributors are running the business, so it is necessary for the manufacturers themselves to create a solid market, and I think that is what they should do.

(I.e.: We need to develop the market. We need to create an environment where everyone can feel safe so that it can take root.

Hirota：We are currently in a transitional period, but I hope that CPO will mature in the future like cars. At the very least, it will be good in the sense that touchpoints will expand. After all, you can't buy Richard Mille in a store right now, right?

Chuan﨑: Yes, you can't buy it. So, in some cases, we offer to customers who absolutely must buy it, "While you wait, we have a few certified pre-owned models available. Would you like to try them?" While they wait, we want them to experience the quality of Richard Mille with a certified pre-owned watch. It's great when, while wearing it, they think, "New is good, but certified pre-owned is good too." If they're satisfied, it means there will be more joy to come.