There has been a sudden enthusiasm amongst luxury brands for embracing the resale model to both increase revenues and meet their sustainability targets. This is true for watches too. After all, the circular economy creates economic value through reuse and preservation, whereas its opposite, the linear economy functions on the concept of “more” and waste.
However, it would be misleading to think that the pre-owned business model alone does the job on sustainability. Luxury watches seem to be circular by nature because they can be easily transmitted from one generation to the next. But repairing, maintaining, shipping, reselling secondhand watches is not necessarily sustainable. These activities can only create positive ecological and social impact if sustainability-oriented practices underpin them.
Besides, circularity practices have failed many times over because the incentives for implementing such business models were never good enough.
Today we are at a crossroads; we cannot afford to let it go wrong this time around. With the UN 1.5-degree containment target by 2050 looking likely to be missed, circularity came to the forefront again in the luxury industry thanks to activists such as Patagonia.
This was the view expressed at a panel on circularity at the latest Watches and Wonders 2022 which I moderated alongside Mélanie Frémond.
“There is no choice, and from a purely commercial perspective, customers will make the decision,” said Matt Bowling, Co-founder of pre-owned watch specialist Watchfinder.
“Last year we surveyed over 26,000 luxury watch owners and collectors – 45.6% of respondents admitted they had at least one luxury watch just sitting at home that they don’t wear. What if these watches went back into the commercial system? What impact would that have?”
“The message is clear that the Swiss watch industry has decided to go in the direction of circularity, whatever the brand is,” said Jean-Marc Pontroué, CEO at Panerai, which makes luxury watches for men. “The question is, how innovative and quick we can be in acting together to react to that?”
What are watch brands doing in the circularity space?
The watch and jewelry industry might be late, but it is fast becoming a cradle of innovation. Coming up with new business models that rethink products as much as people (both customers and employees) is at the essence of the work that the watch industry is doing in this
Clarisse Desgeorge, Chief Marketing Officer at Swiss luxury watch maker Zenith, explained how her firm performs a monthly regrouping to align on actions being taken on sustainability to embed the importance of these goals in the mindset of employees and achieve their goals by 2025.
Zenith has three sustainability pillars, centred around the three Rs: reduce (the environmental footprint of products and packaging), repurpose, and recycle.
In Zenith’s DEFY Extreme E initiative, watches are delivered with a rubber strap containing sustainable materials from recycled Continental CrossContact tires that have been used in races. The watch is delivered in a case incorporating various upcycled elements from the side-lines. For example, the case’s lid coating is made from E-grip recycled tires, while the plate covering is made from parts of an Extreme E racing tarpaulin.
Pontroué explained how Panerai follows a similar 5R plan: recycle/upcycle, reduce, rethink, repurpose and reuse.
The firm was the first luxury brand to use eSteel™ on a large scale. This next-generation metal, obtained from pre-consumer recycled steel scraps (up to 95%), comes from an array of industries and its production significantly reduces CO2 emissions.
“We launched the e-LAB ID in 2019,” he said. “It was the first concept watch created to push the boundaries of recyclability in the watch industry — every component of the watch is produced by using recycled material.”
Diana Culillas, Secretary General of the Swiss Better Gold Association (SBGA), a non-profit network of industry, finance and other service providers which supports the creation of responsible gold value chains from mine to market, expressed how identifying the no-go areas is key to circular business models.
She said, “Circularity starts with responsible sourcing, from the beginning of the value chain with extraction and innovation, to the end of life of the product (assembling and packing). Certain types of provenance are a no-go for us; it happened with rubies and diamonds first and is now happening with other materials.”
Partnerships are driving change
Increasingly, brands are realizing they cannot perform circular and sustainability transformations alone: partnerships and ecosystems are essential.
Cullilas explained how the SBGA collaborates on the supply of gold, helping brands increase the supply pool of positive-impact (both socially and environmentally) gold available to luxury players.
“We are an industry association, not campaigners, so not your usual NGO,” she explained. “We crystalize the needs of the industry players in their supply chain.
“The demand for gold is up 33% in 2022, and recycled gold is limited in supply – accounting for about 17% of gold available at best. Part of this is e-waste – it may come from iPhones, say – and we have no idea about the conditions of that particular source.”
The SBGA, Culillas said, contributes to a lesser carbon footprint, because the footprint in artisanal and small-scale mining (ASM) is smaller than in large-scale mining – some 4,000 tons of emission per kg of gold, compared to 13,000 tons.
Panerai’s partnership with UNESCO is an important one.
“It achieves two goals,” explained Pontroué. “Educating younger generations about the positive impact of luxury and having contact with hundreds of scientists. No-one has all the solutions, and we need the science.”
Zenith, too, runs partnerships that helps the brand upstream, but also downstream with product creation. Desgeorge explained how its Nona Source project transforms excess fabrics from Maisons LVMH Fashion & Leather Goods into watch straps. It also collaborates with LVMH’s Station F, the world’s largest start-up campus in Paris that seeks to build innovative solutions for tomorrow’s luxury.
When it comes to the certified pre-owned watch sector, Watchfinder is growing rapidly; the company offers multiple circularity solutions based on reusing and repairing to brands in the downstream (retail) space. Bowling described how collaboration with other watch brands forms the essence of the company’s work.
“More and more brands are approaching us to develop trade-in programmes,” he said. “These are now up and running in over 80 Panerai, Cartier, Piaget, Jaeger-LeCoultre, IWC, A Lange & Söhne, Roger Dubuis, Vacheron Constantin and Montblanc boutiques across the UK, Switzerland, the US, Hong Kong, France and Germany. But the circularity of these watches really depends on consumer behaviour.”
The market for second hand hard-luxury items – primarily watches and jewellery – is growing at 8% a year, which is faster than the luxury industry overall. Experts expect the pre-owned market to expand by as much as 8-10% per year until 2025, reaching annual sales of between USD 29-32 billion. That’s up from USD 18 billion in 2019. In contrast, Mc Kinsey predicts that the new watch market will grow just 1-3% annually during the same period.
By itself, the second-hand market cannot solve all the sustainability issues of the industry. However, if good service is delivered with these pre-owned pieces, they are usually much cheaper, so it attracts a whole new segment of customers to the watch industry, Bowling said, stressing too that this does not reduce the demand for new watches. Therefore, unless the first-hand circuit becomes circular and sustainable, the 1.5 degree Celsius by 2050 target will become unachievable.
Resolving the challenges ahead
The watch industry must also continue to appreciate differences in consumer trends across generations.
“Millennials and older generations are absolutely interested in environmental topics,” said Panerai. But it is different in the case of future consumers, especially Generation Z. When we talk to them, we see that the feeling is totally different. One interesting question we received was: ‘Do we still need the packaging? We can use what we already have or at the very least, we just need a travel pouch.’”
In addition, sustainable materials don’t always perform well in terms of meeting luxury standards, so we must keep innovating and be patient,” added Desgeorge, who also urged the sourcing of more vintage watches.
Another challenge is fighting the secrecy that is so inherent to the luxury industry – and has traditionally given it much of its appeal – with transparency.
Pontroué explained how, last year, Panerai launched an open-source project, disclosing the complete list of engineers and suppliers who worked with them to create their concept watch, the eLAB-ID .
“The goal was to encourage any player of the watch industry to progress towards a sustainability-centered watch industry,” he said. “The concept of openness came from showcasing the ten suppliers. We also disclosed our protocols for selecting these suppliers to our competitors. We want to help the industry to become cleaner.”
Indeed, the industry is headed in the direction of creating a common pool of best industry practices and this is happy news for all.
Some of the issues to tackle are organizational – crucially, the governance must be put in place to drive circularity and sustainability transformation inside – while others are caused by the limits of our current knowledge and those of innovation.
Perhaps most important is that brands constantly revisit the question of financial incentives and make sure these are met throughout the system.
In the years to come, expect much more innovation in this space.