Hey there, time traveller! This article was published 27/2/2016 (2057 days ago), so information in it may no longer be current.
Next time you’re in the market for one of those 18-carat Everose gold, scratch-resistant sapphire crystal Oyster Perpetual Rolex watches with tachymetric scale but just don’t feel like parting with the entire $34,000 retail price, the folks at Independent Jewellers have a proposition for you.
Why not lease the watch?
Jeremy and Jonathan Epp, the third-generation owners of Independent Jewellers, have launched what they believe might be the only watch leasing business in North America.
Independent Jewellers is the only place in Winnipeg to buy those high-end Rolex, Omega, Cartier, Breitling and Tudor watches. Those brands, as well as Tag Heuer (there are a couple of other places in town to buy that brand) can now be leased through a new company created by the Epps and a couple of other partners, called Luxit.
Using car leasing as the model, the enterprising Epps — they are in the process of rebuilding their flagship store at Notre Dame Avenue and Isabel Street — believe a niche product such as leasing luxury watches could become an excellent way to grow their business.
'There's potential market share you could gain, and the long-term client-retention potential is astonishing'‐ Jeremy Epp, a third-generation owner of Independent Jewellers, on his company's plan to lease high-end timepieces
"I think of my father, who has leased cars for 15 years from the same place, and I don’t think he’s been in another car dealership in all that time," said Jeremy Epp. "There’s potential market share you could gain, and the long-term client-retention potential is astonishing."
The idea is to put 10 per cent down and make monthly payments for up to four years. There’s an automated credit approval process set up for up to $20,000 through credit reporting agency Equifax and proprietary software the Epps have developed for Luxit. Terms are built into the contract to allow the lessee to buy out the balance and own the watch at the end of the term.
Jeremy Epp said the impetus for the watch-leasing business was as a way to grow Independent Jewellers’ business, which has seen its luxury watch business grow significantly over the past five years. (Epp said they were initially talking about leasing fine jewellery, and he believes they could do it in the future, but right now the focus is on watches.)
Ariel Adams, who publishes the popular San Francisco-based on-line magazine about high-end watches called A Blog To Watch, said, "The market awareness of high-end timepieces is at an all-time high."
Like cars, luxury watches have strong residual value, some more than others. Epp believes the ideal target customer for the lease product are young professionals, recently graduated, making $70,000 to $80,000 with no kids or family to support, all their needs met and who may have a few hundred dollars a month in discretionary income.
Or there are those who are just not sure that’s the watch they want forever and, considering it can be the cost-equivalent of wearing a BMW on you wrist, leasing can be a great way to have some variety.
"If you’re in the watch business, I think it is a terrific idea," said Tom Pundyk, CEO of National Leasing, speaking from Toronto this week where he was accepting National Leasing’s recognition as one of Canada’s 10 Most Admired Corporate Cultures.
While it’s too small a niche market to appeal to a large player such as National Leasing, Pundyk can see how it could work.
"You make sure the credit risk is reasonable, and if you are in the watch business, just like the car manufacturers, the watch comes back from lease, you recondition it and put it back on the market," he said.
But there are some who are skeptical about the risk of leasing such luxury items.
George Verras, owner of Dimitra’s Jewellery on Corydon Avenue, said, "I suppose it would put a watch on the wrist of someone who might otherwise not be able to afford it."
But he worries if somone can’t afford it, chances are they might default.
"It is a luxury item," he said. "It’s different than a car. You need a car for transportation, but you don’t need a $10,000 watch for anything."
Adams, who believes his magazine has the pulse of the luxury watch market, is not closed-minded, but he is guarded about the lease idea.
"We have heard of similar business models, and personally we aren’t a huge fan because the prices come dangerously close to what’s needed to actually buy a new watch," he said.
Jeremy Epp said after a trial period at the two Independent Jewellers locations in Winnipeg — the second one is in Polo Park — the plan is to make the lease product available to other similar retailers across the country. Luxit would buy the watch from the retailer and immediately lease it back to the customer.
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Considering the retail prices of some of these pieces — Independent carries a Rolex with a sticker price of $72,000 — there are a limited number of targeted retailers.
In fact, there are only about 30 retailers in Canada carrying at least two brands whose average price point is $5,000. There are another 150 in Canada with at least one brand selling for more than $1,000.
Epp said because it’s such a small fraternity, he knows many of them and believes it is something the other retailers would try.
"The third-party retailer makes a sale," he said. "They get paid just like they would have if they sold to the customer who’s come into the store."
But not exactly the same. After all, the lease company is assuming some risk, so the secret sauce of the arrangement becomes the profit margin for the lease company.
Martin Cash Reporter
Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.