First up, from the Wall Street Journal via MSN, May 22:
Ben Clymer, the founder of the watch website Hodinkee, is the closest thing that the wonky watch world has to a celebrity—the sort of guy collectors would stop on the street to take a selfie with. His personal Instagram is peppered with gold watches, vintage Porsches and photos with celebrities like Lenny Kravitz.
A former project manager at UBS, in 2008, Clymer turned his passion for watches into a chatty blog where he could spotlight watchmakers and opine on the latest Omegas. The site blossomed over its first decade. It published a glossy print magazine and launched a successful YouTube series featuring famous watch collectors like Kevin Hart, Aziz Ansari and Andre Iguodala. Soon, Hodinkee was hosting champagne-filled parties with Omega and collaborating with John Mayer on collectible watches that sold out with the speed of rare Nikes.
By 2020, Clymer had said Hodinkee was generating around $25 million through ad sales, events, a watch insurance program and a small online shop. The next stage was driven by a question: Would people who read about $50,000 watches on Hodinkee buy them there, too?
When online luxury shopping boomed amid the pandemic, Hodinkee rode the wave, pocketing $40 million from investors including Mayer, LVMH Luxury Ventures, the Chernin Group and Tom Brady. At that point, Clymer said, the company was turning a profit and the investors valued it at more than $100 million. In February 2021, it acquired Atlanta watch resale company Crown & Caliber as prices on the secondary market began steadily climbing to record heights. Hodinkee was looking for a way in.
“I don’t want to say we were chasing it,” said Clymer, during an interview in Hodinkee’s Manhattan office last month. “But again, we’re looking out the window and I see it’s sunny, I’m not going to put on a raincoat. It’s no different than that. We saw what was happening in the market and we went for it.” In December 2021, the company set a goal of $141 million in revenue, according to a board presentation.
Then, in early 2022, the rains came.
Prices of pre-owned watches started declining: After hitting a peak in March 2022, they fell nearly 30% by the end of that year, according to the WatchCharts Overall Market Index, which tracks resale prices over 60 high-end timepieces. It has since only dipped further. Resale prices of some high-end watches are about half what they were just two years ago. The decline in interest has crashed into the broader industry—shares of certain luxury watch businesses have plummeted this year, shedding as much as half their value.
Now Hodinkee is an example of how precarious luxury investments often are at a time when trends whipsaw faster than ever. It also shows how the pandemic made many investors overconfident about the promise of online retail and how, years later, they are dealing with the resulting hangover.
“All of us took some form of a bath on some watches at one point,” said Jeff Fowler, Hodinkee’s chief executive, during the interview last month.
Hodinkee’s growth strategy now appears ill-timed. Sixteen former employees paint a picture of a company that is running out of time to turn itself around. For years, Hodinkee has been plagued by overspending and projects that failed to launch, according to the former employees, many of whom left within the last year or so. Former employees said that the company had five rounds of layoffs over 18 months. Its staff today hovers around 50, down from a peak of roughly 160 people, according to Hodinkee.
Revenue at the company has declined to around $70 million last year from around $100 million in 2021, according to former employees familiar with the company’s finances. It also hasn’t been profitable for the past few years, according to former employees.
A downtown Manhattan retail location that is currently plastered in Hodinkee branding has sat dormant since Hodinkee signed a lease for the space in 2019. According to a former employee familiar with the company’s finances, it eventually cost Hodinkee as much as $80,000 a month. The company says it’s planning to sublet the space to a new tenant this summer.
To Clymer and Fowler, Hodinkee’s pullback is better situated for growth at its shrunken scale.
“The business is stronger than it’s ever been,” Clymer said about the downsized company. “I believe in this business now more than ever.”
Positioning for Growth
When Hodinkee announced $40 million in investment in December 2020, Clymer stepped down as chief executive, passing the reins to Toby Bateman, the former managing director of online menswear retailer Mr Porter. Clymer stayed on as executive chairman and described his current role as “the emotional leader of the business.”
Within months, Hodinkee acquired Crown & Caliber, then an 8-year-old pre-owned watch reseller. They paid around $46 million for the company, according to a former employee with knowledge of the deal.
Crown & Caliber knew how to purchase bundles of high-end watches, photograph them, list them and ship them out to buyers. Hodinkee knew how to attract an audience. On paper, the combination seemed like a good fit.
In the year before the acquisition, Crown & Caliber was bringing in $53.6 million in revenue, roughly two times that of Hodinkee, according to a financial report reviewed by the Wall Street Journal....
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And because no story about financial bloggery is complete without a bit of navel gazing, some sharp commentary on the commentary from WatchPro, May 24 (we've got a few levels of that going on here!):
CORDER’S COLUMN: Hodinkee pile-in feels like a hatchet jobTough decisions have been made to restore profitability to the watch world's leading media-to-retail operation, but criticism has been wildly overblown.
An article in March by American media business title Adweek was easily dismissed as a poorly sourced hatchet job but a follow up by Bloomberg and a piece this week by the venerable Wall Street Journal is harder to ignore.
All three draw attention to the changing fortunes of Hodinkee, the world’s best-read specialist watch title and related ecommerce business.
You probably know the broad arc of Hodinkee’s story by now.
Founded by former banker Ben Clymer in 2008 as a classic blog-from-the-bedroom play, it ballooned in popularity and scale thanks to a roster of writers with that rare gift of super-nerd horological knowledge and exceptional talent for making a sometimes-dull and dry topic at that time into light and enjoyable copy.
Hodkinkee is read by around 1.5 million unique users, according to its advertising pitch, probably the biggest audience in the watch world. The size of that audience has barely changed since the business moved into ecommerce as an authorized dealer for around 30 brands, and then into pre-owned watches with the acquisition of Crown & Caliber in 2021.
What did change was the perception of Hodinkee as an independent commentator and guide for people navigating the complex world of watches. It only takes a cursory glance at comments underneath many articles to see that users feel their precious community site had been hijacked by mercenaries focused on flogging watches.
That perception was reinforced with a funding round of $40 million in late 2020 that, according to Forbes, valued the company at $100 million, and paid for the Crown & Caliber acquisition and a hiring spree that grew the payroll to around 160 people across the media and retail arms.
In December 2021, as a pandemic-powered boom in luxury spending peaked, the company set a goal of $141 million in revenue, according to a board presentation, the Wall Street Journal reports.
That presentation, which WatchPro has not seen, was unquestionably over-optimistic as the market for pre-owned watches moved from hysterical buying to panic selling in the second quarter of 2022.
The balance sheet value of Crown & Caliber’s stock declined and transactions ground to a standstill as consumers and trade buyers sat on their hands waiting for cheaper deals down the line; a state of mind that is still subduing the market today.
Following several rounds of layoffs, the team is now around 50, according to Hodinkee, and a former staffer told the Journal that revenue has dropped to around $70 million, a figure the company has not confirmed.
Hodinkee is a private company and, unlike in the UK, is not required to publish its accounts, so some of the figures in the numerous recent reports have come from unnamed sources and have not been verified by either its founder Mr Clymer or CEO Jeff Fowler....
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Also at WatchPro, May 28: "Hodinkee founder stands-by decision to acquire Crown & Caliber"
We've linked to Hodinkee on what became the most valuable timepiece on earth, the Vacheron Constantin inside the Lost Third Imperial Easter Egg:
When possession of this egg was transferred it surpassed the valuation of the previous record-holder, the only non-Imperial the 1902 Rothschild Fabergé Clock Egg:
1900 - Cockerel Egg and the 1904 - Ketch Chanticleer Egg.
If interested, at least six (and maybe eight) of the Imperial eggs are missing which makes for one heck of an Easter egg hunt.
