How Hodinkee's Big Bet on a Watch Business Backfired

When watch enthusiast website Hodinkee acquired used-watch marketplace Crown & Caliber in February 2021 after raising $40 million, the merger made perfect sense on paper. Hodinkee had a loyal audience, while Crown & Caliber knew how to operate in the booming business of second-hand watches, which topped $22 billion in sales that year, according to Boston Consulting Group. But three years later, a downturn in the watch market, an erosion of reader trust and multiple rounds of layoffs have led the once-promising merger to founder, according to interviews with nine current and former staff, as well as industry experts. A Hodinkee representative disputed that its readers' trust has eroded, pointing to Net Promoter Scores of 58 and 71 for Hodinkee and Crown & Caliber, respectively. Now, after gutting much of Crown & Caliber, Hodinkee is scaling back its ambitious marketplace plans and refocusing its strategy. The arc of Hodinkee’s misfortune mirrors the rise and fall many media companies have endured amid the economic turmoil of the past four years. But its failed attempt to interweave commerce and content reflects the challenges of the business model itself. “The theory was that Hodinkee could cover the entire market by adding pre-owned watches, so they flooded the site with pre-owned watches, which is not what the audience was used to,” said one person familiar with the company’s plans. “It hasn’t worked, and because it hasn’t worked, that side of the business has been pulled back on dramatically.” The company said in an email: "Since the acquisition, Hodinkee’s overall readership/consumer loyalty and sentiment has remained positive, with no proof of reader suspicion. Editorial coverage also remained balanced in the watches being featured across pre-owned and new watch styles in the market." AI, the Election and Cautious Optimism: 12 CROs on Ad Trends Shaping 2024 Layoffs and luxury headwinds Neither Hodinkee nor Crown & Caliber were profitable when they merged in 2021, according to five people familiar with the companies’ finances. But the combined operation generated more than $100 million in revenue that year as the new and pre-owned watch markets surged during the pandemic. Hodinkee brought in money from its affiliate marketing, advertising and insurance operations, but between 50% and 66% of its total revenue came from Crown & Caliber, which had thinner margins, those people said. In early 2022, the second-hand watch market began declining in value—a downturn that has since continued. The WatchCharts Overall Market Index, which tracks the prices of 60 timepieces from brands like Rolex and Patek Philippe, has fallen 37% from its March 2022 peak. Crown & Caliber's business relied on buying and reselling pre-owned watches, and it found itself underwater, having paid top-market prices for watches and seeing their value decline, according to four people familiar with the business. The downturn, in combination with cuts to the overall business, led revenues at the combined company to decline, from around $85 million in 2022 to roughly $60 million in 2023, according to one of those people. Other expenses further weighed on its balance sheet. In 2019, Hodinkee signed a 10-year lease on a brick-and-mortar outpost in the SoHo neighborhood of New York—the location of the original Supreme store, according to two people familiar with the strategy. But more than five years later, the store has yet to open. The company was unprofitable in 2021, 2022 and 2023, according to Hodinkee founder and executive chairman Benjamin Clymer. Four rounds of layoffs Hodinkee responded to these and other commercial challenges with a series of layoffs. In 2023, it laid off staff in January, and then reduced headcount by 20% in August and another 50% in November. In March, the company shrunk further: 10 to 15 staffers were either laid off or left, including the chief operating officer, chief product and technology officer and the head of Hodinkee’s VIP program. Only the August 2023 cuts have been previously reported. The company, which had around 150 employees in September 2022, declined to provide an updated headcount. Internal sources placed the figure at between 30 and 75 people. Crown & Caliber, in particular, has shrunk from 75 staff to around 20, and its entire team of watchmakers and technicians was cut in November, according to four people familiar with the operation. Its on-hand inventory also decreased—down from roughly 3,000 watches in 2021 to around 400, according to two sources directly familiar with the matter. (A Hodinkee spokesperson said this was inaccurate). And its customer-service teams in Atlanta and New York have been drastically reduced, according to those two people. While Clymer insists that Crown & Caliber remains a core part of Hodinkee’s future, others are less certain. “The fact that [Hodinkee] let go of its watchmakers is a big indication that Crown & Caliber might not be long for this world,” said one source. Audience trust in commerce content While Hodinkee originally bet that it could turn its readers into Crown & Caliber customers, that strategy didn’t pan out. After the merger, the Hodinkee website began featuring more pre-owned watches, including ones it sold through Crown & Caliber. This made audiences suspicious that Hodinkee was promoting Crown & Caliber inventory rather than recommending the best products on the market, according to six people familiar with the situation. "If you own the product, there's no question that it puts you under a bigger spotlight than someone who just reviews content," said Michael McNerney, founder of Martech Record. "The audience is going to watch your every move, and this is especially acute in an industry where people are passionate about high-end products." In 2022 and 2023, traffic to Hodinkee declined, sources said. When asked about this decline in traffic, a Hodinkee representative said in an email, "According to Google Analytics, Hodinkee’s site never hit below 50,000 UMVs (unique monthly visitors) in one day and saw sustained traffic with an average of 2.1 million monthly uniques in 2023." Comments on Hodinkee’s articles and YouTube videos grew critical of these and other editorial changes, which were spearheaded by then-executive vice president of content Nick Marino and designed to broaden Hodinkee's appeal. Meanwhile, watch sales continued to slump, according to four people familiar with the situation. "I feel that Nick and his new direction is really killing Hodinkee," commented one viewer. "He seems to think he is 'challenging preconceptions,' but really he is [turning] Hodinkee into TMZ and Mr Porter." Going forward, Hodinkee plans to prioritize its media business, according to four people familiar with the strategy. What that means for Crown & Caliber is uncertain. According to Clymer, Hodinkee was profitable in the first quarter of 2024. “Hodinkee was founded on the idea that it was honest, and that if we didn’t like something, we would say that,” said a person familiar with its editorial strategy. “But it started doing what its competitors did, which was plugging with editorial what we sold in the shop, and readers reacted negatively to that.”

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How Hodinkee's Big Bet on a Watch Business Backfired

The company cut costs with multiple layoffs, gutting its Crown & Caliber acquisition

Mark Stenberg

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Mark Stenberg