Controversial Takes on the "Shortage" and Grey Dealers

[JonnyBCisco]

Originally Posted by superstarmar

Yeah, They'll be sitting pretty in the AD"s window waiving at
customers coming and going...

An MSRP of 23K might be a little high for the ceramic SS Daytona, but judging by the apparent success of greys selling them anywhere from 17-19K I don't think they would be sitting around collecting dust if that were the MSRP.

[Burlington]

It would be very interesting if the desirability remained so high, even if the availability was abundant, but with a much higher MSRP.

Higher prices always seem more achievable when scarcity comes into play.

[peterpl]

You start pricing SS Rolex's at $20k and you watch the customer base decline exponentially. As much as everyone likes to believe the current price point for SS watches is WHAT makes them so attractive to many customers.

Double that price to $20k and double gold ones increase to say $50k - I wont be the only one looking at other brands. Plenty of horology on offer at those prices and to simply put it, it would price out 90% of buyers which are in the $8-12k range and work normal 9-5 jobs who have saved hard to afford a Rolex.

Everyone thinks 99% of Rolex buyers are multi multi millionaires or billionaires - sure they are plenty but majority of their customer base is normal hard working people who have mortgages on houses, cars, families to feed etc....many other priorities in life for the average person than a Rolex. LOL

[fixinbones]

Originally Posted by JonnyBCisco

People arent going to like hearing this but just consider this as a possibility.
It isn’t a “supply” or “demand” issue. It comes down to the MSRP prices simply being too low. This is what the market is telling us. Enough people are willing to pay the higher grey market prices to keep and encourage greys to do what they do. If Rolex raised the MSRP to the prices that the greys are using we would actually start to see less of a market for greys to buy up all the watches amd selling them for higher prices. Reason being is their prices would finally be too high for people to be willing to pay.

I don’t know what the new MSRPs should be for each SS watch, but it is obvious that they are far too low right now given their desirability and the amount of disposable income and high quality of life that more people than ever enjoy today.

It isn’t pleasant to think about, but this is by far the easiest way to push greys out of the market and keep watches in shelves in he ADs so that people can buy them there.

Would love to hear what you think.

Your comments make sense to me. Just like PM rolexes are priced too high and therefore anyone can get most PM models for 20% of MSRP. what I don’t understand is how dealers like tourneau stay in business when they give absolutely no discounts off MSRP.

[superstarmar]

Originally Posted by peterpl

You start pricing SS Rolex's at $20k and you watch the customer base decline exponentially. As much as everyone likes to believe the current price point for SS watches is WHAT makes them so attractive to many customers.

Double that price to $20k and double gold ones increase to say $50k - I wont be the only one looking at other brands. Plenty of horology on offer at those prices and to simply put it, it would price out 90% of buyers which are in the $8-12k range and work normal 9-5 jobs who have saved hard to afford a Rolex.

Everyone thinks 99% of Rolex buyers are multi multi millionaires or billionaires - sure they are plenty but majority of their customer base is normal hard working people who have mortgages on houses, cars, families to feed etc....many other priorities in life for the average person than a Rolex. LOL

Spot on !!! I'd be out of the game or maybe only one ....
SS that is...

Even at $20K I might look at other brands for a PM...

[Wahlberg]

Originally Posted by Burlington

Higher prices always seem more achievable when scarcity comes into play.

Well said. I don't understand how someone actually suggested raising the prices will fix it.

A lot of people are buying these watches because:

1 They are hard to obtain and exclusive.
2.The hype surrounding watches.
3 They won't lose any money in the current market. So they spend 8k in the store or 15k at a grey and in the end it doesn't really matter. The person who spent 15k will take a beating if the market changes.

Normal demand, a rather normal stock and prices at +20k = no one will buy these watches.


+

There are a lot of people out there who are wearing a Sub (Hulk) or Rolex GMT (BLNR+Pepsi) who really don't care about 1. watches 2. Rolex and only care about money and status.

[exador]

Originally Posted by Wahlberg

They won't lose any money in the current market. So they spend 8k in the store or 15k at a grey and in the end it doesn't really matter.

Those early buyers that spent over $20K for a Grey SS BLRO have already lost 25%.

[peterpl]

Originally Posted by exador

Those early buyers that spent over $20K for a Grey SS BLRO have already lost 25%.

More than that for sure. A Gray in this climate now would not even offer you $12-13k especially if its worn already.

[Fencer]

I read many such analyses and I wonder - why would an AD sell - presumably at some discount - to the grays, when those watches would be sold instantly at full price in the store?

I see some high demand models offered on Chrono24 for just a few percent premium.

[RJRJRJ]

Originally Posted by Fencer

I read many such analyses and I wonder - why would an AD sell - presumably at some discount - to the grays, when those watches would be sold instantly at full price in the store?

I see some high demand models offered on Chrono24 for just a few percent premium.

Unlikely they sell them for a discount. They let the gray buy them if they also buy a bunch of less desirable models at a steep discount in addition to the hot models.

[Nikrnic]

I'm sure the early buyers of the new SS Blro knew they were paying a big premium going in and aren't losing any sleep over their decision, as most, I'm sure we're bought as keepers

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[00007G]

love your post but for me I think completely opposite , I truly think they try to get away with not AD sellers , my AD gets 2 a month !!!max I couldn't believe what's going on apparently one day the got a lot of Rolex next day all sold out nothing coming in , absolutely fantastic marketing and control ,I wouldn't be surprised if more crack down coming from Rolex targeting non AD sellers
if you ask me its terrible but once you owner of one , then you feel thy doing probably the right move
than again its only my opinion

[subtona]

An additional thing to consider,
It was the zenith Daytona that began this unobtainable sports model phenomenon.

The theory has been because of the third party movment, Rolex received a limited supply from the movement manufacturer, hence the shortage...


There is no current reason for the shortage except a manufactured one, purposely limiting production or purposely cutting off the average buyer from the AD supply.

Either way it doesn’t sit well, but if you want to play you have to pay... until the market turns.


In the interim, Grand Seiko makes an awfully nice watch that is durable, water resistant and good looking...the very reasons I went to Rolex in the first place.

[WJGESQ]

Originally Posted by rnordby

I actually think you are right. I am a finance professor with a lot of training in Economics. There is something wrong with the new Rolex story regarding supply that is being promoted by the ADs.

I have become friends with some ADs in the area and one store told me that they didn't receive a BLRO yet this entire year and only 1 black and 1 white Daytona. Rolex is correct that it takes along to set up the machines and re-tool them and a machine tooled for PM can't easily be converted to producing more SS models.

However, I also believe that Rolex is not doing anything about the issue either. My best guess is that they are enjoying this lack of supply to prop up prestige. The number one rule of luxury has always been exclusivity. I was at Goldman Sachs recently in New York and I counted 5 Batman watches once I got out of the taxi that day. The ADs are either secretly selling their supply to Grey dealers or someone is lying. There are too many watches ending up with Grey dealers and with too many people. PP is playing a similar game too. I am worried that eventually, customers will leave Rolex and Rolex could severely hurt their brand image.

Spot on professor.

[Nikrnic]

I'm sure the Rolex brass do not have their heads in the sand. They must know what's up with the ADs feeding the greys, it keeps the brand exclusive and helps move the so- called dead pieces. At least in the short term.

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[Dlong]

With a 1.5 million dollar quota and investing 100 k in a Rolex counter for your store, it must hurt not being able to get product to sell. At least that’s the story I hear in North Jersey and Southen Florida. I’m on the list for a Pepsi. I’m told I may get a phone call in January. Fingers crossed.

[Ichiran]

Originally Posted by subtona

An additional thing to consider,
It was the zenith Daytona that began this unobtainable sports model phenomenon.

The theory has been because of the third party movment, Rolex received a limited supply from the movement manufacturer, hence the shortage...

There is no current reason for the shortage except a manufactured one, purposely limiting production or purposely cutting off the average buyer from the AD supply.

Either way it doesn’t sit well, but if you want to play you have to pay... until the market turns.

In the interim, Grand Seiko makes an awfully nice watch that is durable, water resistant and good looking...the very reasons I went to Rolex in the first place.

Spot on. And plus 1 on the Grand Seiko.

[Fleetlord]

Originally Posted by subtona

An additional thing to consider,
It was the zenith Daytona that began this unobtainable sports model phenomenon.

The theory has been because of the third party movment, Rolex received a limited supply from the movement manufacturer, hence the shortage...


There is no current reason for the shortage except a manufactured one, purposely limiting production or purposely cutting off the average buyer from the AD supply.

Either way it doesn’t sit well, but if you want to play you have to pay... until the market turns.


In the interim, Grand Seiko makes an awfully nice watch that is durable, water resistant and good looking...the very reasons I went to Rolex in the first place.

Expect the peanut gallery to chime in here asking for specific proof of this being a "manufactured" shortage instead of just selling more watches than Rolex can build.

[belutak]

Originally Posted by T3F

These topics are somewhat controversial, and have been discussed indirectly in a lot of other threads, but I figured I'd start a thread that directly addresses two related things: whether there is a "shortage," and whether or not Rolex really hates the grey dealers.



I'll start with the "shortage." Up until the last few days, it was my belief that there actually was a huge mismatch between supply and demand for the SS sport models. I'm not saying there isn't, but I don't think it's as huge of a difference as I previously believed. There are a few reasons for my change in opinion, the first being the grey market supply of "rare" models. Someone started a good thread that showed there were hundreds of Daytonas, Sky-Dwellers, BLROs, etc. listed for sale on Chrono24. Also, go to any grey dealer in person or look at their social media accounts, and you'll see that they usually have multiples of all of these models (often 10+ of each). While I haven't personally talked to any grey dealers in person, multiple people on the forums said that they have and have been told that it's very common for the greys to get multiples of each rare model in one shipment from one AD -- one even said that he saw them unpack a shipment and it had multiple BLROs, multiple Daytonas, etc. This hints that ADs are getting a lot more of these models than some of them claim to be getting, which makes sense if you run through the (rough) numbers, which I'll do below.



Rolex makes around 1,000,000 watches per year. I haven't been able to find anything on how many Rolex ADs there are worldwide, but I think that 1,000 is a decent guess. If SS sport models comprise 30% of production, which I think is another reasonable estimate, then each AD receives about 300 SS sport models per year. (Note: this is an average -- the biggest dealers might be getting 1000+ of them, while the smallest might only be getting 100 or so.) There are 18 sports model references by my count (including dial color variations), so the average number of each reference -- again, this is accounts for each dial variation, not just the model in total -- received is 16-17. Realistically, each aren't going to be made in equal numbers -- most likely, more 116610LNs are being made than 116500s -- but you've got to imagine that these dealers are receiving at least 15 Daytonas between the two dial colors and 20+ black Subs per year. This is consistent with what I've heard from an AD that I trust, but seems to fly in the face of what a lot of other ADs have said. I've been told by some that they're lucky to get a Daytona every six months, haven't yet gotten a BLRO, haven't seen a black sub in 3 months, etc., and that just doesn't make any sense. Even if my math is off, which I'm sure it is to some degree, it's unlikely it's off by a factor of 10 like it would have to be to make what some ADs are saying true.



Because of all of the above, I think that a significant portion -- I don't know how to estimate it, but my guess is somewhere between 25% and 75% -- of sales of "rare" models are ending up on the grey market, and that a lot of them are knowingly sold to grey dealers. That brings me to my second point...



My opinion is that, if they wanted to, Rolex would be able to shut down a lot of the sales to grey dealers pretty easily. They could do anything from requiring dealers to keep the warranty cards for a period of time to making buyers give more information (e.g., driver's license, address) about themselves and limit them to, say, 1 of each reference. I'm not saying these tactics would be 100% effective, but I think that there's a number of things they could do to restrict sales to the grey market, none of which seem to be widely adopted.



I think that Rolex secretly likes the grey market. They get the same amount of money for the sport models regardless of who they go to, but if they sell them to grey dealers, they are able to move a lot of undesirable pieces that they wouldn't otherwise be able to sell in that same quantity. The fact that they don't seem to be doing anything, other than a few isolated reports of ADs keeping warranty cards, backs this opinion up.



There's my conspiracy theory-esque take. What does everyone else think?

You are spot on mate. Where else do gray dealers get their stock from?

Collusion with ADs and Rolex turning the blind eye on.

And as long as there are die hards with a must have mentality the show will carry on.

It is not only Rolex. Just look at the brainwashed hordes in sleeping bags in front of Apple stores. It is the same thing.


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[belutak]

Originally Posted by rnordby

I have come to the same conclusion. This is definitely a sad situation with Rolex customers but if the ADs supply is so limited, I am guessing their sales are down and they need to make profit. My local AD's shelf is almost completely empty. Maybe a few Yachtmasters, a couple of two-tone DJ41s and a ton of women's smaller DJs. Don't know how the ADs can survive and they deal with upset new and existing customers most of the day. I can't imagine Rolex really thinks this is good for their brand long term.

You do not get it, ADs sell their stock to Grays before it even reches their store.


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[belutak]

Originally Posted by jlovda

Assuming Rolex even cares, I think the only way to minimize grey market sales is to have the warranty become non-transferable and valid only when the sale is registered with the factory (both the AD and customer in the database.) However, I am sure a lot of customers pay cash and want to remain anonymous.



I also wonder what an AD's selling price of, say, a BLRO is to a grey? What is the grey dealer actually paying?

It could be that the same owners own ADs and Grays as well. All stays in the family ... :)


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[rambo99]

Originally Posted by belutak

It could be that the same owners own ADs and Grays as well. All stays in the family ... :)


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yes, its quite possible.

[Wahlberg]

Originally Posted by exador

Those early buyers that spent over $20K for a Grey SS BLRO have already lost 25%.

Yeah well, tough one for them.

I assume most of the people who are willing to spend +10k over list are people who make that within a week and it simply doesn't matter.

[train-time]

Originally Posted by 05carbondrz

They are secretly selling out the back to Grey dealers...No doubt about it.

Absolutely a fact!! As well as sharing in the mark-up profit that the Grey's are making.

[EDL7]

Grey dealers...are...Rolex AD's...

[Dlong]

I'm new to the forum. Have a black sub with date and the wife has a 41mm ss datejust with blue dial that she just got back from a warranty repair. We picked up her watch yesterday at the store and their rolex counter was pretty bare. She said they got zero deliveries in October, will get none in November and none in December. Kinda sucks going into the holiday season. She said right now the hot watches are subs, gmt , daytona and 41mm datejust with jubiliee bracelet and fluted bezel and blue dial. I have a Pepsi on the list here and a jeweler in FL that we frequent. Not to sure about the grey market thing as I was told a rolex dealer lost their dealership for selling over msrp. The other reason for the limited stock is that rolex is a private company that does not have to answer to greedy shareholders so they keep there manufacturing to about a million pieces a year. Plus, the economy has been great and peoples portfolios have been doing quite well. Hence why I bought both mine and my wifes at the same time and got a fantastic discount back in October 2017. Timing was right as I cant even find a sub in a store, never mind with a discount. I think the guys that are selling out the back door are taking quite a risk in losing their dealership. People that work for an AD or rolex cant even get watches. And if they do, they must have their initials engraved so that they can not just buy and flip watches. I get my info from two people personally that I know that work for rolex for what ever it is worth.

[subtona]

Originally Posted by subtona

There is no current reason for the shortage except a manufactured one, purposely limiting production or purposely cutting off the average buyer from the AD supply.

.

Originally Posted by Fleetlord

Expect the peanut gallery to chime in here asking for specific proof of this being a "manufactured" shortage instead of just selling more watches than Rolex can build.

I gave you an “OR” but you seem to pass on that ?


According to the multitude of FS adds, the watches are available to some buyers in bulk.

So the AD keeps the watch in the safe for anyone other than the average guy off the street?

Cant know for certain what it is but it is certainly disappointing.

[Pops1973]

Originally Posted by EDL7

Grey dealers...are...Rolex AD's...

I have suspected this for some time and I have abeen in contact with a grey that has all the watches - I asked to meet and buy a certain watch he refused to meet and replied that if I wanted the watch I pay and he will deliver it. There are 2 ads in the city and I have been in both one of them is an independent and I was laughed out the shop and told I needed to buy so much before I would get anything the other ad is a large national chain and after going in a few times I was put on a list. I suspect the independent is the grey as well.

[ROLEXster]

Originally Posted by EDL7

Grey dealers...are...Rolex AD's...

Grey is a subsidiary of a Rolex AD.

Usually it's managed by the Rolex AD owner's sons / daughters.
Keeping all the profits in the family.

[T3F]

Originally Posted by Dlong

She said they got zero deliveries in October, will get none in November and none in December.

There's just no way this is true. There is no chance that an AD goes three months without receiving any watches. Multiple ADs I've talked to said that they get deliveries pretty much on a weekly basis. The only reason they'd be saying this would be if they were selling out the back door to grey market dealers (or, as someone else noted, might secretly be a grey dealer themselves).

The other reason for the limited stock is that rolex is a private company that does not have to answer to greedy shareholders so they keep there manufacturing to about a million pieces a year.

I also can't stand when ADs throw around this statement -- Rolex is still a company that is trying to make money, and a million -- MILLION! -- watches is a lot! It's more than any other luxury watch brand.

Plus, the economy has been great and peoples portfolios have been doing quite well. Hence why I bought both mine and my wifes at the same time and got a fantastic discount back in October 2017. Timing was right as I cant even find a sub in a store, never mind with a discount.

The economy is doing well, and that certainly contributes to some extent. However, the economy was also doing well back in October 2017, and at many other points in the last 50 years. However, Rolex stock in AD's cases has never suddenly dried up across the board like it has in the last 12 months.

I think the guys that are selling out the back door are taking quite a risk in losing their dealership.

I think they are taking a risk, but at the same time, it's unlikely they get caught if they are reasonably smart about, as Rolex isn't currently doing anything to stop them. Additionally, selling out the back door might allow some of these ADs to go from making a slight profit that just allows them to stay in business to making substantial money. They're selling a bunch of watches they wouldn't be able to sell to normal customers through bundling deals, or, if they're operating as grey dealers themselves, are selling sport models for a substantial amount over list.