Why the grey market are nuts

[Highjinx]

I have two friends in HK who work for large watch dealerships. They have plenty of stock of ALL Rolex SS wristwatches. These watches are for sale at prices well above the original retail price that the dealerships paid.

They have a team of employees in other cities in other countries who buy any SS model they can get their hands on and bring them back to HK to sell later to Chinese who don't care paying double.

Rolex ADs are complicit too. If you're an employee being paid $1-2k a month in HK the option of buying any watch received from Rolex and immediately flicking it on to a dealer (e.g. Princes) for more profit than your monthly salary would be hard to adjust.

Rolex make plenty of watches, they're just all in a safe in HK.

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[blown5.0]

I believe this. Really unfortunate that ADs would be ok with this. I guess at the end of the day, business is business :/

[WJGESQ]

At the prices--go Omega.

[Chadridv]

So on a global level, we’re hearing the same reasons and excuses from almost all ADs. There are now known policies about sticker removal, holding warranty cards and new vetting processes of potential customers. You think this is a conspiracy across an international network of AD owners or something?

[beshannon]

Pricing is simply rising to meet demand.

Has anyone stopped to consider that this is the defacto price increase that Rolex SA does not have to issue? Let the lack of supply cause prices to equalize?

Or looking at this another way, have Rolex watches been under priced for far too long? I believe so, yes.

[Abdullah71601]

Originally Posted by beshannon

Pricing is simply rising to meet demand.

Has anyone stopped to consider that this is the defacto price increase that Rolex SA does not have to issue? Let the lack of supply cause prices to equalize?

Or looking at this another way, have Rolex watches been under priced for far too long? I believe so, yes.

Rolex isn’t seeing any of these profits. They are locked in to whatever the wholesale price to the dealer is. It makes no sense whatsover that Rolex would be complicit in this secondary market free for all.

If Rolex believed prices were too low they could simply increase prices. The fact that they haven’t is proof that their scheme is correct for their strategy.

[beshannon]

Originally Posted by Abdullah71601

Rolex isn’t seeing any of these profits. They are locked in to whatever the wholesale price to the dealer is. It makes no sense whatsover that Rolex would be complicit in this secondary market free for all.

If Rolex believed prices were too low they could simply increase prices. The fact that they haven’t is proof that their scheme is correct for their strategy.

Agreed.

As a non profit entity owned by a trust their motives are not purely profits.

They sell luxury not watches. It is all about the image.

[Quicksilver]

I think all new SS sports models in HK go directly from the AD's to the greys so they can be purchased by desperate and wealthy Chinese visitors. SS sports are as rare in China as anywhere else. I was in the main Rolex AD in Guangzhou two weeks ago - not a ss sports model in sight. Not even an Explorer.

[Chillychow]

We should almost flip our perspective on pricing and consider grey pricing as 'retail' and any SS sports watch you are lucky enough to source through an AD is at a discount to market value.

[Abdullah71601]

Originally Posted by Chillychow

We should almost flip our perspective on pricing and consider grey pricing as 'retail' and any SS sports watch you are lucky enough to source through an AD is at a discount to market value.

Market value for a new watch is MSRP. Most ordinary people are buying watches from ADs at market value.

The secondary, or used watch market is not the same as the new watch market. People often conjoin the two with errant belief that buying from a grey dealer is the same as buying a new watch from an AD. The watches in the secondary market carry fees and additional mark ups that the new watch market doesn’t have, so the two cannot be conjoined for valuation.

[Duey]

It's not the Grey's. Just look here on TRF at all the new members. Tons of members here just purchase for profit. Nothing more then that. Before we had "flippers", people who just love to buy new watches and then would sell them here for a loss. But now if people can get a hold of a hard to come buy SS sport model they run home and post it up here on TRF for sale for a good profit. It's sad what has happened to Rolex, and TRF too .... just IMHO

[clb521]

I think all grey market new watches are coming from Asia. I just bought a SS daytona and black sub from different sellers and they both had asian ADs on the card. Stickers in place too.

I think my hulk i purchased a few years ago also has an asian AD.


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[Chillychow]

Originally Posted by Abdullah71601

Market value for a new watch is MSRP. Most ordinary people are buying watches from ADs at market value.

The secondary, or used watch market is not the same as the new watch market. People often conjoin the two with errant belief that buying from a grey dealer is the same as buying a new watch from an AD. The watches in the secondary market carry fees and additional mark ups that the new watch market doesn’t have, so the two cannot be conjoined for valuation.

Actually MSRP is simply that - MSRP and not necessarily market price. An equilibrium market price is found at the intersection of the demand and supply curve for any product. Whenever you see a secondary market evolve for a particular product, it shows that MSRP is not at equilibrium. The only way to bring the price of an item to a new equilibrium (ie MSRP) is to increase supply or to have demand decrease (this can happen through a substitute product coming to market or even a decrease in consumer appetite from changing trends). The current buying environment for SS Daytona's and the new SS BLRO is a great example of seeing this equilibrium way out of whack from MSRP. On the flip side, more traditional Rolexes appear to be in equilibrium at MSRP assuming Rolex is happy with the sales of these items (ie consumer demand). We also have to include other costs you mentioned as part of this, but for arguments sake, I'm using the term MSRP to include all taxes and other fees.

[LINVS]

SS sports Rolexes are just being sold at market value.

The whole MSRP thing is silly in my opinion - ADs should sell them for whatever they can get for it. It’s a luxury good, not baby milk or insulin.

I think most ADs have a grey market connection, if not a grey market store. What kind of businessman would pass on selling a Pepsi for 20K USD when they got it for what - 5K-6k?

[fishingbear]

Originally Posted by Duey

It's not the Grey's. Just look here on TRF at all the new members. Tons of members here just purchase for profit. Nothing more then that. Before we had "flippers", people who just love to buy new watches and then would sell them here for a loss. But now if people can get a hold of a hard to come buy SS sport model they run home and post it up here on TRF for sale for a good profit. It's sad what has happened to Rolex, and TRF too .... just IMHO

I agree, alot has changed in a very short time.
Often it seems that what was a platform to share knowledge and passion for horology has become discussions of commodity trading.

[beshannon]

Originally Posted by LINVS

SS sports Rolexes are just being sold at market value.

The whole MSRP thing is silly in my opinion - ADs should sell them for whatever they can get for it. It’s a luxury good, not baby milk or insulin.

I think most ADs have a grey market connection, if not a grey market store. What kind of businessman would pass on selling a Pepsi for 20K USD when they got it for what - 5K-6k?

Agreed

What better way to raise the value of the brand without raising the price. Let the buyers do it for you! Brilliant!

[dhknola]

I find all of this fascinating as opposed to sad.

I agree with OP's line "Rolex make plenty of watches, they're just all in a safe in HK." in that the burgeoning Chinese market and demand from said market could be globally skewing everything to a perhaps false shortage being experienced now. There are so many newly minted rich Chinese that have prospered in the last 20 years and what does one do when they get rich...lot's of things including indulging in the marquis luxury wrist watch market dominated by the ol Crown and paying whatever for it, maybe even boasting it cost double than the tag because it is so sought after.

[glamorama]

Almost looking forward to a China market crash, or another clamp down on corruption. That's when prices came down before.

[enjoythemusic]

Originally Posted by fishingbear

I agree, alot has changed in a very short time.
Often it seems that what was a platform to share knowledge and passion for horology has become discussions of commodity trading.

(Sigh) Agreed. Even during 2006/07 it wasn't THIS bad. Of course many of us also remember the 'Asian Crisis' when mechanical timepieces were being sold-off so fast that buyers had the upper-hand. Ebb and flow, yet agree this very recent situation is perplexing to guys like me who have loved and daily worn mechanical timepieces for decades.

We live in interesting times.

[AK797]

Originally Posted by LINVS

SS sports Rolexes are just being sold at market value.

The whole MSRP thing is silly in my opinion - ADs should sell them for whatever they can get for it. It’s a luxury good, not baby milk or insulin.

I think most ADs have a grey market connection, if not a grey market store. What kind of businessman would pass on selling a Pepsi for 20K USD when they got it for what - 5K-6k?

The ADs had deals with greys here after Brexit started off this whole market change that has now spread globally, but Rolex UK soon clamped down on this practice and warned ADs they would lose their franchise if they sold to greys and then even, rather unfairly, to loyal customers who turned flipper - that was how much they didn't want watches ending up with greys here. But for some reason they are far more lax in other countries and esp Asia where ADs look free to do what they want and that will ofc be operating like a grey in this buoyant market.

I think Rolex need a unified global policy, either let ADs sell their watches to whomever and whenever as they did before, or define clear rules in place for allocation, but make it uniform across all countries, otherwise this just leads to anger and resentment.

[Chillychow]

Originally Posted by AK797

The ADs had deals with greys here after Brexit started off this whole market change that has now spread globally, but Rolex UK soon clamped down on this practice and warned ADs they would lose their franchise if they sold to greys and then even, rather unfairly, to loyal customers who turned flipper - that was how much they didn't want watches ending up with greys here. But for some reason they are far more lax in other countries and esp Asia where ADs look free to do what they want and that will ofc be operating like a grey in this buoyant market.

I think Rolex need a unified global policy, either let ADs sell their watches to whomever and whenever as they did before, or define clear rules in place for allocation, but make it uniform across all countries, otherwise this just leads to anger and resentment.

Or just make more SS Sport watches to meet consumer demand from AD’s!!

[HK Islandboy]

Originally Posted by LINVS

SS sports Rolexes are just being sold at market value.

The whole MSRP thing is silly in my opinion - ADs should sell them for whatever they can get for it. It’s a luxury good, not baby milk or insulin.

I think most ADs have a grey market connection, if not a grey market store. What kind of businessman would pass on selling a Pepsi for 20K USD when they got it for what - 5K-6k?

Agreed!
Getting (almost) any piece you want is simple - pay to play

[HK Islandboy]

Originally Posted by Chillychow

Or just make more SS Sport watches to meet consumer demand from AD’s!!

Though this would degrade the perceived value of the brand.

There are many, many great watches available where production meets (or exceeds) demand ...but people aren’t queuing up to buy most Omegas, IWCs, VCs, etc

[lecorsaire]

Originally Posted by beshannon

Pricing is simply rising to meet demand.

Has anyone stopped to consider that this is the defacto price increase that Rolex SA does not have to issue? Let the lack of supply cause prices to equalize?

Or looking at this another way, have Rolex watches been under priced for far too long? I believe so, yes.

This makes no sense. Just exactly a year ago the only watch that was problematic to buy was the Daytona. That’s it. Everything else could be had in a reasonable amount of time or pre-owned for less the retail. I refuse to believe that demand drastically rose during the summer to bring it to where we are today.

I believe the Rolex shortage in the fall which led to higher market prices simply brought in more resellers who are always looking for opportunities to profit on goods. This has plagued concert and sports events and the sneaker market.

The bull market can only account for so much real demand. In fact all of these watches are readily available. There are always hundreds on Chrono24, forums and jewelers around the world.

The same thing happens with real estate. When newcomers overpay it ends up raising prices for everyone else. I have seen this happen in NYC even before the huge wave of gentrification.

Hopefully the new hypebeasts get tired of Rolex and move on to next cool trend. Until this happens barring an economic crisis, this situation will not change.

[Chillychow]

Originally Posted by HK Islandboy

Though this would degrade the perceived value of the brand.

There are many, many great watches available where production meets (or exceeds) demand ...but people aren’t queuing up to buy most Omegas, IWCs, VCs, etc

True - funny you should say this. There's an Omega Speedmaster '57 that's on my short list for my collection, however, I'm leaving it on the backburner in case one of the those ultra elusive SS BLRO's and/ or Daytona's show up. Normally I could time my purchases according to my immediate wants and not watch availability. Given I know the Omega will be available when I want it, I'm able to delay my purchase and make the Rolexes take front stage. In this environment, Omega loses out on a potential sale because of their perceived availability. (Hopefully the Omega marketing team doesn't read this ;))

[Duey]

Originally Posted by fishingbear

I agree, alot has changed in a very short time.
Often it seems that what was a platform to share knowledge and passion for horology has become discussions of commodity trading.

Yes knowledge and passion for horology has become Rolex commodity trading - It's just sad

[Caduceus]

What about just selling them online directly from Rolex and cut ADs/Grey all together?

“oh no!, here come the pitchforks!!!!”

[LINVS]

Originally Posted by HK Islandboy

Agreed!
Getting (almost) any piece you want is simple - pay to play

The complaints come from guys who for years could walk in to an AD and demand 20% off a GMT and a bag of Rolex swag - pens, white gloves, ball caps - you all remember those days?

I remember looking at Subs and GMTs and dealers offering discounts left and right. I'm kicking myself for not buying a couple old pepsis and just holding on to them to sell today. Now unless you walk in to an AD all enthusiastic about Datejusts, salesmen won't even give you the time of day.

It's not 1996.

[subtona]

The grey market has been enabled and bolstered by the internet.

Much like popular restaurants have forever waiting list for the average, off the street customer to get in ... internet hype is real.

At this point, the global grey market has solidified itself as a firm part of the business model. Perhaps a market correction will dent it but I don't expect it is going away.

[jfoord27]

Moral of the story: get yourself on waiting lists and when you finally get the call from an AD to buy at retail you know you have made money if you ever needed to sell, due to the great secondary market market demand.