Grey market profit

[dori]

Just a random thought I’ve had stuck in my head all day- how did the grey market work before the whole Rolex/PP/AP bubble? If back then You could get nearly every model at a AD/Rolex boutique etc and even get discount for it , what incentive would you have to go and buy at the grey market? How did they actually make a profit




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[Albusdabbledore]

Originally Posted by dori

Just a random thought I’ve had stuck in my head all day- how did the grey market work before the whole Rolex/PP/AP bubble? If back then You could get nearly every model at a AD/Rolex boutique etc and even get discount for it , what incentive would you have to go and buy at the grey market? How did they actually make a profit




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The grey market just used to be a great option for someone to get a watch discounted and yes always if you study dealer trade in vs used retail even in watches that aren’t hot rn there’s money to be had imho


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[2nastie]

Originally Posted by dori

Just a random thought I’ve had stuck in my head all day- how did the grey market work before the whole Rolex/PP/AP bubble? If back then You could get nearly every model at a AD/Rolex boutique etc and even get discount for it , what incentive would you have to go and buy at the grey market? How did they actually make a profit




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In the past grey dealers offered discounts larger than ADs. ADs don't just give maximum discounts to any individual who walks into the store, there was usually a negotiation that takes place.

A grey would often receive higher discounts as they purchased multiple watches or have built a strong relationship with the AD, thus they would make their money on the margins in between.

In today's world it works the opposite.

[dori]

So basically once upon a time the grey’s actually were a way to get watches for cheaper. Today they source all the hot pieces on the market and sell them for double msrp... what bastards haha


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[Rashid.bk]

Originally Posted by dori

So basically once upon a time the grey’s actually were a way to get watches for cheaper. Today they source all the hot pieces on the market and sell them for double msrp... what bastards haha


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Now you're tracking although not them per se, but the market.

[2nastie]

Originally Posted by dori

So basically once upon a time the grey’s actually were a way to get watches for cheaper. Today they source all the hot pieces on the market and sell them for double msrp... what bastards haha


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I would disagree with that. They are like any business, it's usually percentage based and return of investment/cost/equity approach.

They made a certain percentage in the days where watches sold below MSRP and they make a certain percentage today with watches above MSRP.

That percentage could very well be the same as greys do not necessary buy the watches at MSRP. They buy from individuals who flip themselves or they are forced like many to bundle on other undesired pieces (i.e. take a lose on those pieces to reap the rewards on the SS).

They don't "double" their money.

[droptopman]

Not just cheaper but easier. Simple email and money transfer and you could have your watch delivered to your office the next morning. I miss the old days. Although the market situation has stopped me from buying and selling all the time.

[dori]

Q


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[dori]

Originally Posted by 2nastie

I would disagree with that. They are like any business, it's usually percentage based and return of investment/cost/equity approach.

They made a certain percentage in the days where watches sold below MSRP and they make a certain percentage today with watches above MSRP.

That percentage could very well be the same as greys do not necessary buy the watches at MSRP. They buy from individuals who flip themselves or they are forced like many to bundle on other undesired pieces (i.e. take a lose on those pieces to reap the rewards on the SS).

They don't "double" their money.

I’m sorry to disagree with you, but it seems unlikely they make the same percentage these days with inflated prices (which is dictated by them since Rolex has static prices).. if they would make same percentage then they wouldn’t agree to pay private sellers more to begin with, and so prices wouldn’t be where they are at. As stated in many discussion here, there is no shortage in SS watches in the grey market and you can get any of them there.. just for double the price (at least)


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[djgallo]

The greys can make larger profit because the world demand for Rolex continues to increase... The world population continues to grow and more people are getting the means monetarily to purchase these expensive watches. Back in the 60s, 70s, and even 80’s I can’t remember any shortages. The trend will probably continue....

[othertbone]

Originally Posted by dori

Just a random thought I’ve had stuck in my head all day- how did the grey market work before the whole Rolex/PP/AP bubble? If back then You could get nearly every model at a AD/Rolex boutique etc and even get discount for it , what incentive would you have to go and buy at the grey market? How did they actually make a profit




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Up until a couple few years ago, we bought grey market to get a pre owned watch at a better price than retail. You can still do that if you want Panerai, IWC, or anything other than steel sports Rolex, steell sports Patek or Royal Oaks.

Oh and what bubble? Did I miss something??

[The Libertine]

Grey market is also where you could buy discontinued models.

Heck, I bought my 16710 from DavidSW when this forum was his primary source for listing items. Paid a fraction compared to what he would charge now for the same exact watch.....

[2nastie]

Originally Posted by dori

I’m sorry to disagree with you, but it seems unlikely they make the same percentage these days with inflated prices (which is dictated by them since Rolex has static prices).. if they would make same percentage then they wouldn’t agree to pay private sellers more to begin with, and so prices wouldn’t be where they are at. As stated in many discussion here, there is no shortage in SS watches in the grey market and you can get any of them there.. just for double the price (at least)


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This is a forum, perfectly fine to disagree haha

It might not exactly be the same percentage, but the percentage is similar or adjusted to take a bigger risk with a higher dollar amount. It's actually simple business practice and economics.

Most hot watches (few exceptions that trade for more) trades at most double MSRP. What you said before is the grey dealers "double" their money. That only applies if they get that single watch at MSRP.

In reality, they do not. a) they will have to buy it off an individual who was able to get it at MSRP... and then pay that individual a suitable amount to both convince them to sell and have room on top to make a profit. Even an average person will not sell a watch to a grey dealer unless they get top dollar with a bit of room; so knowing what the grey currently ask for publicly, you as a seller will squeeze the grey. Or b) the grey does get it from an AD. The AD will sell them the desired watch at MSRP but along with undesired models at full pop as well. So while the grey appears to "double" on that particular watch, the undesired model will act as loss for them. Simple math will likely show that the net profit received is close to that of option A. Option B is also not always available.

It solely depends on that grey's or individual's risk level. I can't determine that for them; however, it is not uncommon to make 10-20% on a sale, especially when you are buying and selling a pretty liquid item. It's a pretty common range in any standard retail business.

Don't always assume that mark-ups are high. It all correlates with risk level, time, and energy.

[Calatrava r]

Purchased used watches from people at a huge depreciation and offered watches for sale at discounts bigger than ADs. They always made money. One of the first big sellers was a firm called Marcus & Company. They had all the big brands at discounts back when watches were generally sold at retail.

[dori]

Originally Posted by 2nastie

This is a forum, perfectly fine to disagree haha

It might not exactly be the same percentage, but the percentage is similar or adjusted to take a bigger risk with a higher dollar amount. It's actually simple business practice and economics.

Most hot watches (few exceptions that trade for more) trades at most double MSRP. What you said before is the grey dealers "double" their money. That only applies if they get that single watch at MSRP.

In reality, they do not. a) they will have to buy it off an individual who was able to get it at MSRP... and then pay that individual a suitable amount to both convince them to sell and have room on top to make a profit. Even an average person will not sell a watch to a grey dealer unless they get top dollar with a bit of room; so knowing what the grey currently ask for publicly, you as a seller will squeeze the grey. Or b) the grey does get it from an AD. The AD will sell them the desired watch at MSRP but along with undesired models at full pop as well. So while the grey appears to "double" on that particular watch, the undesired model will act as loss for them. Simple math will likely show that the net profit received is close to that of option A. Option B is also not always available.

It solely depends on that grey's or individual's risk level. I can't determine that for them; however, it is not uncommon to make 10-20% on a sale, especially when you are buying and selling a pretty liquid item. It's a pretty common range in any standard retail business.

Don't always assume that mark-ups are high. It all correlates with risk level, time, and energy.

I didn’t mean they make double the money, but they do make more than they used to (on SS Rolex models). Regarding the rest of the things you said, makes pretty good sense so thanks for the brake down :) one thing though, since you seem like you know economics, then take into consideration that the nice grey dealers wouldn’t take the losses on them- rather dump it on the end customer (the people that purchase from them) and hence the very hefty premiums that we see today (which also contains inside the element of increase in demand which will make some customers pay that price ).


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[exador]

I was conversing with one of the biggest Greys in Hong Kong and he was complaining about the small margins on Rolexes. Compared it to the currency exchange market.

There was also another post about watches going through up to 8 different Greys before you see them for sale.

[huncho]

greys were loved here before and now they're hated. i doubt much changed in what they're doing now and before in terms of inventory numbers. they always had anything you ever wanted and could source you anything fairly quick

[Steerpike999]

Keep in mind, before the current Steel watch craze, every man and his chihuahua wasn't a grey dealer, selling watches from their parents basement. There were and are established grey dealers that will still be there long after the SS watch craze dissipates

[DTap]

Originally Posted by dori

So basically once upon a time the grey’s actually were a way to get watches for cheaper. Today they source all the hot pieces on the market and sell them for double msrp... what bastards haha


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Once upon a time= 2017

[pkincy]

The marketing system of the Greys is modern. They use the internet, show their stock and know what they are doing. Rolex and its ADs use a 1950's based system, B&M stores that you actually have to travel to only to be told they don't have anything for you. The AD doesn't know what his inventory is day to day and if he does he is not allowed to advertise it nor does he know what his incoming is. So there will always be a place for a good grey even when the shortage disappears so long as Rolex continues to operate like my great grandfather's store.

[exador]

Originally Posted by Steerpike999

Keep in mind, before the current Steel watch craze, every man and his chihuahua wasn't a grey dealer, selling watches from their parents basement.

[Steerpike999]

Originally Posted by exador

[InitialAndPitch]

Brands like Breitling have monumentally big mark-ups. AD's who need to shift stock fast will sell to the jomashops of the world at 40 to 50% below MRSP. The reseller then sells it while still making a healthy margin. And many don't have the costs of bricks and mortar.

On some sites you'll see an undesirable Breitling with MRSP crossed out and new price inserted.

Breitling Avenger
MRSP: $7500
OUR PRICE: $6000.00

They use the same algorithm for Rolex but it ends up looking like this:
Rolex BLRO
MRSP: $9250
OUR PRICE: $18,500
OUR PRICE:

[Boo-E]

I want the old days back!