Controversial Takes on the "Shortage" and Grey Dealers

[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?

[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.

[05carbondrz]

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.

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

[lenfried29]

I spare a lot of writings with quote from my AD: "Why should I sell you Datona C for $12K if it's selling for $22K". Got it?

[rnordby]

Originally Posted by 05carbondrz

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

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.

[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?

[kingSubTT]

15 Daytonas per year is not correct. It is 2-3. Even few years back JamesC version of DSSD was 4 per year.

[steve099]

Perhaps the ADs look bare because they are selling so much stock to grays...and that's why they cry poor but managed to meet their sky high staff and rent costs..

Just a thought...

[Vivalas]

There are over 100 AD’s in the U.K. apparently so I’d imagine there’s far more than 1000 worldwide.
Supply is probably not much difference than it was last year or 3 years or 5 years ago, difference is demand has rocketed. Plus people now more than ever have multiple Rolexes rather than just one.
There will be AD’s selling to greys however it’s a risky game. In the U.K. agencies have been pulled by Rolex for not playing their game correctly. Lately some AD’s are taking extremely protective measures like holding the warranty card back (one apparently even gets you to sign a 3 year contract of conditions), so they aren’t going to risk their ADship doing back handed deals with greys.

[NJC]

Hello.

Think this is probably my first post though I've been lurking a while.

I've been lucky enough to form an excellent relationship with a local AD in quick time. Received my first Rolex (Sub Date) a few months ago after a short wait which was very nice.

Anyway... the interesting part of my post is the understanding I've been given on the SS situation by my AD and it makes a lot of sense.

Essentially Rolex supply SS sports to AD's in a ratio model based on their total watch output. I think the figure quoted was around 10% of the stock an AD receives will be SS sports. AD's can special order the SS sports but there is no guarantee when they'll get them because it's based on their total business with Rolex across the range.

Rings true for me on many levels - the reason they want to bundle SS sports with PM, the reason they literally have no clue when they're getting stuff. Think about it - Rolex production is probably predictable enough - they've been making these watches forever at the same plant. If it were just straight fulfilment of stock orders, Rolex would be able to offer a level of supply chain predictability to the AD's. Straight fact is that the AD's don't know how long the SS sports waiting lists are going to be because they don't know how many other watches they're going to sell!

Maybe some of you should test the theory guys? - Go and put your name on a waiting list for a DateJust and see if you get a predictable answer. I think you will.. 3 months for a special order sir or madam will be the reply...

As for they greys - They're getting plenty of flippers and they've got people in the AD's doing deals for a backhander in some cases and in others I'm sure there are AD's who are happy to bundle a LOT of PM watches for a few choice SS sports.

Makes sense to me anyway...? :-)

NJC.

[RJRJRJ]

I think your estimate of 30% SS sports models is quite high.I don't know the actual answer, but I'd guess it's maybe half of that.

Also, Rolex doesn't want to be involved in the inner workings of each AD. Otherwise they would just get rid of ADs altogether and do it themselves.

[Sebastian5]

Originally Posted by T3F

Someone started a good thread that showed there were hundreds of Daytonas, Sky-Dwellers, BLROs, etc. listed for sale on Chrono24.

To be fair, Chrono24 is a worldwide platform so a couple of hundred isn't that much considering the scale.

[Beckster]

My personal take on this is that supply hasn’t really changed. But demand has skyrocketed. Especially in the last few years thanks to the popularity and use of social media, ie Facebook, Instagram etc. Plus the fact that the economy is doing well.

[m j b]

Originally Posted by rnordby

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.

Horsepoopie. All of that fancy "retooling" is just a CNC machine, and it's just a matter of loading a program and changing the cutting bits. It doesn't take much more time to do that then it does to perform periodic preventative maintenance.

Originally Posted by RJRJRJ

... I'd guess it's maybe half of that.

And that's the problem with the OP's comments and most of the replies - everyone is guessing at the numbers. No one knows.

I'd guess that more than half of you are wrong. LOL

[BT1985]

I personally don’t think it’s coincidence that the increase in marketing/rise in popularity of their Tudor brand and the Rolex shortage perfectly coincided. Yes, it could be Rolex reacting to the shortage. Or they could be strategically pushing those that buy the less expensive SS models to Tudor while driving up their TT and PM sales for the Rolex brand. My AD has said this is the best they have done on PM watches, ever. It wouldn’t surprise me to see Rolex continue to raise prices to capture the full market value of their watches but they want to fully establish Tudor as a brand first so that they don’t lose market share when they do.


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[jsausley]

I think your reasoning is sound but your scale is off. My local AD received three BLNRs in one year. They may have gotten a few (maybe 5?) LNs and maybe a BLRO or two but that's less than ten of a single style.

[HogwldFLTR]

I do agree that seeing the number of hard to get Rolex watches available at the grays I've looked at that there is a combined effort for them to get as much as possible for their stock making it difficult and expensive for the traditional buyer to buy at retail prices. I wish Ma Rolex would actually do something about their customer base other than turn the other cheek. When I see that the grays are lacking stock then I'll believe that Rolex is actually concerned about their customer base. I guess being a non-profit with excess dough means they don't have to give a damn about anything.

[RJRJRJ]

Originally Posted by m j b

Horsepoopie. All of that fancy "retooling" is just a CNC machine, and it's just a matter of loading a program and changing the cutting bits. It doesn't take much more time to do that then it does to perform periodic preventative maintenance.



And that's the problem with the OP's comments and most of the replies - everyone is guessing at the numbers. No one knows.

I'd guess that more than half of you are wrong. LOL

I would imagine (yes another guess) that the gold and platinum machines are not side by side with the SS machines. They probably have a separate, more secure area where they operate them.

[BT1985]

Originally Posted by HogwldFLTR

I do agree that seeing the number of hard to get Rolex watches available at the grays I've looked at that there is a combined effort for them to get as much as possible for their stock making it difficult and expensive for the traditional buyer to buy at retail prices. I wish Ma Rolex would actually do something about their customer base other than turn the other cheek. When I see that the grays are lacking stock then I'll believe that Rolex is actually concerned about their customer base. I guess being a non-profit with excess dough means they don't have to give a damn about anything.

I agree with you and Rolex has responded with policies such as removing stickers, only being able to buy in person and taking up punitive measures against ADs that they can prove supply to flippers. I think the first two things I mentioned are good measures but taking punitive action I think has unintended effects. First, it keeps SS sport models in the safe because now ADs need to be far more diligent in vetting buyers which makes it very difficult for Joe Schmo off the street to buy a hot reference. Second, as it stands now a random person off the street is just as likely to sell a hot reference for a profit than keep it. The problem is that ADs trust the greys they supply to sell discreetly. What I mean by this is that greys do a good job protecting the AD by concealing serial numbers and anything that could link the watch to the AD when being marketed for sale. I can’t tell you how many people on this forum I have seen post pictures of the hot watch they are flipping with serial number clearly exposed. This actually makes it safer for ADs to sell to greys. I have found that once you build the trust of an AD, that you aren’t a flipper or that if you do choose to move on from a watch that you can at least do it discretely and it isn’t something you are doing systematically for a profit, desirable references become easier to source.


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[TickTockChuck]

It's obviously much more profitable for ADs to sell out the back door to a Grey than at MSRP to regular front door customer. My local AD is pretty much bare except for the usual slow movers. No waiting lists either. So I have to ask what is the point of ADs at all if they offer no stock or sales service. Fancy Rolex displays with little of interest to show. However, I do believe many ADs secretly keep the good stuff in the safe for bundling or favors to VIPs, friends & family. That leaves many of us out in the cold with slim hopes. This can't be good in the long term for Rolex's image. As mentioned, I wish Rolex would register the owner's name on a central data base and/or make it non-transferable to curb the Grey market. I now tend to view the slick Rolex advertising as just a tease. I'm personally starting to think of other ways to deploy my discretionary funds. At the same time I'm happy for all those have secured the watch of their dreams (to actually wear). An interesting discussion though. Cheers!

[snowgoat]

I suspect several factors are in play and practices at AD will not be uniform. Some will be gaming to their advantage and others will be playing it straight. In North Queensland the only AD went bust and a local jeweller informs me they shut shop because they couldnt get stock. Pre shortage they will have done steady trade with Chinese tourists. To establish a relationship with an AD will now require a 1600 km trip to Brisbane or further to Melbourne and Sydney. Having done so and met some very helpful AD staff and bought a DJ for my better half I see myself as no closer to acquiring any desired SS. And the gray dealers here don’t seem to have large numbers of BNIB.

[peterpl]

Originally Posted by rnordby

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.

Hit the nail on the head right there. ALL and I mean ALL Rolex's come originally from an AD. This means grays are all getting their watches from flippers or back doored directly to them. I think this is very common knowledge now.

And I totally agree with you the brand is already being tarnished since people without rose colored glasses on have finally come to realise exactly what is happening. Long term this is going to be very very bad for Rolex.

Its not about watches anymore or passion its just all scalpers and about making a quick buck. That is what is an absolute shame of what this brand has become. Rolex has lost complete control of their distribution network and control of their ADs.

Everyone keeps talking about supply, jeezus when is that going to stop. It is NOT supply. I will believe it is the supply when these watches are not available anywhere. When every single Rolex is available at every single gray dealer then that is NOT a supply issue.

[exador]

Originally Posted by T3F

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.

I think that figure’s way too low. There have to be at least 500 in the US alone:

https://www.rolex.com/rolex-dealers/...n=unitedstates

[RJRJRJ]

Originally Posted by exador

I think that figure’s way too low. There have to be at least 500 in the US alone:

https://www.rolex.com/rolex-dealers/...n=unitedstates

There are a little over 500 in the US as of a few years ago. I counted them manually

[doubleinfive]

I'll throw a couple of Econ 101 words out there: Nope, not supply and demand but cartel and collusion...

[Pops1973]

Originally Posted by peterpl

Hit the nail on the head right there. ALL and I mean ALL Rolex's come originally from an AD. This means grays are all getting their watches from flippers or back doored directly to them. I think this is very common knowledge now.

And I totally agree with you the brand is already being tarnished since people without rose colored glasses on have finally come to realise exactly what is happening. Long term this is going to be very very bad for Rolex.

Its not about watches anymore or passion its just all scalpers and about making a quick buck. That is what is an absolute shame of what this brand has become. Rolex has lost complete control of their distribution network and control of their ADs.

Everyone keeps talking about supply, jeezus when is that going to stop. It is NOT supply. I will believe it is the supply when these watches are not available anywhere. When every single Rolex is available at every single gray dealer then that is NOT a supply issue.

Agree with your comments you are talking sense also the brand is being tarnished among a lot of people. the people that are now getting the watches and flipping them I think Rolex should be making more of an effort to stop this but not seeing any action from them and it is very confusing and disappointing as it is stopping genuine customers from getting the watch they want as a first watch or just to add to their collection to keep and enjoy.

I always saw Rolex as a premium brand but it’s losing that image with me. But as someone who enjoys watches I still like the watches and will satisfy my passion with other brands until this madness ends. I will then venture back into an AD and not fear being laughed out the shop for dare asking to buy a ss watch.

[imgook]

At the end of the day, it all still driven by demand. Grey just have a lot of power atm cause demand is ridiculously high. Obviously when demand was low, grey dealers were giving discounts which no seemed to complained about...

[seabreeze60]

Brilliant thoughts and posts. There are threads that dig deep into this subject. You have hit the high points. The only problem is that threads come and go quickly!

[peterpl]

Originally Posted by doubleinfive

I'll throw a couple of Econ 101 words out there: Nope, not supply and demand but cartel and collusion...

I would have to agree with this. Don't underestimate the power of money. There is some dodgy dodgy things happening here and its similar to cartel behavior.

There has been some big repercussions due to cartel behavior in certain industries I do business in including real estate and telecommunications industries which never end well.

There is PLENTY of supply out there - just not to your usual end buyer.

[Vanmarsenille]

Originally Posted by peterpl

Hit the nail on the head right there. ALL and I mean ALL Rolex's come originally from an AD. This means grays are all getting their watches from flippers or back doored directly to them. I think this is very common knowledge now.

And I totally agree with you the brand is already being tarnished since people without rose colored glasses on have finally come to realise exactly what is happening. Long term this is going to be very very bad for Rolex.

Its not about watches anymore or passion its just all scalpers and about making a quick buck. That is what is an absolute shame of what this brand has become. Rolex has lost complete control of their distribution network and control of their ADs.

Everyone keeps talking about supply, jeezus when is that going to stop. It is NOT supply. I will believe it is the supply when these watches are not available anywhere. When every single Rolex is available at every single gray dealer then that is NOT a supply issue.

This ^^^.