Question about Grey Market vs AD relationships...

[Biginboca]

I don’t know if this is an appropriate topic or not, I’m new here so please forgive me if it’s not acceptable.

I’ve never been a Rolex shopper and have only become aware of the AD vs Grey market happenings by accident on this forum. I joined this forum last week because I bought a Tudor watch and my searching for Tudor discussion forums led me here.

In the last week or so I’ve been on this forum the state of the Rolex marketplace and the constant discussion of availability, pricing, and sourcing watches has been really surprising to me. Like I said I was never interested in buying a Rolex before, and even more now after reading about all the inflated prices at Grey resellers, years long waiting lists, and tons of constant drama about secondary market pricing. (Honestly the whole thing is really a turn off, seeing a respected brand being almost prostituted by Grey Market “pimps” lol)

But one question I don’t understand is this... if all the AD’s have such demand that they can’t keep desired models in their display cases because they sell so easily, why would any dealer sell behind the scenes to a grey market secondary reseller?

It seems to me that when/if inventory arrives they can flip those watches instantly to a long waiting list of legitimate retail buyers, so why would they bother selling them to a “grey market” reseller and take the chance of losing their dealership should Rolex find out?

I ask this based on a presumption that the grey market sellers must be getting new watches from AD’s behind the scenes. I assume they have some sort of relationships where watches are delivered to AD’s and then never even make it to the display case, instead they go right out the back door to the grey market dealer. (This is my presumption after reading the “No AD’s in Nashville” thread.)

Why wouldn’t the dealer just sell it to the end user directly and cut out the grey market dealer? Does Rolex price fix what the dealers can sell for at retail?

Lots of automobiles have waiting lists and the dealers put a line item called “limited availability” on the window sticker and just take the added mark up. It seems like this would work perfectly fine in the case of Rolex also, cutting out the grey market and allowing the AD’s to take the added profit for legitimately investing in and promoting the brand.

[watchmaker]

As much as certain factions of this forum refuse to accept it, ADs are not the only (and in some cases are not the majority) supply source for resellers/greys.

“Genuine customers” buy watches from ADs and flip them for a slice of that sweet sweet profit.

[Wes911]

I assume the Grays are buying at a price premium over retail so the individual AD is making more profit than selling at retail to John Q Public. Always comes down to the almighty dollar.

[illiguy]

Originally Posted by Biginboca

I don’t know if this is an appropriate topic or not, I’m new here so please forgive me if it’s not acceptable.

I’ve never been a Rolex shopper and have only become aware of the AD vs Grey market happenings by accident on this forum. I joined this forum last week because I bought a Tudor watch and my searching for Tudor discussion forums led me here.

In the last week or so I’ve been on this forum the state of the Rolex marketplace and the constant discussion of availability, pricing, and sourcing watches has been really surprising to me. Like I said I was never interested in buying a Rolex before, and even more now after reading about all the inflated prices at Grey resellers, years long waiting lists, and tons of constant drama about secondary market pricing. (Honestly the whole thing is really a turn off, seeing a respected brand being almost prostituted by Grey Market “pimps” lol)

But one question I don’t understand is this... if all the AD’s have such demand that they can’t keep desired models in their display cases because they sell so easily, why would any dealer sell behind the scenes to a grey market secondary reseller?

It seems to me that when/if inventory arrives they can flip those watches instantly to a long waiting list of legitimate retail buyers, so why would they bother selling them to a “grey market” reseller and take the chance of losing their dealership should Rolex find out?

I ask this based on a presumption that the grey market sellers must be getting new watches from AD’s behind the scenes. I assume they have some sort of relationships where watches are delivered to AD’s and then never even make it to the display case, instead they go right out the back door to the grey market dealer. (This is my presumption after reading the “No AD’s in Nashville” thread.)

Why wouldn’t the dealer just sell it to the end user directly and cut out the grey market dealer? Does Rolex price fix what the dealers can sell for at retail?

Lots of automobiles have waiting lists and the dealers put a line item called “limited availability” on the window sticker and just take the added mark up. It seems like this would work perfectly fine in the case of Rolex also, cutting out the grey market and allowing the AD’s to take the added profit for legitimately investing in and promoting the brand.

This is all speculative on my part (because I truly do not know), but rumblings here are that certain ADs benefit from arrangements where the grey market dealers will also purchase hard-to-move Rolex pieces (like PM, TT, etc.). Separately, I’ve also read rumblings that certain ADs might also cut deals with grey market dealers where the AD actually sells “hot” items (i.e., Stainless Steel Sport Models) above MSRP to Grey Dealers who, in turn, still profit by marking up at a comfortable margin from AD acquisition price.

If you do a search, there’s myriad discussion on this topic.

[WatchLurv]

Greys are either buying at premium or bundling. They're doing what a normal customer wouldn't do. If you were to buy 4 datejusts for a hulk, you could get that deal done; you just aren't because it's a hassle to get rid of 4 datejusts that you don't want.

By them doing this, they need to sell off the hulk at the highest price possible to cover for the 4 datejusts as they don't know when they would be offloaded.

[Biginboca]

So based on what you guys are saying, the AD’s might have to buy undesirable models from Rolex to get the desirable ones. And the Grey’s help them to unload the slow movers.

Does Rolex fix the maximum price a dealer can sell for? Do they fix the minimum price? Why wouldn’t the dealer just mark up the Hulk themselves and discount the Datejust?

Why not take those added profits the Greys thrive on for themselves?

Seems like an AD would just look at eBay closed auctions (or watchrecon, chrono24, etc) and see a Hulk is going for $14k (or whatever), realize that’s the current market price, and put it in their case for that. And likewise see the Datejust is going for 80% of MSRP (or whatever it is) and price it in the case at that.

[teck21]

Originally Posted by Biginboca

Does Rolex fix the maximum price a dealer can sell for? Do they fix the minimum price? Why wouldn’t the dealer just mark up the Hulk themselves and discount the Datejust?

Why not take those added profits the Greys thrive on for themselves?

Seems like an AD would just look at eBay closed auctions (or watchrecon, chrono24, etc) and see a Hulk is going for $14k (or whatever), realize that’s the current market price, and put it in their case for that. And likewise see the Datejust is going for 80% of MSRP (or whatever it is) and price it in the case at that.

There will be people insisting that it’s not illegal for ADs to sell above MSRP, and of course it’s not illegal and that ADs can sell above MSRP if they wish but it is nonsense to say they can do it with impunity.

Rolex will terminate their dealerships if they do it constantly and Rolex finds out.

Any that are ‘allowed’ to by Rolex are few and far between, and more likely zero.

Bundling and/or insisting on prior purchase history on the other hand is accepted by Rolex (and possibly encouraged). It is through this mechanism that ADs try to compensate for not being able to sell at grey prices themselves.

Of course they are some ADs who are outright in cahoots with grey dealers, but I suspect most do actually attempt to balance the need to satisfy customers with their own profit objectives.

If they were allowed to sell above MSRP, wouldn’t every single AD simply do that rather than do the whole convoluted bundling/purchasing/backdoor deals with greys?






Sent from my iPhone using Tapatalk

[grymg]

Originally Posted by WatchLurv

Greys are either buying at premium or bundling. They're doing what a normal customer wouldn't do. If you were to buy 4 datejusts for a hulk, you could get that deal done; you just aren't because it's a hassle to get rid of 4 datejusts that you don't want.

How do the greys eventually get rid of the 4 datejusts then? Seems like they take a hit on those and then the profit on the one hulk is supposed to make up for it? Doesn't make much business sense.

[csaltphoto]

Keep in mind that any individual, grey or entrepreneur type, who frequents AD's and buys a lot of watches is a "good customer". Nothing more and nothing less. I can't imagine any retailer has some kind of altruistic need to move merchandise to the "truly deserving" unless there is some kind of special relationship or circumstance. Someone who wants a PM watch and asks for a bundle with a desirable SS model that they can flip is one source to help offset the PM purchase. There are others who sweep the stores every morning. If they literally buy every desirable SS model the day it received, 10,20,30 watches a year, AND some PM models, THAT is a good customer too! Why wouldn't a retailer cater to them as opposed to some random dude like us who just wanders in?

The AD's I've been to seem like pretty normal folks. Sure, I know the big ones have models in the back to bundle or move to celebs or whatever. But the rent comes due every month, overhead is what it is and if they need 20-30K at the end of the month it's time to make a few phone calls. Sales is a tough biz and any place that keeps its doors open for decades has learned a few things along the way and is not going to shy from all the things that makes sales work.

[Coopdog]

Resellers get their watches from customers who buy and flip them, and also from diverted new watches from ADs for sure. The answer to why is pretty self explanatory, they can both make more money that way.

Rolex doesn’t allow ADs to mark up watches - I think they are strict about this because otherwise they have no control of the price. I can see a case for letting them increase the price, but I think Rolex wants to be making that decision not individual jeweler all over the world.

Also it’s important to note that this may seem like it’s totally normal now but the crazy demand for Rolex sports models (besides the Daytona which has been limited since the 90’s) only started two years ago. I imagine when we have a recession a lot of this will even itself out.


Sent from my iPhone using Tapatalk

[RJRJRJ]

1. Many of the grey watches come from regular buyers that flip to them and the gray pays a premium for them.

2. The grey also buys slow movers from the AD and in turn gets some hard to get stuff. When you think you're a VIP, remember that there is a grey out there that spends a lot more than you do and is a VVVIP.

[grimlock525]

Originally Posted by Coopdog

Rolex doesn’t allow ADs to mark up watches - I think they are strict about this because otherwise they have no control of the price. I can see a case for letting them increase the price, but I think Rolex wants to be making that decision not individual jeweler all over the world.

Sent from my iPhone using Tapatalk

Rolex advertises an MSRP on their website for each model. While technically this is a "suggested retail price", I am in agreement that in reality they probably have strict rules that the ADs honor this price in order to protect their brand image. Consider if Rolex allowed ADs to price the watches at whatever the market dictates. Your average new Rolex buyer sees the price on the website and shows up at an AD excited to buy that SS Daytona, only to find that it's almost double what Rolex advertised as the MSRP on their website. Furthermore, they call up a few more ADs only to find out that the price is double everywhere else too. So who are they going to be frustrated with? The ADs, or the company that is advertising a significantly lower price than what its products actually cost?

You also have to think about when the pendulum swings the other way. When the economy enters recession (as it always does) and consumers tighten up spending, does Rolex really want its ADs pricing watches based on the market? It might be great for enthusiasts like us if there ever came a time where we see 40% discounts at the AD, but you can be certain Rolex would never let that happen, because once again they need to protect their brand above all else.

[pkincy]

I suspect that "Grey" dealers run the gamut from those that are honest and take unwanted models from the AD along with hot models all the way to the money laundering drug dealers that are discussed in another thread. And imagine this; a slightly devious but generally honest grey makes a deal with a number of ADs that the grey will buy all the "hot" models they get and pay them MSRP on each purchase with an honest invoice and include a paper bag full of cash as an "incentive" each month as an enticement. The AD has a "good" customer and can show a number of sales to the Grey and his friends or shills and gets a large chunk of cash monthly that they can either declare to their local tax authorities or not as their conscience dictates because this cash comes in a paper bag and is not accounted for on anybodies books.