The Gray Market Watches Conspiracy

Watchpro’s Rob Corder is a Swiss watch industry mouthpiece: the consummate insider-outsider. In Why [the] grey market is the friend we have to hate, Mr. Corder argues that gray and secondary markets provide benefits to the watch industry, such as price discovery and geographic redistribution of supply. The breezy bromide gives a thumbs up to gray market watches with unsupported assertions, lazy language and wishful thinking . . .

“Luxury watches have been elevated as investment-class assets because of the transparency that the grey/secondary market delivers.” Luxury watches are not an asset, and price transparency does not an asset make. His vague reference to Chrono24’s “artificial intelligence” was also a bit of a reach. But what puzzled me most: Mr. Corder’s casual equivalence of gray and secondary markets.

The gray market sells brand new watches outside of the authorized dealer (AD) network. One way or another, they were originally purchased from an AD (as opposed to the black market, which sells counterfeit or stolen watches). Gray market watch sales are in direct competition with primary market sales.

The secondary watch market is a market for preowned pieces; individuals or dealers selling previously owned watches. Mr. Corder’s arguments apply to the secondary market, not the gray market. The first time I read his column, I thought it was just sloppiness. The second time I realized Mr. Corder was engaging in a bit of sophistry:

Step 1: Make some fairly innocuous arguments about the benefits of secondary markets in general, such as price transparency and customer data

Step 2: Mix true claims (Richemont bought Watchfinder) with speculation (the transaction “legitimized the secondary market”)

Step 3: Equate gray and secondary markets throughout the piece (“the transparency that the grey/secondary market delivers”)

Step 4: Defend the indefensible: “There are too many shady characters breaking tax and other laws to expunge its record, but that is a reason for the industry to engage more, not less . . . We may not like it, but the grey market is too valuable to be ostracized.”

Mr. Corder singularly, spectacularly failed engage with the legal and commercial issues raised by the gray market. He didn’t even articulate why it needs to exist. All of the benefits he cited are available on the secondary (preowned) market.

Why this piece? Why now? Why does the Swiss watch industry’s semi-official mouthpiece want to semi-legitimize gray market watches? Simple. watchpro.com’s running cover for C. D. Peacock in specific, the Swiss watch industry in general. Again.

In his recent post examining watchpro.com’s coverage of the case, RF asked what Rob Corder wasn’t saying about the wrongful dismissal lawsuit threatening to reveal the Chicago retailer’s policy of reselling Rolex abroad, and, perhaps, Rolex’s knowledge thereof. I see this column as another attempt to soften a potential blow.

If nothing else, the C.D. Peacock case highlights the Swiss watch industry’s dirty little secret: manufacturers are unwilling to take the simple steps needed to crush the gray market. They could terminate errant AD’s’ contracts and/or allow AD’s to add a dealer markup to hot watches and publicly discount slow moving stock. But they won’t.

Killing gray market watches would force AD’s to stock unloved inventory, preventing them from ordering the new product that keeps factories humming. Allowing AD’s to price watches to satisfy demand would ruin the manufacturer’s overall marketing strategy. So manufacturers turn a blind eye to out-the-back-door sales, letting their AD’s enjoy “hidden” spiffs and churn unwanted inventory. According to The Financial Times, 20 percent of all luxury watch sales take place in the ‘grey market.’

At the same time, manufacturers are moving to online sales. Mr. Corder fails to mention that Richemont’s acquisition of Watchfinder (for example) is a direct threat to the mothership’s AD’s. You want to trade your watch towards a new IWC? You do that through Watchfinder, not an IWC authorized dealer. Richemont “saves” the dealer’s 40 percent markup and establishes a direct relationship with the customer for future sales.

Richemont and Rolex et al. have no reason to rock the AD boat. We’ll keep turning a blind eye to the gray market sales. You buy new inventory and STFU about online sales. Mr. Corder’s column is a deliberately obtuse defense of the status quo, which benefits the industry at the expense of the consumer. Which makes watchpro.com the friend we have to hate.