The Gray Market Watches Conspiracy

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Rob Corder - defender of Gray Market Watches
Courtesy watchpro.com (click on image for link)

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.

Gray market watches - Rolex Submariner

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.

Bob's watches Submariner

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.”

Gray market watches on parade

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.

C.D. Peacock Woodland Mall

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.

Rolex at C.D. Peacock

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.

Used Watchfinder IWC's for sale vs. gray market watches

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.

12 COMMENTS

  1. I hate hate hate the conflation of collectibles with assets or the perception of a collectible as solid “investment”.

  2. Watch Pro’s recent direct coverage of C.D. Peacock has been cowardly garbage, but I will take a more charitable view toward this article. The C.D. Peacock allegations involve the very small (and only recent) amount of grey sales that are above MSRP. The vast majority of grey sales are below MSRP to move inventory, and that is what Watch Pro is talking about here. Some of the below MSRP grey inventory is coming from retailers and distributors, but some of it is also coming directly from manufacturers.

    It is basically a price discrimination model. Buyers willing to pay for a warranty and AD service get one price. Buyers willing to take the risk of no warranty and that either are not willing to pay an AD premium, or prefer not to have the hassle of dealing with an AD get another price.

    I think what Watch Pro is advocating is that it be a bit more acknowledged (e.g., the shopworn model). However, what Watch Pro is failing to realize is that if watch manufacturers actually acknowledge they are moving inventory out the back door to discounters their AD relationships are going to get very strained.

    • You’re making a good point – the grey market certainly does get rid of unsold inventory, too, without the reputation hit of customers seeing sale prices in ADs. Problem is that mfrs can’t look away for one direction and care about the other and expect the ADs to toe the line.

      If WatchPro is advocating mfrs engage with the grey market to move unsold inventory, they should just say so. Corder is being too cute by half.

  3. I have been completely turned off by Rolex, whereas the Daytona has been my “grail” for literally decades. The thrill is gone. I’m done with Rolex (while I will keep my 16 year old YM). I no longer have another Rolex as a goal. That’s not to mention that I’m far more “horologically enlightened” than I was years ago. There are many fine watches out there that don’t have the crown logo.

    Without a doubt, Rolex (at the top) knows EXACTLY what their ADs are doing (selling out the back door to gray market). And, that tells me all I need to know about their corporate compass, not to mention what they REALLY think about their customers. They think we’re stupid and blindly loyal to the brand. Not this guy.

    • Yep. I think Corder has a point about high secondary prices feeding upon itself. At this point, there has to be no question that Rolex is not only ok with this state of affairs, but is at least tacitly encouraging it.

      If there were Rolex availability, I would probably have 3-4 by now. Instead I’m hunting elsewhere with my watch money (article coming soon!)

      • If you can hold out until July it was just announced that the Tissot PRX will get the Powermatic 80 automatic movement.

    • I never got the appeal of the Daytona, so Rolex is doing you a big favor by turning you off it. I get why people like the GMT-Master II. Rolex is up there with Glycine and Patek as a dual time watch innovator, and the GMT-Master played an iconic role with Pan Am. The sad irony is that the GMT-Master II is so expensive on the secondary market, and so attracting of the wrong attention, that it no longer makes a good international travel watch.

      On the other hand Rolex has been a pathetic also-ran when it comes to chronographs, with companies like Zenith (which powered the Daytona up until 2000), Heuer, Longines, Omega, Breitling, and Seiko having much more impressive histories with chronographs. And watches from those companies can be acquired on the grey market the proper way – at well below MSRP.

      • Rolex is the Diver, GMT 2 and all gold pieces (maybe the Explorer,but the bluesy is awesome). The skydweller, YM2 and cellini are terrible.

      • To be honest, I fell in love with a very specific Daytona some 20 years ago. I saw it in a Rolex boutique just off the casino floor at the Atlantis resort in the Bahamas. And, I’ve never seen another like it ANYWHERE… not even online. And, I’ve looked.

        It was a YELLOW gold case with a meteorite dial. Alligator strap with yellow gold clasp. It was STUNNING. Price tag at the time: $28,000.

        The only type of Daytona I see out there now are WHITE gold with meteorite dials. Blech! And, the prices are crazy now, too.

        Then throw in the behavior of Rolex, as a company… I’ve lost that lovin’ feelin’. The thrill is gone. Furthermore, I’ve become a bit more horologically enlightened and now know there are OTHER fine, FINE watches besides Rolex.

  4. Maybe this makes me a terrible person …

    Bought my last five Rolex from gray market dealers. Set foot into a few ADs first, and being entirely appalled by their completely rude attitudes (shorts, t-shirt, sneakers, maybe not looking like their general target customer). Really shocking actually how consistently dismissive and impolite all of them were. Seems a brand thing, sort of like Ferrari dealers tend to be.

    This was all before the recent Rolex stock issues. My favorite gray dealer, incredibly helpful and polite, doesn’t mind dudes in t-shirts, and they also had much more favorable prices than the AD – and any and every piece available.

    There are a few exceptions, a few nice ADs in Hong Kong. Other than that though … in Thailand they tell you they have steel sports in the safe but won’t sell you any unless you buy full gold pieces at retail (which seems inflated to begin with there). Singapore, hit or miss. Vietnam, totally awful.

    Not even considering ever buying a watch from an AD at this point. Or with what’s going on with supply, just kind of over all of that game in general. Plenty of other kind of toys to spend money on.

    • Buying grey market is OK in my book.

      And ADs are super hit and miss, especially for Rolex. I’ve encountered everything from polite indifference to hyper-sycophantic salesperson-ness (I prefer the former). Generally I find mfr-owned boutiques (like Omega boutiques) have the best service, followed by airport ADs, since they have so many browsers, they’ll leave me alone unless I ask to see something. That’s all I really want since I can’t remember the last time that I learned something from the salesperson.

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