Grey Dealers beginning to break?

[Explorer2polar]

I had an interesting conversation today with a UK Grey Dealer owner, some of his comments and business worries may indicate that change may be coming.
I will summarise the main conversation points.

1. He states he is now forced to massively over pay for all Rolex's even by todays rampant standards, just to fill his displays and web site such is the buying frenzy. The pressure on his business finances is not sustainable, he cannot restock at affordable prices and has extended credit with his bank.

2. Flippers are asking/demanding massive premiums to seal the deal, often pitting competing Greys against each other for the best price.

3. The amount of capital invested in stock vs return/profit is at critical level and some deals go through with a £ 50 profit margin on a Rolex worth between £ 10K to £15K.

4. He has told me that some Flippers are now at professional level, they operate between AD's and Greys and are cashing in on a large number of Rolexes which are days old, unused and have just come from a EU or UK AD's directly. Some of these Flippers are highly organised and have access to any Rolex watch.

5. The UK Tax man has realised the profit potential and money passing thru and demanded his share.

I got the honest and distinct impression from him that All the effort and financial risk was starting to become to much for little reward.

Who knows maybe the Grey market will eventually weaken and disappear?

[Seddyspaghetti]

Interesting.

[bonovox]

I'm a doubter

https://www.cnbc.com/2021/10/13/luxu...nd-market.html

[Explorer2polar]

Originally Posted by bonovox

I'm a doubter

https://www.cnbc.com/2021/10/13/luxu...nd-market.html

Good article, but they are late to the party in my opinion by trying to develop the go to watch buying web site as the market is to fragmented.

[TomLou]

Originally Posted by bonovox

I'm a doubter

https://www.cnbc.com/2021/10/13/luxu...nd-market.html

I agree
ADs are selling to their flipper cronies at a very large premium
The cronies sell to their friends and Greys for another smaller premium
and the well funded Grey sells to everyone else
How else
the price for a new steel white dial ceramic Daytona is $40,000 ?

[garyk]

Originally Posted by bonovox

I'm a doubter

https://www.cnbc.com/2021/10/13/luxu...nd-market.html

My former AD (Rolex canceled their franchise), sent me this very article last Wednesday. Seems like some very big people smell money and are jumping in. Like an incandescent lightbulb, they burn brightest just before they go out altogether

[samuel019]

Well I don’t want the Grey market to disappear but I would like to have it circa 2014 and before.

Anything you wanted at MSRP with no sales tax or decent discounts. I joined here in 2012 as you can see and times were muuuuuuuuuuch different. Greys haven’t always been the so called big bad evil.

[RJRJRJ]

Sounds like pretty much any other business.

[Kevin of Larchmont]

Originally Posted by RJRJRJ

Sounds like pretty much any other business.

This was my first thought exactly.

My second thought is it sounds like this guy is in over his head an should maybe look for another line of work.

[teck21]

Originally Posted by Kevin of Larchmont

This was my first thought exactly.

My second thought is it sounds like this guy is in over his head an should maybe look for another line of work.

Yes, quite possibly. Not everyone has the necessary skill set to make it in that business that has almost zero barriers to entry.

Naturally it attracts many who think it’s easy money.


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[BroncoOne]

Originally Posted by Kevin of Larchmont

This was my first thought exactly.

My second thought is it sounds like this guy is in over his head an should maybe look for another line of work.

Agreed. Every market has weak players and they generally get washed out.

[Explorer2polar]

Originally Posted by RJRJRJ

Sounds like pretty much any other business.

I cannot think of another business that overpays 2 or 3 times retail price for stock to then resell and make £ 50 profit ???????

Can you ?

[joli160]

Originally Posted by Explorer2polar

I cannot think of another business that overpays 2 or 3 times retail price for stock to then resell and make £ 50 profit

You really believe this ? Come on, nobody would accept such a small margin. Just enough for a lunch

[Number3]

Originally Posted by Explorer2polar

I cannot think of another business that overpays 2 or 3 times retail price for stock to then resell and make £ 50 profit ???????

Can you ?

I find this hard to believe. Just ask Watchfinder what they’ll give you for a new Sub and then look at what they’re selling them for - the difference is thousands. Sounds like this grey is late to the game and doesn’t have a network of contacts.

Also don’t understand the comment about the tax man wanting his share - if this guy runs his operation as a legit business he’s already paying tax...?

[VogelPhoenix]

Originally Posted by Explorer2polar

Who knows maybe the Grey market will eventually weaken and disappear?

I don't know about the Grey market as a whole disappearing. A small business that operates on 0.5% margin however... One can only assume that is not a typical deal.

[RollieNZ]

Originally Posted by VogelPhoenix

I don't know about the Grey market as a whole disappearing. A small business that operates on 0.5% margin however... One can only assume that is not a typical deal.

Federico has said his mark up is between 20 - 30%.

I think this would be more the norm and what is required to stay in business.

[ugoblue]

Originally Posted by RollieNZ

Federico has said his mark up is between 20 - 30%.

I think this would be more the norm and what is required to stay in business.

Federico sells lots of other brands and doesn't appear to rely just on Rolex.

Competition from pre-owned watch dealers for inventory will drive up prices. If there are too many people trying to get into the business of being a pre-owned dealer, then there is going to be an artificially high demand until as the OP indicates, all the johnny come-latelys can't afford to buy inventory.

The "organized nature" of flipper intermediaries between the pre-owned dealers is worrisome, as they could easily become gangs of organized crime pressuring ADs to sell only to the gang.

[Fleetlord]

Originally Posted by ugoblue

Federico sells lots of other brands and doesn't appear to rely just on Rolex.

Competition from pre-owned watch dealers for inventory will drive up prices. If there are too many people trying to get into the business of being a pre-owned dealer, then there is going to be an artificially high demand until as the OP indicates, all the johnny come-latelys can't afford to buy inventory.

The "organized nature" of flipper intermediaries between the pre-owned dealers is worrisome, as they could easily become gangs of organized crime pressuring ADs to sell only to the gang.

He is definitely a contrarian in terms of his inventory and message.

He stocks a bunch of low demand, but high margin watches because he can acquire them for peanuts.

Then he produces YouTube content to attempt to dissuade Rolex buyers….

It’s funny, but he seems to have found a niche and his blended margins are pretty good.

[Explorer2polar]

Originally Posted by VogelPhoenix

I don't know about the Grey market as a whole disappearing. A small business that operates on 0.5% margin however... One can only assume that is not a typical deal.

It was just one example to illustrate the high prices Greys are paying to stock shelves.

An interesting variable which we have not yet seen is what happens when the market dips and Greys which have a large amount of cash tied up in stock??

[16610Swiss]

I love turtles...

[Explorer2polar]

Originally Posted by 16610Swiss

I love turtles...

https://www.youtube.com/watch?v=tb2Ct3yyB4g

[Goochy]

Originally Posted by Explorer2polar

https://www.youtube.com/watch?v=tb2Ct3yyB4g

Brilliant.

[daveswordfish]

Originally Posted by Explorer2polar

It was just one example to illustrate the high prices Greys are paying to stock shelves.

An interesting variable which we have not yet seen is what happens when the market dips and Greys which have a large amount of cash tied up in stock??

It’ll be a race to the bottom, the bottom being a 10-15% discount off retail prices. Just a matter of time.


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[RJM25R]

Originally Posted by daveswordfish

It’ll be a race to the bottom, the bottom being a 10-15% discount off retail prices. Just a matter of time.


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Quoted for posterity.

Never gonna happen

[daveswordfish]

Originally Posted by RJM25R

Quoted for posterity.

Never gonna happen

That’s the way it always was until around 6-7 years ago. Gray dealers were where you went for discounts….that’s the model. To think that that’s not going to be where this ultimately ends is incredibly naive. It’s just a matter of when.


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[RollieNZ]

Interesting video on YouTube today from CRM Jewellers where the owner says he has many people contacting them to sell their watches.

[MYBROTHERSKEEPER]

Originally Posted by RollieNZ

Interesting video on YouTube today from CRM Jewellers where the owner says he has many people contacting them to sell their watches.

Watched that episode too. A lot of people want to make a quick buck. Just like every other hard to get item. People are trying to hustle like there is no tomorrow.


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[McinRolex]

Eventually gray market will be overwhelmed by the flippers and inventories.
Price can't just go up without settling at some price equilibrium. It may continue 2-3 years max and it will eventually go drop. UNLESS ROLEX DROPS PRODUCTION SIGNIFICANTLY.

[RollieNZ]

https://www.youtube.com/watch?v=mGFHNkb6CPY

[alphadweller]

How can he make 0,5% net margin when his gross is 20 to 25% on a sports steel piece? He's either lying or has a serious cost control deficit. Typically, a grey dealers would make 5 to 10% net margin (after costs, expenses, interest and taxes).