A few candid home truths (or not) from some greys in Hong Kong and the market today

[InitialAndPitch]

After a day in Zurich and more time zone changes on the GMT-II, I had an afternoon free in Hong Kong to decompress before the next leg back to Australia.

I crossed the harbour and visited three grey dealers who proved that they were happy to talk slightly more openly if the mood was right and one more grey who gave me a more candid set of responses. A couple of interesting things came of the conversations. I’ve chosen this set of dealers to see what’s happening over time - albeit a short one.

Naturally, a thread like this one is the horological equivalent to saying “Smoking is fine, my grandfather was a pack a day smoker and lived til he was 95”. This is a very small sample with no statistical significance. They’re simply individual takes on bits of the Rolex puzzle at the bottom end of Nathan Rd.

All this took place in a 750 metre radius from the corner of Nathan road and Mody road in Tsim Sha Tsui today - Saturday 25th May.



(1) THE REACTION TO THE NEW BLNR ‘BATMAN’ ON JUBILEE HAS BEEN SURPRISINGLY NEGATIVE IN SOME QUARTERS.

Firstly, many of you have expressed the view that the BLNR ‘Batman’ on a Jubilee is just wrong. When I was here in HK just a few weeks ago, the guy who runs Jag watches in the arcade beside Chungking Mansion had placed an order for five of them. He said that he expected that pricing would be around $HK188,000 ($US23,900) and they’d race out the door. The staff member that I sat and chatted with today said that once his customers saw the Batman/Jubilee combination they were generally saying “No way, I’ve made a mistake”. I’m not sure that he had taken deposits and his customers were running for the exits after they tried one on. He ended up getting rid of all but one of them. I tried it and the ‘old’ model on an Oyster bracelet and the Oyster was stronger in my newbie opinion. He had a single Oyster version remaining. It was $HK124,000 ($US15,800) three weeks ago and $HK132,000 ($US16,800) today.



I was getting much the same feedback from all the greys I spoke to today. A bunch of people expressed early enthusiasm at the updated version but were not fans when they were trying them on. For all that though, all the dealers I spoke to said that those who crave being first were almost reluctantly in some cases picking up the new model but that the reaction had surprised the hell out of them. They also confessed that the price for the new model was well and truly absurd as it stands.

(2) FOR THE FIRST TIME (FOR ME), ONE OF THE GREYS DESCRIBED THE GAMES THEY HAVE TO PLAY WITH AD’s TO GET DESIRABLE STAINLESS MODELS.

As the prices keep sky-rocketing, one of the guys said that most AD’s were getting angrier that they were pushed and shoved to sell at MRSP when the grey across the road was cashing in. As a result, the moment new stainless models arrived, the phone calls offering new stock out the back door started but price negotiations between AD and greys were getting much tougher. AD’s were frustrated and wanted larger and larger percentages of the grey selling price. The AD’s felt “cheated” that they were forced to sell at MRSP but knew they needed to retain a portion of their SS allocation for VIP’s. These sales were described (according to one grey) as “charity sales” by one cranky AD who supplies them.

One grey, pointed out a Rolex AD across the road and down a bit and said they got about 10 to 15% of their SS stock from that store not 50 metres away.

(3) IT’S AN UNSPOKEN RULE THAT GREYS NEED TO KEEP SERIAL NUMBERS OFF RECEIPTS AS AN AD DEMAND.

The AD’s are terrified about being caught out by Rolex so any way of minimising the paper trail is used. When I ask about insurance companies wanting a serial number on the receipt, two of the greys said that if they are called by an insurance company they’ll confirm the sale and serial number. If they were to print serial numbers on receipts, supply would go elsewhere, fast.

(4) THE GREYS CONFIRM THAT THE LIKES OF CHRONO24 IS A TESTING GROUND FOR HIGHER PRICES. AND THEY COINCIDENTALLY SELL A FEW THAT WAY TOO.

The greys say that their businesses were bound to fall in line with global non AD pricing. While stock levels were generally pretty good at greys in HK, there are some pretty good value sellers in the US. Prices change daily and there have been a couple of brief ‘dips’ on the BLRO for example but they tend to recover quickly.

(5) PICKING THE TOP OF THE MARKET IS A FUTILE GAME TO PLAY

I ask about whether any of the greys are prepared to take a stab at picking where the top of the market will be. A bit over 12 months ago, one of the bigger grey players in HK had a staff informal betting pool. Using the SS Daytona with white face and black ceramic bezel as a yardstick - the 116500LN that has a MRSP of $HK96,700 ($US12,320) - in January 2018 the staff were convinced that $HK180,000 ($US22,900) would be the ceiling over the next year. Of course, they were all wrong and it’s selling now for between $HK205,000 and $HK228,000 ($US30,000+) most frequently.

I had a pretty neutral view of this model but tried it on today and on the wrist, it is a stunner. That’s the bit that has always fascinated me, buyers desperate to buy a piece they’ve never tried on.



The consensus today was that the GMT-II SS BLRO and BLNR would never sustainably be $HK200,000 ($US25,500) in grey prices. I don’t know whether to take that with a grain of salt.

(6) MUCH OF THE HEAT IN THE MARKET WAS COMING FROM MAINLAND CHINESE WHO STILL HAD TO PAY 13% TO TAKE THEIR PURCHASES BACK ACROSS THE BORDER

Plenty of mainland Chinese customers are cashed up and prepared to ignore the absurdity of the market to satisfy their desire immediately.

(7) HERE’S A SNAPSHOT OF SOME GREY PRICES TODAY IN KOWLOON ON A FEW HOT MODELS

Blue dial Sky Dweller $HK173,000 to $HK179,000 ($US22,800)



BLRO Pepsi GMT-II $HK153,000 to $HK160,000 ($US20,380)

BLNR 116710 on Oyster $HK132,000 to $HK140,000 ($US17,800). That’s up $US1000 in 3 weeks on average (when I was here last). With a few 2016 ‘new old stock’ pieces at $HK118,800

BLNR 126710 on Jubilee $HK182,000 to $HK202,000 (US$25,600). Whether they’re selling at this price I can’t gain any admissions or find any reliable evidence.

And just for fun, the Platinum Daytona 116506 was available for $HK562,000 ($US71,600). That’s over a hundred grand in Australian pesos.

Even though it was probably (almost certainly) a bit of salesman talk, the greys still managed to express that Rolex had become a ‘stick it in the safe’ commodity for many, a product that was now sparking fears in their owners minds about wearing them and god forbid, bumping into something. And purely as an exercise in market cultivation, they all see continued growth even though they personally get their price predications wrong.

Several said that the Paul Newman Daytona sale was a huge catalyst in Rolex market making and that self interest driven profiteering and a healthy dose of social media was keeping all this on the boil. But these market drivers were nothing in comparison to the more energetic back door participation of AD’s seeking a bigger share of the treasure. So you’re going to see a lot more XXXX notations on the name field of the warranty cards you take home.

In Hong Kong, the way to access public transport and pay for day to day purchases like a Coke at 7-11 is via the terrific Octopus card. Bit like a New York Metro card but with many more uses. Good news is that if thirty thousand bucks for a Rolex gives you chills, you can now buy an Octopus watch... top up the cash amount available, spend as you like with a swipe of the watch and it tells the time very nicely! Only $HK458 ($US58.30) - even less if Hello Kitty is your thing.



It’s a bloody funny world.

[faimag]

Thanks for this interesting write up! safe travels :)

[teck21]

Fantastic and revealing anecdote on many related issues. Many thanks.


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[pepsiretail]

Excellent synopsis of the market, thanks for taking the time.

On the term “charity sales” in a way this is true. The customer gives them 10k for a BLRO who then walks out the door with a 20k watch. All those who decry not getting a watch from an AD in the current climate should ask themselves, when was the last time I gave 10k to a stranger? Even to a friend or family member?

[Carry The Interest]

Great, thorough write-up. Thanks for taking the time to share this with us. Hope your travels were enjoyable!

[cdmorenot]

Very good read ! Thank you.


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[TswaneNguni]

Excellent in depth investigation and reportage .
One of the very best write ups on TRF .
Thanks

[zetaplus93]

Funny and insightful, thanks for sharing!

[fjack88]

Thanks for the market update, very informative, especially in HK side of the Rolex World!


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[georgekart]

The way I see it, while people are paying those prices, they are here to stay. So IMO that's nothing new. One thing I am surprised by is the fact that people don't like the new BLNR but still get it at those prices. Does having the newest SS sports Rolex really matter that much to them that they'd get it for those crazy prices even when they like older version that's cheaper that also costs less?

[watchmework]

Thanks for taking the time to write this up, it’s an interesting perspective to hear.

[TswaneNguni]

Originally Posted by georgekart

Does having the newest SS sports Rolex really matter that much to them that they'd get it for those crazy prices even when they like older version that's cheaper that also costs less?

Yes.
3.4 million dollar millionaires in China .(2nd in the world) USA 17.3 million (Rich country hey !!! )

I really never see much Chinese/Asian tourists in my country.Guess where I saw last ? Rolex AD/ PP boutique/Panerai boutique/Cartier boutique .. They shop all over the world.Here is a happy hunting ground because they claim 15% back at the airport.All tourists do .ADs here do not sell sports models to tourists anymore,at all.

Prices coming down ? Any economic down turn will have very little effect on pricing.There are MANY buyers out there keeping demand sky high,under any circumstances.

Those with collections,be happy .It's value keeps on rising !...and sometimes you are lucky and get a nice one at the AD.

Like I have said before,ss sporties are commodities.

[Fleetlord]

To go along with point number 2, another reason most AD immediately shed themselves of most SS Rolex is they hate hassle...and SS Sports to the general public are HASSLE.

Lists that would need to be managed, filled with either neurotic WIS types or gentleman flippers antsy to get their piece and cash in. That is not what AD's want to do when they have VIP's to cater to that are worth the customer service effort...so let the greys deal with the plebeians playing pretend with their SS silliness.

[SeaDweller50]

Very interesting, thanks.

[101031-28]

Very interesting and insightful read, thank you OP

[101031-28]

Originally Posted by Fleetlord

To go along with point number 2, another reason most AD immediately shed themselves of most SS Rolex is they hate hassle...and SS Sports to the general public are HASSLE.

Lists that would need to be managed, filled with either neurotic WIS types or gentleman flippers antsy to get their piece and cash in. That is not what AD's want to do when they have VIP's to cater to that are worth the customer service effort...so let the greys deal with the plebeians playing pretend with their SS silliness.

Always on point. Makes perfect sense

[SoCal_Batman]

Insightful read, thanks for sharing with us.

[TswaneNguni]

Originally Posted by Fleetlord

...so let the greys deal with the plebeians playing pretend with their SS silliness.

[Swaye]

Informative post. Thanks.

[CarrJ]

Thanks for sharing

[KBM]

Interesting, thanks for the story.

[desmomini]

Very insightful, much appreciated!

[Eatapp]

Great write-up, I enjoyed reading it! They may be your musings and observations, but I believe them to be true based on my own observations.

[NineToes]

Good read. Thanks

[MercedesHand]

Well written & interesting read as always IAP.

Three things:

1)The market is juiced precisely because of the AD's wanting their (bigger and bigger)cut. Thats where the supply comes from. Whoever feels sorry for those guys is not comprehending their complicity. They have to sell MSRP to their whales, but do so reluctantly. It's good business.

2)While I would never pay 30k for the White Daytona, I thought about it at 20, and should have done it. The white dial in person is striking. The closest Ive seen to 6263 non deco dial. And possibly the 4130. Very similar but no black bezel.

3)China, China, China. The Chinese have been historically savers. Now, they're transitioning to consumers. I miss Hong Kong, but not the humidity.


Only new Rolex models will blunt the supply/price spiral and that will take time.

[Seibei]

Thanks, cashed up Chinese have been snapping up real estate around the world. Sure they would want a nice watch or two too.

I totally see where they are coming from regarding the jubilee bracelet. It just does not work on some watches.

[SlideRacker]

Great write up. In fact, the best ever on TRF IMO. Looking forward to many more IAP as you seem to be in the thick of it.

[AK797]

I didn't think profit sharing happened any more as that is a straight termination event, ADs here tried that post Brexit but Rolex UK clamped down hard on this and so bundling became the preferred option, with HK greys so nearby ADs Rolex could easily see which ADs have been supplying them, and they don't need evidence just suspicion is enough when you are the King, so Rolex are turning a blind eye in HK, def not so here.

[TswaneNguni]

Originally Posted by AK797

I didn't think profit sharing happened any more as that is a straight termination event, ADs here tried that post Brexit but Rolex UK clamped down hard on this and so bundling became the preferred option, with HK greys so nearby ADs Rolex could easily see which ADs have been supplying them, and they don't need evidence just suspicion is enough when you are the King, so Rolex are turning a blind eye in HK, def not so here.

Numerous posts has pointed out that in the UK,Grey's are more flipper supplied.
Good on Rolex UK for clamping down

I would like to see a starry eyed first time buyer get his SubC at MRSP from an AD.Even a 3 month to year waiting time is ok

[Oldfellow]

Great article, thanks for an interesting insight.
Please keep your stories coming.