Grey Dealers beginning to break?

[bob sims]

Originally Posted by macrowatch

I know plenty of dealers which proclaim publicly low margins, but know none that actually operate on such low margins.

[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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[RJM25R]

Originally Posted by grimps

Rolex have mad a similar amount of watches for many years , it's not entirely their fault that lots more people want them these days

Yes, I agree but my point was that they COULD make more but don’t want to.

The motor car industry can’t make enough cars at the moment but they WANT to!

Originally Posted by daveswordfish

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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You have your opinion and I have mine.

Rolex/grays selling Rolex will NEVER go back to discounting and you can quote me on that.

I’m not suggesting that watches may not drop in value, but Rolex demand is outstripping supply now for 10 years and as such there is no way they will fall below retail. The flipping/profit monster phenomenon has only existed for 3-4 years….

if a global disaster of Covid 19 hasn’t done it, what do we need for it to happen?

WW3?

[Mini2]

Originally Posted by 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?

No one would be investing 10/15k for 50£ profit
Take away 1/6 for vat margin scheme
20% for tax
over heads
He or she has probably made 25£

0.25% ROI
I don't personally think they would buy a watch with that return

[1665fan]

Originally Posted by Mini2

No one would be investing 10/15k for 50£ profit
Take away 1/6 for vat margin scheme
20% for tax
over heads
He or she has probably made 25£

0.25% ROI
I don't personally think they would buy a watch with that return

Yea that grey is pissing on your head and telling you it’s raining lol

[Mini2]

Originally Posted by 1665fan

Yea that grey is pissing on your head and telling you it’s raining lol

[Duckman25]

Originally Posted by 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?

Something sounds a little fishy about the whole story. Since when did jewelers not make massive profits on their inventory? I have never heard of a poor jeweler so if this guy can't make a profit on trade ins (let alone selling watches), it is his business practices that are causing it. More importantly, it is in every asset class that is over pumped with cheap credit from central banks that at some point will go bust. Waiting and being patient.

[absoluteczech]

I believe it. A lot of these stupid resellers are just selling between one another and hedging the prices keep going up. They buy at 16/17 and hope it goes for 18k. Then they all buy at 18/19 and hope it goes to 20 and start asking 20. It's an endless cycle

I had ask several greys and resellers about getting a BLNR for around 16,500-17k and all said "I have more invested in the watch" which goes to show how little profit margin they really are making on these watches.

[stockae92]

I still feels like this pricing hierarchy is like a house of cards, when it falls, many of the shop will close overnight and owner never seen again.

[johnwigan]

Originally Posted by RJM25R

Yes, I agree but my point was that they COULD make more but don’t want to.

The motor car industry can’t make enough cars at the moment but they WANT to!









You have your opinion and I have mine.

Rolex/grays selling Rolex will NEVER go back to discounting and you can quote me on that.

I’m not suggesting that watches may not drop in value, but Rolex demand is outstripping supply now for 10 years and as such there is no way they will fall below retail. The flipping/profit monster phenomenon has only existed for 3-4 years….

if a global disaster of Covid 19 hasn’t done it, what do we need for it to happen?

WW3?

COVID and massive fiscal stimulus have caused the problems. When COVID is over and we have to start paying off the bills, that's when the Rolex craziness will stop. Worldwide production and supply will return to normal. You'll be able to buy that new car, PS5, Rolex - if you can still afford it when austerity hits.

House prices are increasing everywhere in the UK. It makes no sense unless you factor in COVID and fiscal stimulus, There is going to be a terrible hangover after the government spending frenzy stops. It all has to be paid for.

[Mendota]

Originally Posted by absoluteczech

I believe it. A lot of these stupid resellers are just selling between one another and hedging the prices keep going up. They buy at 16/17 and hope it goes for 18k. Then they all buy at 18/19 and hope it goes to 20 and start asking 20. It's an endless cycle

I had ask several greys and resellers about getting a BLNR for around 16,500-17k and all said "I have more invested in the watch" which goes to show how little profit margin they really are making on these watches.

That is exactly what fueled the tulip mania. It was resellers buying tulip options, not even the actual bulbs because they hadn't even been grown yet. The banks were lending on the tulip options, so resellers would buy the tulip options and levered up 10:1. Then they would turn around and sell the option to another party. The original party then paid back their loan and kept the profit. The next party had often times already gone to the same bank and levered up 10:1 for that same option, so they had to find a 3rd party now to sell, repay the loan, and walk away with profit. Sometimes the same option traded hands 10 times in a single day, with all of the buyers using 10:1 leverage and scalping profits each time. It wasn't until the first bank saw this and said no, we are taking away the leverage, that the rest of the banks also took away the leverage and the music stopped playing.

On top of that everyone couldn't conduct their normal, routine businesses because the Black Plague was sweeping through Europe at the time and Holland was getting hit. The virus pandemic created a situation of easy money with the banks and bored/desperate merchants, all wanting to trade and make easy profits.

See any resemblance to today?

[worldofoyster]

they are doing just fine, they find way to transfer the cost to the end buyers

[RJM25R]

Originally Posted by johnwigan

COVID and massive fiscal stimulus have caused the problems. When COVID is over and we have to start paying off the bills, that's when the Rolex craziness will stop. Worldwide production and supply will return to normal. You'll be able to buy that new car, PS5, Rolex - if you can still afford it when austerity hits.

House prices are increasing everywhere in the UK. It makes no sense unless you factor in COVID and fiscal stimulus, There is going to be a terrible hangover after the government spending frenzy stops. It all has to be paid for.

Rolex envy and flipping frenzies (along with house prices and Porsche/Ferrari et al) existed before covid, they are not products of the pandemic……


There will be austerity but not at the levels being preached here. Rich will stay rich and keep buying, and people who couldn’t afford it and never could will be on their ar$es.

BTW, football or Rugby?

[Kevin of Larchmont]

Originally Posted by absoluteczech

I believe it. A lot of these stupid resellers are just selling between one another and hedging the prices keep going up. They buy at 16/17 and hope it goes for 18k. Then they all buy at 18/19 and hope it goes to 20 and start asking 20. It's an endless cycle

I had ask several greys and resellers about getting a BLNR for around 16,500-17k and all said "I have more invested in the watch" which goes to show how little profit margin they really are making on these watches.

That’s what I’d tell you too if I didn’t want to sell you the watch.

[Goochy]

Originally Posted by Explorer2polar

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

Brilliant.

[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.

[Yas.2k]

I’ve sold to pre owned here in UK before Covid and they were making about £1000/1500 on each watch. Well that’s what they were making if it sold at the listed price.

[Yas.2k]

Forgot to mention that was mainly not rolex

[daveswordfish]

Originally Posted by RJM25R

Rolex/grays selling Rolex will NEVER go back to discounting and you can quote me on that.

Quoted…


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[Jack T]

Originally Posted by macrowatch

I know plenty of dealers which proclaim publicly low margins, but know none that actually operate on such low margins.

Do you know the actual margins of any grey dealers?

[Aventura]

Originally Posted by 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?

I don't understand what the "flippers" are ... can someone help me?

[Dirt]

Originally Posted by Jack T

Do you know the actual margins of any grey dealers?

One can gauge their margins by asking them what deal they're prepared to do by comparing the difference between a consignment arrangement and selling the watch to them.
Of course we need to factor in how long a watch is likely to be sitting in their inventory if they buy it from you outright.

But a consignment arrangement will likely yield the biggest return to an owner depending on age, condition and service history. Taking this into consideration, a grey that has to potentially assume responsibility/costs for pre inspection and or servicing and cover a warranty will likely have their margins squeezed, especially if they have to pay someone else to do the work.

[teck21]

Originally Posted by Dirt

One can gauge their margins by asking them what deal they're prepared to do by comparing the difference between a consignment arrangement and selling the watch to them.
Of course we need to factor in how long a watch is likely to be sitting in their inventory if they buy it from you outright.

I have seen a dealer offer a price outright for a Pepsi that was awfully close to the prevailing asking prices quoted.

Asia is a low margins kind of place, but even I was surprised by how small the spread was.

They must have ready buyers, or confidence in being able to move it on at the asking prices.


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[Gary.]

A lot of the greys that can't be afford to be exposed to such a high degree for so little gain will go.

It's as simple as that.

Do we think that there aren't enough grey dealers?

Once they go, the remaining dealers will be in a better position to offer the greediest flippers less and things will be become more sensible.

The current madness is unsustainable.

[telesquire]

In a moment of boredom I screen shot a UK greys mighty list of Daytona. Twelve days later that list is exactly the same. That's not what I call 'in demand'

[brandrea]

I agree, this UK gray dealer won’t be in business long if what he says is true.

[Alvar*]

I guess the situation for greys can be hard in UK becaue Brexit has basicly pushed them out of the EU internal market?

[1665fan]

Some greys drive ferraris….sounds like 50$ a watch profit lol…

[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 Harry-57

He's running a business and he's just realised that he needs to make provision for tax? Impossible to take seriously.

No that is your misplaced assumption!

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

What my friend added but I summarised above was that HMRC are now scrutinising closely all financial activity with preowned watch purchases and sales through his business and others who he deals with. He speculated this was because some Grey dealers are operating two sets of accountancy books and because of potential money laundering within the high end watch market.