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

[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.

[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.

[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.

[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 ?

[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]

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

[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

[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.

[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...

[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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[Explorer2polar]

Originally Posted by 16610Swiss

I love turtles...

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

[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).

[Tensai]

The number of dumbasses with designer backpacks calling themselves watch dealers is at new heights. Like the day traders and house flippers of past eras (and crypto fan boys of present day). In an up market everyone is a genius. In a down market (which always comes), bye bye…

[Tyler_Durden_8]

Few thoughts:

1) Couple of points that OP posted were told to me by couple of local grey market dealer as well.

2) Grey market will always be around. Even though now it is serving mainly as the channel for people like me who has no access to Rolex via AD for purchasing watches, but grey dealers more importantly, serve as a function of liquidity for pre-owned time piece. So I don't see the grey market dealers going away. Change of businss model for sure.

3) A corretion is coming. I am sure of it. But I don't know when. Not all Rolex are created equal. Some will hold values better than the others. Which ones? Well, that is an opinion that everyone differs. I think that any Rolex that is discontinued, has historical significance, small production run, and/or has strong following or cult status will still hold its value relative well.

[Gab27]

Rolex is nearly its own currency and I assume it likely allures many people into buying/selling them who may not necessarily have a comprehensive understanding of the the industry and/or running a business. That said, those who are on the ball are probably raking in more now than ever before. Those who are really on the ball probably have a much better idea of future pricing trends than we do.

[JC316]

Originally Posted by Tyler_Durden_8

Few thoughts:

1) Couple of points that OP posted were told to me by couple of local grey market dealer as well.

2) Grey market will always be around. Even though now it is serving mainly as the channel for people like me who has no access to Rolex via AD for purchasing watches, but grey dealers more importantly, serve as a function of liquidity for pre-owned time piece. So I don't see the grey market dealers going away. Change of businss model for sure.

3) A corretion is coming. I am sure of it. But I don't know when. Not all Rolex are created equal. Some will hold values better than the others. Which ones? Well, that is an opinion that everyone differs. I think that any Rolex that is discontinued, has historical significance, small production run, and/or has strong following or cult status will still hold its value relative well.

I agree. Grey will ALWAYS be around. The hype will subside.

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[7enderbender]

I have some tulip bulbs if anyone is interested. Only one million guilder.

[bswizzle2552]

I think when this eventually ends and the market corrects

A good amount of “grey dealers” are going to get smoked

[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

[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 ?

[JC316]

New and impatient money. The FOMO is real.

[waxy88]

Paul Thorpe recently posted a video on YouTube, where he talked about how Rolex was cutting supply to the UK, because it is fed up with the situation with watches being flipped to grey market dealers.

Apparently they view the UK as being one of the worst for this, so are diverting the watches elsewhere.

To back this up, when I popped into my local AD recently and was chatting with my SA he told me that they had been told by head office that consignments of Rolex watches was going to be much smaller in the future, kind of backing up what Paul Thorpe had said in his video….

[OrangeSport]

Assuming Greys are members some type of industry / trade group that situation could be easily sorted. Stop over-paying flippers by such a margin.
Have less capital in the watches. Sell for less, but perhaps with more profit and certainly more % profit. Everyone wins except the flippers..

Only trouble is, I think that might constitute a cartel and be illegal..

Oh well!

[shaunylw]

Their is no reason to make $50. The market changes way too rapidly to buy watches and make $50. You could get hammered for hundreds if not potentially a thousand. They should shut the doors when they need to make that little, their is no way they could sell enough volume to make it work.


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