Grey Dealers beginning to break?

[Fleetlord]

This is been going on for quite some time now.

Margins on Rolex stink because it is difficult for the dealer to pull a strong rip(off) on the buy as EVERYONE knows how much these watches are "worth".

So in order to get inventory, they have to pay more to get them. They HAVE to get them because that's what the market desperately craves.

The issue this creates is that the dealers whole business centers around low margin, high turn references from select brands. Since the margins are so low, they can't afford to RIPOFF buy softer brands and stock them so that they can make more margin and "blend" it into an overall more profitable mix.

They essentially don't have enough money, to make money, because they have to focus only on super liquid, high turn brands because they can't afford to sit on them.

The more stable and successful grey market dealers have a diverse blend of brand offerings that they can make money off of. 35% margin or higher on soft brands like Breitling, IWC, Panerai...etc. 10%to 20% on super hawt references because they have to pay more to get them....but at the end of the day, their overall margins are bolstered by their soft brands.

There is one dealer and YouTuber who does this a lot. He downplays Rolex and promotes weaker brands as alternatives because he makes way more margin off them. Buy LOW and sell high as possible with a little nudge to try to get buyers away from those bleeping Rolexes and into this junk that more money can be made off of.

[RJM25R]

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?

1. He’s doing it wrong

2. That’s what happens in a competitive market

3. He’s DEFINITELY doing it wrong. I could flip 2nd hand Tag Heuer on EBay for more than £50 a unit profit.

4. That’s what happens in a competitive market

5. Capital Gains tax exists and always has in the UK. If you buy and sell over a certain threshold you should be paying tax but if you don’t advertise yourself as a flipper you won’t likely be caught.

Grey (like any other business model) will only break or disappear if there’s no profit to be had.

[Frits1980]

£50 sounds difficult to believe. Maybe on a Breitling thats been sitting there for ages.

But isnt the current profit margin for a hot ss Rolex/AP/Patek for Greys pretty low like 5 to 10% max do? I wonder if people realy are getting those prices? Selling your Panda with a market value of 35K for 31.5K (10%) directly to a Grey sounds a bit to easy and high to me.

[Sprezzatura!,]

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?

Sounds like he just has his violin out.

[Sandpit]

£50 does sound a bit far fetched, however I recall one video from a certain US based grey dealer / youtuber / banned TRFer attending a buying market and talking about selling on for between $250-500 margin.

Tbh, I really don’t see the point at those margins unless there is significant volume.

[htc8p]

i hk grey dealers are the life blood of watches.

whether market prices are high or not. whether rolex or not.

before rolex blew up. they just buy up the preowned watches from people who need money then sell high.

some times it takes years some times days to turn over stock.

if people stop looking for rolex globally then they would just follow the market price.

[Rafabond]

The big problem that UK individuals have to be able to resell their Rolexes is that they can practically only sell it to grays in their country, since Brexit it is difficult to put a watch on Chrono24 and for a member of the European Union to buy it , there are duties and taxes involved. UK with Brexit is going to have a very big economic problem.

[Roddypeepa]

I can believe £750- 1000 profit minimum but £50 I just cannot believe.


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[Moondoggy]

When you are hot your hot, when you are shot your not, these people are the new breed.

[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...?

[OrangeSport]

Originally Posted by Roddypeepa

I can believe £750- 1000 profit minimum but £50 I just cannot believe.


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Grey I spoke to was making £10k on SS Faytonas recently and about £7k on PM versions.

[jaySL350]

Big grey in Hatton Garden refusing to buy anymore OPs,,,
Sitting on lots and don’t know which way the wind is gonna blow,,,
Not aware if the Turquoise dial is included but I assume so,

[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

[dannyp]

Sounds like he may be facing two problems:

1. Competing with those not in possession of the watch. Seems like there are many online dealers (and some B&M; see the thread about 47th St.) that sell watches they aren't actually in possession of. Much, much less risk there, and easier to take only a small profit when there was no need to pay cash upfront for inventory.

2. Double taxation. Flippers are paying VAT, and he's forced to charge VAT as well. Flippers purchasing from the EU, who may have gotten a VAT refund, are still able to resell at market, and therefore are capturing a greater spread, too. Either way, taxes being collected twice, if I'm reading the "UK Tax Man" comment correctly.

[DoctorA]

How does that break grey dealers??? If anything it fuels it more……here’s why:

If flippers are asking for more, it’s a sign that supply/demand is getting worse, which is to grey market favor

If grey dealers are paying higher premiums, it will get reflected on their grey prices (hence daytona white dial reaching $40k)

If grey dealers are struggling to keep their cases full, it’s a sign of further supply demand problem, which is exactly what grey wants to see happen

Finally, this whole story is probably because that grey dealer is trying to convince you/justify why his asking prices keep creeping up!!

[rambo99]

they are immortal!

[dannyp]

Originally Posted by DoctorA

How does that break grey dealers??? If anything it fuels it more……here’s why:

If flippers are asking for more, it’s a sign that supply/demand is getting worse, which is to grey market favor

If grey dealers are paying higher premiums, it will get reflected on their grey prices (hence daytona white dial reaching $40k)

If grey dealers are struggling to keep their cases full, it’s a sign of further supply demand problem, which is exactly what grey wants to see happen

Finally, this whole story is probably because that grey dealer is trying to convince you/justify why his asking prices keep creeping up!!

But it doesn't seem that market prices are climbing all that significantly. More that the long-time secondary market sellers are paying a premium to stay relevant, likely for the sake of getting people into the stores by showing full Rolex cases.

It's not the secondary market that's "cracking" but the a very specific type of secondary market seller fighting to remain relevant.

Perhaps more of them will shift to a consignment model, where flippers can put watches in the cases of established secondary market shops in exchange for a percentage of the sale (rather than doing same on C24).

[Calatrava r]

Your talking about the used watch market. As long as people tire of things or need money and want to sell stuff there will always be used vendors of whatever. Your point is well taken that the ever rising prices on used Rolex watches is simply not sustainable where the sellers can dictate the prices to the used watch dealers causing thinner and thinner margins.

[Calatrava r]

Originally Posted by Rafabond

The big problem that UK individuals have to be able to resell their Rolexes is that they can practically only sell it to grays in their country, since Brexit it is difficult to put a watch on Chrono24 and for a member of the European Union to buy it , there are duties and taxes involved. UK with Brexit is going to have a very big economic problem.

And the ease and safety of selling to used watch dealers is a big plus. Too easy to get ripped off selling watches to end users these days.

[Calatrava r]

Originally Posted by Fleetlord

This is been going on for quite some time now.

Margins on Rolex stink because it is difficult for the dealer to pull a strong rip(off) on the buy as EVERYONE knows how much these watches are "worth".

So in order to get inventory, they have to pay more to get them. They HAVE to get them because that's what the market desperately craves.

The issue this creates is that the dealers whole business centers around low margin, high turn references from select brands. Since the margins are so low, they can't afford to RIPOFF buy softer brands and stock them so that they can make more margin and "blend" it into an overall more profitable mix.

They essentially don't have enough money, to make money, because they have to focus only on super liquid, high turn brands because they can't afford to sit on them.

The more stable and successful grey market dealers have a diverse blend of brand offerings that they can make money off of. 35% margin or higher on soft brands like Breitling, IWC, Panerai...etc. 10%to 20% on super hawt references because they have to pay more to get them....but at the end of the day, their overall margins are bolstered by their soft brands.

There is one dealer and YouTuber who does this a lot. He downplays Rolex and promotes weaker brands as alternatives because he makes way more margin off them. Buy LOW and sell high as possible with a little nudge to try to get buyers away from those bleeping Rolexes and into this junk that more money can be made off of.

I think I know the person you are referring to. To be fair to him, his point is that there is a lot of bang for the buck in brands other than Rolex at the moment. He also feels Rolex at MSRP is overpriced viewing the watch apart from resale value. The Breitling in house Chrono, BO1, Zenith El Primeo and Omega co axial chronos are outstanding values and every bit the same quality as the Daytona at a lesser price point.

[Frits1980]

Everyone is throwing numbers. No flippers here? What do you actualy get for a 35k market value daytona or a 100k market value 5711 if you sell it to the average grey? I guess the average grey takes at least 15 or 20% even on those kind of models.

[dannyp]

Originally Posted by Calatrava r

And the ease and safety of selling to used watch dealers is a big plus. Too easy to get ripped off selling watches to end users these days.

And that's the part that seems to be valued less and less these days, for one reason or another. Secondary market dealers are no longer about getting watches out there, the way they once were, they're more of a pseudo insurance policy.

[Calatrava r]

Originally Posted by Frits1980

Everyone is throwing numbers. No flippers here? What do you actualy get for a 35k market value daytona or a 100k market value 5711 if you sell it to the average grey? I guess its a lot lower then most i (we) think...

On the hot models the margin is crazy thin. If you own one of these watches you actually can set the price to the used dealers. If the market skyrockets the dealers do great. If it levels out they do not. As said, used watch dealers make their money on the soft pieces where they can set ridiculously low buy prices and sellers are stuck with the offers if they want to sell.

[Divingdeep87]

All the grey dealers in my country drives a Porsche 911 and we have 180% in car taxes. I think they are doing just fiiiiiine. But there are more and more of them and a lot of private sellers too.

[whited3]

Your dealer is simply on the wrong side of those huge margins...

[Frits1980]

Originally Posted by Calatrava r

On the hot models the margin is crazy thin. If you own one of these watches you actually can set the price to the used dealers. If the market skyrockets the dealers do great. If it levels out they do not. As said, used watch dealers make their money on the soft pieces where they can set ridiculously low buy prices and sellers are stuck with the offers if they want to sell.

Yes I heard numbers like 5% before on the hot models but also stories about clubs like watchfinder that offer 20/30% below market value for blros, subs, daytonas etc. Maybe the bigger ones have direct AD connections

[gerry100]

markets fluctuate

[OrangeSport]

Originally Posted by Frits1980

Everyone is throwing numbers. No flippers here? What do you actualy get for a 35k market value daytona or a 100k market value 5711 if you sell it to the average grey? I guess the average grey takes at least 15 or 20% even on those kind of models.

Posted it before here, but as an example a bricks and mortar grey I spent a while talking to gave me a couple of examples. One was a brand new (as in 10 minutes out of the AD) SS Daytona.

Original buyer paid £11k, 10 minutes later sold it for £20k and
grey sells them (quickly) for £30k.

[superpop]

We are seeing the same behaviors in the US on used cars. People are paying stupid prices for used cars and the dealers are offering new MSRP for 2 year old cars. Profits on these cars are super thin and now we are headed for a very bad sales year for the car manufacturers. This is not sustainable and neither is the Rolex scenario we are in now.

[OrangeSport]

Originally Posted by superpop

We are seeing the same behaviors in the US on used cars. People are paying stupid prices for used cars and the dealers are offering new MSRP for 2 year old cars. Profits on these cars are super thin and now we are headed for a very bad sales year for the car manufacturers. This is not sustainable and neither is the Rolex scenario we are in now.

Why? Are new cars not easily available?