Strange happenings in Hong Kong - grey market dealers

[supernova]

Just like dollar cost averaging on a stock, you continue to buy as it drops but there comes to a point where you just run out of bullets.

Same with most greys (generally newer ones who think watch prices only go up), they have been constantly buying as market drops and most are over stretched now.


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[77T]

Interesting story. I realize this is the AP section so excuse me if my opinion sings a bit.

Oftentimes we have had convo’s about this brand vs that brand. Also, what’s the real value of Rolex. Well, for those few dealers, the AP wasn’t wanted in trade.

Would have been interesting to ask “how about my Pt. DD as a trade-in?”

That could’ve separated the twain twixt brand trade choice vs financial straights with those dealers…


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[conkers]

Originally Posted by Old Expat Beast

I remember back in the early 90s here in Hong Kong, one pound sterling got you very close to HK$16. Today it's almost down to HK$8 (US$ and HK$ are linked). Might be a good time to call it a day and move back home.

Hang on my friend. It gets much worse there before it gets better.

[aa909]

I've spoken with 2 greys in the past week regarding high demand Rolex pieces (GMTs, Green subs, etc) and they're barely willing to pay a premium on those watches. So I can only imagine this is going to reverberate across the market and hit more expensive pieces that are typically harder to move.

[AperolSpritz]

Not that I care but anything above $30k goes directly to consignment or is quoted at offensive prices, even vs. recently discounted C24 prices.

The grey market is broken as you can't sell anything really.

I personally think it's good news. But it might come to bite some of the brands eventually. As always there is a lag effect.

[GB-man]

There was a long stall for most of July/august into September but I believe prices have begun to continue their March lower and quite honestly there is no demand. We all know that speculators were buying at these levels not end users.

I suspect run of the mill royal oaks (153/4/500) will be in the 20s by new years.

There is no watch I want to own over msrp plus tax right now and I’m a deeply disturbed watch addict if that wasn’t already clear.

[Harry_S]

Originally Posted by dmash

It’s the market. Some greys are refusing Subs and GMTs even at retail, as they’re already so saturated. This isn’t an opinion, there’s dealers who have posted videos saying such and other firsthand experiences such as yourself.

A bit of ‘writing on the wall’ if you will……kind of hard to turn a blind eye at this point. But this shouldn’t even matter to anybody who was truly into horology from the get go. I simply track pricing as a means of seeing how much longer I might have to wait for my allocations.

I believe in the coming months we’ll see who *truly* liked these watches. I have a feeling a lot of these new guys who were quote on quote 'obesessed with watches and here for the long term', will have a sudden change of heart if their money spent turns negative. A lot of people were disillusioned into loving something simply because it was an immediate profit maker, not for what is actually was. Time will tell!

💯 agree with this sentiment.

[Old Expat Beast]

Originally Posted by conkers

Hang on my friend. It gets much worse there before it gets better.

At least it will get better, eventually

[moting]

The thing with AP is that unlike Rolex they have been agressively hiking prices twice a year since 2020 (Last increase in May) so with the MSRP going up quickly and now grey market price going down, the spread is getting lower and it's becoming less profitable for flippers (with the exception of some rare models) which is a good thing. In addition to the fact that dealers are flooded with sell requests so they will either pass or give a low ball offer.

[squall1]

Originally Posted by moting

(Last increase in May)

Actually just had another this month. The twice a year 5%ish hikes are getting irksome...though I agree it may help with the flipper issue, it can go too far.

[psm11]

Originally Posted by Old Expat Beast

At least it will get better, eventually

It is already getting better, no? At least if you are a collector who has been sidelined by all these so called investors and flippers. Prices continuing to fall is a good thing for collectors. I have not a single ounce of sympathy for flippers and investors who are losing their shirt on 15500s they purchased for $75k a few months ago. They have ruined the hobby the last couple of years. Good riddance.

[dmash]

Originally Posted by psm11

It is already getting better, no? At least if you are a collector who has been sidelined by all these so called investors and flippers. Prices continuing to fall is a good thing for collectors. I have not a single ounce of sympathy for flippers and investors who are losing their shirt on 15500s they purchased for $75k a few months ago. They have ruined the hobby the last couple of years. Good riddance.

BNIB 15510ST 41mm 50th RO, are now selling for $42.5k. BNIB 26240ST 41mm 50th ROC are going unsold for $50k. and it's going further down.

I agree about the hobby being a bit ruined. If it were just Rolex it would be one thing, but it really irks me that this happened to the haute horology brands. They're already so limited in production and have minimal physical stores to begin, makes it a seemingly impossible task to get certain allocations now.

[youthagainsttt]

Originally Posted by moting

The thing with AP is that unlike Rolex they have been agressively hiking prices twice a year since 2020 (Last increase in May) so with the MSRP going up quickly and now grey market price going down, the spread is getting lower and it's becoming less profitable for flippers (with the exception of some rare models) which is a good thing. In addition to the fact that dealers are flooded with sell requests so they will either pass or give a low ball offer.

I think this is exactly their plan. I believe there are many examples of AP pieces where the grey dealer makes more profit than AP does on a single watch if you take into account the overheads:

-R&D
-retail space
-marketing
-staff salaries
-sponsorships

[Old Expat Beast]

Originally Posted by psm11

It is already getting better, no? At least if you are a collector who has been sidelined by all these so called investors and flippers. Prices continuing to fall is a good thing for collectors. I have not a single ounce of sympathy for flippers and investors who are losing their shirt on 15500s they purchased for $75k a few months ago. They have ruined the hobby the last couple of years. Good riddance.

Was only referring to the sterling/dollar exchange rate.

[AperolSpritz]

Originally Posted by youthagainsttt

I think this is exactly their plan. I believe there are many examples of AP pieces where the grey dealer makes more profit than AP does on a single watch if you take into account the overheads:

-R&D
-retail space
-marketing
-staff salaries
-sponsorships

Agreed but if you push that too much, you'll enter again this world where greys sell at a discount to MSRP (apparently already happening on some ROOs and Codes). And that might alter the virtuous circle some brands have enjoyed since 2018.

[scottywein]

First time in a long time, an SA reached out to me about coming in and seeing some of their new collection pieces. Cautiously optimistic.

[zionongch@gmail.com]

I think it is because this particular model is too volatile. The drops on this model has been pretty dramatic. It used to be 130k usd and now it’s 85k usd 2022 brand new. The demand of this watch is just not there to support the premium. Personally, I predict them to trade around $70-$75k usd by the end of this year. 15510 rubber strap 50th anniversary trades around low 60s usd and it is a limited production.

[GW44]

Originally Posted by zionongch@gmail.com

I think it is because this particular model is too volatile. The drops on this model has been pretty dramatic. It used to be 130k usd and now it’s 85k usd 2022 brand new. The demand of this watch is just not there to support the premium. Personally, I predict them to trade around $70-$75k usd by the end of this year. 15510 rubber strap 50th anniversary trades around low 60s usd and it is a limited production.

Which reference is that please?

Not familiar with a new for 2022 RO 15510 on a Rubber strap that is a 50th Anniversary piece.

[psm11]

Originally Posted by zionongch@gmail.com

I think it is because this particular model is too volatile. The drops on this model has been pretty dramatic. It used to be 130k usd and now it’s 85k usd 2022 brand new. The demand of this watch is just not there to support the premium. Personally, I predict them to trade around $70-$75k usd by the end of this year. 15510 rubber strap 50th anniversary trades around low 60s usd and it is a limited production.

15510s (non blue) have been being sold on MODA the last couple of weeks for under $50k. Maybe blue ones are in the 60ks but the other colors are in the high to mid $40ks.

[dmash]

Originally Posted by psm11

15510s (non blue) have been being sold on MODA the last couple of weeks for under $50k. Maybe blue ones are in the 60ks but the other colors are in the high to mid $40ks.

42.5, I just mentioned this a few posts before you

[aa909]

Originally Posted by dmash

42.5, I just mentioned this a few posts before you

and will go even lower by new years...

IMO I think we eventually grind our way back to 2019-early 2020 market dynamics. non-blue 41mm ROs on the grey market did not command any premium, and regularly sold below retail. It's just gonna take time to wash out the existing inventory before we get there. and how long can greys who have revolving debt which has gone from 0% interest to now 5%, 6%, 7%+ really hang on to inventory that's not selling before they have to cut their losses and drop prices?

[dmash]

Originally Posted by aa909

and will go even lower by new years...

IMO I think we eventually grind our way back to 2019-early 2020 market dynamics. non-blue 41mm ROs on the grey market did not command any premium, and regularly sold below retail. It's just gonna take time to wash out the existing inventory before we get there. and how long can greys who have revolving debt which has gone from 0% interest to now 5%, 6%, 7%+ really hang on to inventory that's not selling before they have to cut their losses and drop prices?

I agree that pretty soon they have to start liquidated some inventory. Obviously not all, but at a certain point every smart business owner takes a loss and gets it over with than a constant leeching of money with the outlook progressively getting worse.

A luxury timepiece that *maintained* MSRP was historically a fantastic purchase (from a price perspective). Anybody who has actually been into watches for longer than 5 years knows this. I’d be absolutely thrilled if I pickup my ROC and it maintains its value long term. But again, to me, I honestly don’t even care. Anybody buying modern watches for a part of their ‘investment portfolio’ is incredibly ill informed and should speak to a financial advisor.

I believe the higher end brands have redeveloped their marketing/production strategy to where we never get back to 2016 discounts, I think everything shakes out around MSRP. But this is 100% the ideal situation every TRUE watch guy/gal should hope for. 1- your purchase doesn’t fall off a cliff (like Lange of old) and 2- there’s no grey market premium so every single flipper has zero incentive to ever be on a list.

[scottywein]

I personally believe that AP will start reaching out to new customers to build those relationships. Selling multiple watches to the same clients every year without many changes isn't a sustainable long term play. As the spread between retail and grey market closes it'll create more reassurance for the brand to allocate to new customers without the hesitation of flippers. FWIW, you're seeing a large uptick in 50th Anniversary watches on the secondary market so the initial allocation strategy hasn't paid off or they're producing a lot more than we all expected.

[Qngo516]

Originally Posted by scottywein

I personally believe that AP will start reaching out to new customers to build those relationships...

I’m not convinced that will ever happen. The illusion of ultra luxury, is exclusivity.

If everyone gets what they want, the magic disappears. At least half (to 75%) of new customers will wait for a long time for a call, even if AP can satisfy everyone in a recession.

40 grands will NOT get you an RO. 40 grand plus LUCK might. LUCK, is the magical ingredient for ultra lux brands.


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[psm11]

Originally Posted by dmash

I agree that pretty soon they have to start liquidated some inventory. Obviously not all, but at a certain point every smart business owner takes a loss and gets it over with than a constant leeching of money with the outlook progressively getting worse.

A luxury timepiece that *maintained* MSRP was historically a fantastic purchase (from a price perspective). Anybody who has actually been into watches for longer than 5 years knows this. I’d be absolutely thrilled if I pickup my ROC and it maintains its value long term. But again, to me, I honestly don’t even care. Anybody buying modern watches for a part of their ‘investment portfolio’ is incredibly ill informed and should speak to a financial advisor.

I believe the higher end brands have redeveloped their marketing/production strategy to where we never get back to 2016 discounts, I think everything shakes out around MSRP. But this is 100% the ideal situation every TRUE watch guy/gal should hope for. 1- your purchase doesn’t fall off a cliff (like Lange of old) and 2- there’s no grey market premium so every single flipper has zero incentive to ever be on a list.

This lines up with FHB said recently (that AP's goal is to make sure their pieces do not lose 50% of their value once you buy it). It didn't seem they were concerned about making sure their pieces exceed MSRP on the open market. This would also explain the aggressive price hikes.

[youthagainsttt]

Originally Posted by zionongch@gmail.com

I think it is because this particular model is too volatile. The drops on this model has been pretty dramatic. It used to be 130k usd and now it’s 85k usd 2022 brand new. The demand of this watch is just not there to support the premium. Personally, I predict them to trade around $70-$75k usd by the end of this year. 15510 rubber strap 50th anniversary trades around low 60s usd and it is a limited production.

Just as note of reference, the model in question that I mentioned in my original post is a gold 15500 on alligator strap, not full gold bracelet.

It’s totally expected with the price hikes, it doesn’t really make any difference if 15500 were going for double or triple their retail price, it only lines the pockets of the greys and flippers

[dmash]

Originally Posted by Qngo516

I’m not convinced that will ever happen. The illusion of ultra luxury, is exclusivity.

If everyone gets what they want, the magic disappears. At least half (to 75%) of new customers will wait for a long time for a call, even if AP can satisfy everyone in a recession.

40 grands will NOT get you an RO. 40 grand plus LUCK might. LUCK, is the magical ingredient for ultra lux brands.


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This is all being spoke of whilst watches have been trading above MSRP. This all goes out the window of grey settles to MSRP. What you speak of is only in a post COVID watch market, it wasn’t the case as recent as 4 years ago. AP/PP was still haute horology, produced in even lower numbers, and was seen as some of the most exclusive brands. Yet Joe Schmoe could walk in and grab a Nautilus or RO off the street, at discount (that was more 2015 but still). It was ultra luxury then, yet your point of exclusivity was non-existent.

People should be careful believing with *certainty* this a downturned watch market could never be the reality again. I like to buy watches assuming they’ll be worth half what I paid. I’m happier that way.

[Kittayos]

Originally Posted by youthagainsttt

Just as note of reference, the model in question that I mentioned in my original post is a gold 15500 on alligator strap, not full gold bracelet.

It’s totally expected with the price hikes, it doesn’t really make any difference if 15500 were going for double or triple their retail price, it only lines the pockets of the greys and flippers

Like new 2021 condition for 15500or leather strap is more or less $53,000 using today's exchange rate in Asian market.

A strong dollar is good for those who is looking to buy new watches now. Grey market dealers get the hardest hit given their past and large inventory especially in the US. Dollar surges almost 20% against most currencies and watch price has dropped like 40-50% since March meaning your selling price is in turn down more than half unavoidably. You are affected both directions.

[cascavel]

Every asset on Planet Earth is adjusting in value vs. the U.S. $ which, for some unknown reason, seems to be the only thing people are willing to hold on to. Not equities, debt, other currencies, precious metals, crypto, real estate. Less liquid things like art and luxury items will take time to mark-to-market. Watches are leveraged and illiquid but will, eventually, sell around retail unless they are out of production like the 15300, perhaps. The rest of this stuff?
Just look at some of the SOTC posts, particularly in the Rolex area. All new watches, looking pretty much the same, from a company that produces over one million per year. Once these begin to look like Not-so-Sure-Things, hard core collectors will begin to bail, taking advantage of the fact that the Swiss Franc is tied to the U.S. $. And then prices will break below retail reflecting the collapse in currencies like the Pound and Euro.

[Mini2]

Originally Posted by scottywein

First time in a long time, an SA reached out to me about coming in and seeing some of their new collection pieces. Cautiously optimistic.

No ones reaching out to me