Rolex & The Grey Market
Anybody who is familiar with Rolex is most likely familiar with the grey market. The grey market is undoubtably the biggest obstacle standing between you and your Rolex stainless steel sports model or even other hot models within the Datejust collection.
Recently I met with my local Rolex authorized dealer to discuss getting the Rolex GMT Master II Pepsi. During our conversation I learned something new that I think everyone should know about Rolex and the grey market.
We’ll get into what I learned about Rolex and the grey market further in our article but first I think it’s important to understand what the grey market is, the challenges it creates, and how the grey market effects Rolex buyers.
If you choose to buy Rolex new, check out our Guide To The Rolex Waitlist.
What Is The Grey Market
The grey market is made up of dealers outside of the Rolex authorized dealer network. These grey market Rolex dealers by definition can only sell pre-owned Rolex watches because they are technically an owner themselves. In most cases they aren’t the first owner of the Rolexes they sell but in some situations they are.
Grey market Rolex dealers receiver their inventory primarily in two different ways. The most common is when an individual buyer sells his/her watch directly to the dealer. The second way is when an authorized dealer will sell inventory in bulk. Now the second way they receive inventory is of course pure speculation because no authorized Rolex dealer will ever admit to it but the possibility of this being true is almost certainly a reality. Rumored scenarios of this happening is a Rolex AD packaging a popular stainless steel model with a couple of watches that have been in their inventory for a while. Makes sense right?
Issues With The Grey Market
On the surface one would think the grey market might play to the buyers advantage because they have access to purchase models they can’t find in Rolex stores. Once you dig deeper though you find that you’re almost as helpless as walking into an authorized dealer. We’ll cover some of the main issues regarding the Rolex grey market.
- Pricing is 20% – 100+% above retail MSRP: The knowledge of supply and demand is well known to the Rolex grey market. These unauthorized dealers know what they have and that most buyers can’t get these models from authorized sellers. Therefore what we’ve seen in the last 5-6 years is a considerable increase in the pricing of used Rolex and more specifically stainless steel sports models.
- The Rolex counterfeit market is sophisticated: Anytime you are buying a product that is as expensive as Rolex when the fakes look almost as authentic as the real ones, you need to be cautious. Buyers being scammed through the grey market is prevalent especially on the rare or hot Rolex models.
- Rolex manufacture warranties are void: If you’re buying a 20 year old Submariner on the used market a warranty isn’t expected. If you’re buying a new 2020 Submariner 41mm or Rolex Explorer II that someone quickly flipped from their AD, you’ll not only paying over retail, you’re also foregoing the warranty that Rolex had on that watch. I understand that most of us want that new Rolex stainless steel sports model unworn but are the costs seen and unforeseen of buying on the grey market worth it?
- You’re not maximizing value: Rolex watches are well known to increase in value because production is low and demand is high. Rolex also does an excellent job at strategic price increases over time to ensure owners retain value. With that being said if you purchase a Rolex on the grey market, most often the super hot models, you’re paying top dollar. This means that you’re most likely buying at its short term ceiling and will not realize monetary gains in your investment.
- You may not like the watch: The reason why we list this is because it’s true. If the model isn’t available in the store and you can’t try it on, how do you know if it fits or if you like it. We’ve all had the experience of liking a watch online and once trying it on finding out it wasn’t for us. This happens everyday purchasing from the grey market.
How Does The Grey Market Effect Rolex Buyers
If you haven’t skipped to this section, by now you understand that the grey market has an effect on Rolex buyers. Outside of the obvious price increase we want to focus on the largest effect the grey market has on Rolex buyers.
The introduction of the grey market has made it increasingly difficult to buy new from an authorized Rolex dealer. Whether it be a Submariner, Explorer, GMT, or any other model, the grey market has made it more difficult to acquire the model you choose.
Profit is the main driving force behind the rise of the Rolex grey market. It’s easy for someone who is afforded the opportunity to buy a Hulk to turn around in a day and make $4k flipping to the grey market. What that means to a Rolex buyer, not he flipper, is that their opportunity to buy that watch at the AD has significantly decreased. The more flippers are purchasing these watches the more enthusiasts can’t purchase them and therefore the only other option is paying double retail on the grey market.
How do we know this is happening at an alarming rate? The most popular Rolex model, the Submariner, released a new version in 2020. As soon as supply hit the authorized Rolex dealers, inventory hit the grey market. That means that many buyers who had first rights to buy the new Subs flipped. This not only effects the local markets but the perception of the brand as a whole.
Many buyers and potential Rolex buyers are starting to get fed up with not being able to purchase what they want. Many blame Rolex and many blame the ADs. In my opinion both share part of the blame. This brings us to what I learned from my local AD on my visit to receive the Rolex GMT Master II Pepsi.
Does Rolex Care About The Grey Market
Yes it’s true. Rolex does care about the grey market and here is how I know. When asked what I would do with my current Datejust if I were to purchase the new Pepsi on the jubilee I responded with, “I would probably move off of it because I don’t want two watches with jubilee bracelets”. What my rep said next shocked me.
After I told him of my intentions he relayed to me some interesting information. They wanted first rights to buy my current Rolex because of new actions Rolex was taking to control the grey market. He informed me that Rolex has been tracking down their watches on the grey market and doing a reverse history on them. What that means is they are tracking serial numbers back to the Rolex authorized dealer who sold them, finding out who the customer is, and then most ADs are asking how soon after did they sell the watch and to whom. That’s pretty amazing right??? I was told that Rolex has even gone as far as providing who to look out for when selling a watch.
This means that Rolex actually does care about the grey market and the buyers experience. This doesn’t mean that there isn’t more they can do and the answer to that is pretty obvious.
What Can Rolex Do To Combat The Grey Market
There are realistically two things Rolex can do to combat the grey market and they both involve production.
The first move Rolex can make is to increase overall production. We all know that they produce well under demand. Increasing production would be a welcomed signal to Rolex buyers. I think many would just appreciate a small bump which may not even lead to full demand but at least increasing more than the usual of the popular models.
The second move could be limiting the the number of skus / references in its overall lineup. If Rolex isn’t committed to investing in more manufacturing facilities then they can shift production to match demand. It’s not hard to tell what sells the best. Go into any Rolex authorized dealer and just look at the case.
Summary
Overall what I’ve learned is very encouraging and a step in the right direction for Rolex. What I think we would all like to see is improved production by Rolex and more accountability from the authorized dealer. Who knows what 2021 or 2022 will bring but let’s hope that more of us who want to buy and wear Rolex will get the opportunity to.
