Interesting thread on TRF - Rolex IS watching

Discussion of Rolex Watches.
DON
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Re: Interesting thread on TRF - Rolex IS watching

Post by DON » Thu Jun 30, 2022 8:06 pm

hoppyjr wrote:
Thu Feb 24, 2022 8:14 am
jimyritz wrote:Rolex created the problem- go look at the OP 41’s in orange, pink, Turqoise all retail for $6000 and selling for 3-5 times msrp… I wonder how these grey mkt dealers are getting brand new watches— my guess.. from the ADs… if Rolex increased production they would squash the grey mkt or at least reduce the crazy mark up. Again, Rolex created the problem..
Absolutely. I’m sure many AD’s are getting a kickback from grey dealers, so selling inventory to them. Rolex could absolutely end this with increased production.
Are they getting a kickback? If someone offered to take slow sellers or dead stock off my hands. Cost would suit me fine. I would think that gray market dealers are buying the better watches from customers. Can't see why AD's would be flipping them to GM sellers when they could sell them them selves all day long. You want the better sellers in stock to bring the buyers in

Increasing production wouldn't help. Just foist more the same dead stock on AD's except in higher quantities. Those watches have to go somewhere and if there's too many. Gray can't absorb, AD's can't sell and it hurts cash flow for other brands.

A lot of companies are going boutique anyways in order to maximize their profits and push the AD's off to the side

DON

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Ryeguy
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Re: Interesting thread on TRF - Rolex IS watching

Post by Ryeguy » Fri Jul 01, 2022 8:18 am

DON wrote:
Thu Jun 30, 2022 8:06 pm
hoppyjr wrote:
Thu Feb 24, 2022 8:14 am
jimyritz wrote:Rolex created the problem- go look at the OP 41’s in orange, pink, Turqoise all retail for $6000 and selling for 3-5 times msrp… I wonder how these grey mkt dealers are getting brand new watches— my guess.. from the ADs… if Rolex increased production they would squash the grey mkt or at least reduce the crazy mark up. Again, Rolex created the problem..
Absolutely. I’m sure many AD’s are getting a kickback from grey dealers, so selling inventory to them. Rolex could absolutely end this with increased production.
Are they getting a kickback? If someone offered to take slow sellers or dead stock off my hands. Cost would suit me fine. I would think that gray market dealers are buying the better watches from customers. Can't see why AD's would be flipping them to GM sellers when they could sell them them selves all day long. You want the better sellers in stock to bring the buyers in

Increasing production wouldn't help. Just foist more the same dead stock on AD's except in higher quantities. Those watches have to go somewhere and if there's too many. Gray can't absorb, AD's can't sell and it hurts cash flow for other brands.

A lot of companies are going boutique anyways in order to maximize their profits and push the AD's off to the side

DON
Hi Don -
I think your perspective makes sense if you perceive the Rolex stock to be "dead". I think the challenge is just the opposite. Market demand was so high, people were willing to pay well over MSRP for a Rolex.

My suspicion is that Rolex AD's know they can't sell watches over MSRP due to contractual agreements with the manufacturer. If a customer complained that AD "XYZ Jewelers" tried to sell a Sub for $20K, Rolex would probably come down on them pretty quickly. This is why we hear some stories about the only way to get a Rolex at a jeweler is if you also bought a bunch of other jewelry at inflated prices. Yes, you paid $10K for the Sub, but you also paid $15K for a $5K tennis bracelet. They got their bonus somewhere.

Alternatively, a grey market buyer might meet with that same XYZ Jeweler and say "I'll buy your entire Rolex stock for $2K over MSRP per watch and Rolex will never know." The jeweler makes some extra cash and the only way Rolex would find out is if they traced serial numbers from watches returned for service. Probably not for years down the road.

As for dead stock at AD's, I think luxury brands have a couple ways of dealing with it. Richemont famously bought back a bunch of watches from AD's and destroyed them so they wouldn't go to the grey market and devalue the brand in the eyes of the consumer.

I suspect Doxa has a similar requirement with their AD's, that unsold stock must be returned to Doxa for refund. This is why the recent Jomashop sale on Doxa's crashed.

Other brands probably have no contractual obligation for the AD to return unsold stock, so that is where the JomaShops and Ashfords of the watch world come in.

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JP Chestnut
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Re: Interesting thread on TRF - Rolex IS watching

Post by JP Chestnut » Fri Jul 01, 2022 8:25 am

Ryeguy wrote:
Fri Jul 01, 2022 8:18 am
DON wrote:
Thu Jun 30, 2022 8:06 pm
hoppyjr wrote:
Thu Feb 24, 2022 8:14 am
jimyritz wrote:Rolex created the problem- go look at the OP 41’s in orange, pink, Turqoise all retail for $6000 and selling for 3-5 times msrp… I wonder how these grey mkt dealers are getting brand new watches— my guess.. from the ADs… if Rolex increased production they would squash the grey mkt or at least reduce the crazy mark up. Again, Rolex created the problem..
Absolutely. I’m sure many AD’s are getting a kickback from grey dealers, so selling inventory to them. Rolex could absolutely end this with increased production.
Are they getting a kickback? If someone offered to take slow sellers or dead stock off my hands. Cost would suit me fine. I would think that gray market dealers are buying the better watches from customers. Can't see why AD's would be flipping them to GM sellers when they could sell them them selves all day long. You want the better sellers in stock to bring the buyers in

Increasing production wouldn't help. Just foist more the same dead stock on AD's except in higher quantities. Those watches have to go somewhere and if there's too many. Gray can't absorb, AD's can't sell and it hurts cash flow for other brands.

A lot of companies are going boutique anyways in order to maximize their profits and push the AD's off to the side

DON
Hi Don -
I think your perspective makes sense if you perceive the Rolex stock to be "dead". I think the challenge is just the opposite. Market demand was so high, people were willing to pay well over MSRP for a Rolex.

My suspicion is that Rolex AD's know they can't sell watches over MSRP due to contractual agreements with the manufacturer. If a customer complained that AD "XYZ Jewelers" tried to sell a Sub for $20K, Rolex would probably come down on them pretty quickly. This is why we hear some stories about the only way to get a Rolex at a jeweler is if you also bought a bunch of other jewelry at inflated prices. Yes, you paid $10K for the Sub, but you also paid $15K for a $5K tennis bracelet. They got their bonus somewhere.

Alternatively, a grey market buyer might meet with that same XYZ Jeweler and say "I'll buy your entire Rolex stock for $2K over MSRP per watch and Rolex will never know." The jeweler makes some extra cash and the only way Rolex would find out is if they traced serial numbers from watches returned for service. Probably not for years down the road.

As for dead stock at AD's, I think luxury brands have a couple ways of dealing with it. Richemont famously bought back a bunch of watches from AD's and destroyed them so they wouldn't go to the grey market and devalue the brand in the eyes of the consumer.

I suspect Doxa has a similar requirement with their AD's, that unsold stock must be returned to Doxa for refund. This is why the recent Jomashop sale on Doxa's crashed.

Other brands probably have no contractual obligation for the AD to return unsold stock, so that is where the JomaShops and Ashfords of the watch world come in.
Honestly, I think both things happen. There are TONS of young guys who don't seem to know anything about watches on the Moda group with a random selection of high demand Rolex watches. I assume that most of those guys aren't buying constantly and in volume from ADs since they definitely can't float $200k per month in inventory costs. People like DavidSW or the huge Asian grays who have multiples of everything at all times are definitely not buying piecemeal from random dudes. They're cutting ADs in on their action without a doubt. Via what mechanism? Who knows, but you don't get 10 or 20 white Daytonas without some serious infrastructure.

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