Thursday, October 19, 2006

Guide to Buying a Watch Part 3. Going Grey Market

You're probably wondering if the grey market makes sense to purchase from as deals are just too good to be true and the industry has scared you witless that buying from non-authorized sources means fakes, counterfeits, stolen pieces, defective pieces, or worse, no service under warranty!

Well, in fact, in the grandest move of hypocrisy, manufacturers actually encourage the grey market process.
  1. Over producing and forcing product down the throats of authorized dealers, in excess of what they can sell. (So called junk according to one Rolex dealer.)
  2. By selling knowingly to non-authorized channels.
  3. By accepting orders from authorized dealers knowing that these orders will immediately be turned over to non-authorized dealers.
  4. By looking the other way
The majority of the pieces in the grey market are fresh, (ordered as part of a legitimate order by an AD) or the piece was ordered directly by the unauthorized dealer from the manufacturer, and released by the manufacturer directly to the unauthorized seller for a specific market, yet these products make their way to the grey market.

Of course, not all pieces in the grey market originate from legitimate channels. There are also a large proportion of pieces being sold which are truly secondhand with a long and dubious history. Sometimes there are relatively fresh products which just recently came directly from the manufacturer, but there are also pieces which have been sitting in stock for months, sometimes years. A dealer has taken a piece, tried to sell it to no avail, so returns it to the dealer market, where it either sits or bounces around. All the time increasing the likelihood that it was mishandled, but with no visible scars (external or internal), or was actually sold but got returned, still looking like new. And this is all without even worrying about the the chain of custody and title; is there money owing on it?

And of course, fake and counterfeit pieces or even stolen pieces….

If something goes wrong with a purchase from an AD, one has recourse to the manufacturer. Both regarding simply the warranty, but also legal liabilities according to the country or state law.

Is buying from any and all unauthorized dealers necessarily bad? No.

Is buying from authorized dealers 100% and always safe and satisfactory? No.

There are no absolutes, you are always in the hands of chance and making a probabilistic choice. At least with the authorized dealer, you have the manufacturer to fall back on, without question. This is legally protected and assured.

Oh and when you go grey, at least factor the possible cost of having the watch serviced to the total cost of the watch, then decide if it is a deal or not.

Bottom line when working out your deal? And this last point is something only you can answer, for yourself, “What is that "comfort" level of AD supply worth?”


Anonymous said...

Yep, making ADs buy "garbage" is inevitably turning into a problem. Many big manufacturers keep making stuff that is in less demand and shove the goods down the AD' throat. Rolex was the first to impose purchases on their dealers, other have followed since and many more are going that route too. Unless manufacturer stop this policy the grey market will flourish. I have nothing against these practices yet I completely agree that what stinks here is the hypocrisy of manufacturers, importers and dealers. They all (well 99% at least) constantly recur to the gray market when things get difficult.

Cannot stress the point of computing the service cost with the the price of the grey market watch in the equation enough. Many only see the final price of the piece and as you say, most of them will need a service after they have been going around for a while.

Good post!

Anonymous said...

V., thanks for all three of your "how to buy" articles, and for a great blog which I have recently completely read through including the archives. As a cross-over motorcycling enthusiast (my first love) only recently bitten with the watch passion, I very much enjoyed the Ducati article as well. And I think you were the one who linked to "My Descent into Hell" which is a stupendous and hilarious intro into one man's folly...

Your most recent post is very apropos for me as I've only just purchased one higher-end watch, an Omega, at this point, very pleased with it, via ebay. In "like new" condition it arrived visually stunning and performing perfectly but without papers, etc. from a fellow in Japan. Transaction couldn't have been more civilized, and I was sure to scan all his feedback and note that he only deals in Omegas, and had very clear photos of every single watch he sold. But it could have gone all wrong, I was taking a chance, and the point about factoring in the cost of service is an important one that's still in play should anything go wrong with this watch.

At this point I would buy from him again because the price point was so very much lower, I could reasonably afford to service the watch at least once, probably three times, before I'd be at the list price for the model I purchased.

One side note in Omega's favor, the recent issues exposed re: their underwhelming response to the 30XX movements problems notwithstanding: when I contacted them for how to purchase an instruction book for the watch and information about the band/strap the watch had originally shipped with, they replied in under 24hrs with a .jpg of the watch as originally shipped and are sending me the instruction book gratis. That's nice manufacturer support.

Thanks again for a great blog.

Anonymous said...

Sorry, that should have been "...underwhelming response to the 33XX movements' problems..." Did I mention I'm new at this watch thing? Thanks again.

Speedmaster said...

Great post and well-stated. I wouldn't go grey for a 10% discount, but I of course would for a 70% discount. The breaking point for me might be around 40% and would depend on the brand. In general though I prefer ADs.

Anonymous said...

Mr.V. This is a great damn good sharing. Having own many watches as a pure consumer, I realize these activities are very TRUE! Through these years, I've been buying from AD, Grey-stock, Private sellers. The grey market is just so ACTIVE! that you can place your order if you know someone in the business. I can see this continue forever as long as the BRANDS limit their AD network. I have some good talks with these people and they just told me this: "Do you believe we(AD) can sell that much watches?". Having very good control in AD network, also creates very ACTIVE grey market when they have all freedom without limitations. Well, the system already created "Official Grey Dealers"! The trend will definitely continues. BTW, even LIMITED EDITIONS are accessible in grey market. That means... they are in one BIG FAMILY! Difference is, the good boy lives in a big and nice looking house, the other brothers are selling hard on the street.

Thanks again for V.'s article, very good knowledge.