Luxury Watchmakers See The Grey Market As A Necessary Evil

Luxury Watchmakers See The Grey Market As A Necessary Evil
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This month Reuters cited that Luxury watch makers see the grey market as a necessary evil, reporting unsold luxury timepieces are leaving the carefully controlled environment of the retail store, to turn up as heavily discounted items from online discount stores.

Examples of the heavy discounts were a diamond-studded Rolex with 40 percent off the $34,000 retail price tag and an Omega Speedmaster Moonphase for less than $10,000. And yes, while this is still out of reach for many, it’s a significant discount and one which will not surprise my readers.

Rolex

Close The Stable Door

It’s interesting to see this report from Reuters who are known for their accurate reporting to be breaking this news years after this particular horse has bolted. For many years now, the grey market has been happily servicing its wide customer base through online discount watch stores. While they’re certainly mixed emotions from within the Swiss watchmaking industry there is more than a few reasons for the industry to embrace this market.

Reuters, for example, cites that the situation “highlights the perplexing predicament in which luxury watchmakers now find themselves.” Claiming the Swiss watchmakers loathe the grey market because it erodes the brand’s prestige built up over the years of precision watchmaking, damaging their name and limiting their ability to market goods at full price.

Counting The Cost

This could be a reasonable assumption to make on the face of it. Allowing an expensive luxury piece enter the market at a heavily reduced price making it affordable to everyone, may very well put off those looking for exclusivity. Essentially cheapening the brand making it less attractive the well healed, permanently devaluing the brand.

I guess it could be argued the luxury watchmakers are between a rock and a hard place, it’s true the market has been struggling recently for many different reasons from a drop in demand from the Chinese market falling off sharply with extremist attacks deterring tourists from visiting Europe, where many of the watches are sold, and bizarrely, China cracking down on luxury gift-giving by civil servants. Not only this but the general economic gloom has affected sales throughout Europe and the USA, for example, Swiss watch exports fell 8 percent in the first two months of this year, on top of a 10 percent drop last year.

The good news for the luxury watch industry is the growing Asia market that has seen Omega opened yet another boutique in the last month.

The Result

The net result has been what Reuters describe as unsold timepieces finding their way to the online platforms where they are often offered at a steep discount, destroying the illusion of prestige and brand confidence. The report goes further to quote Jean-Claude Biver, head of LVMH’s watch division saying “It means a slow death for luxury goods,” describing the grey market as the “industry’s cancer”.

For me, this all comes as a surprise seeing as the successful discount stores like Jomashop.com, Gemnation.com and Ashford.com (grey market), has been working closely with the watch manufacturers for many happy years. But what’s more to the point, is the news that proves the discount watch stores are offering discounts on genuine products.

What Do They Get

Let`s look at what the Swiss or Luxury watchmakers are getting out of this arrangement.

Strangely, Swatch Group and Richemont who represent some of the largest luxury watchmakers refuse to discuss their grey market strategy, but if we read between the lines it`s plain to see some manufacturers would benefit from working in this space’

Just think of every blogger like me with an interest in luxury watches, then think about all the social media feeds, tweets, pins giving free advertising to already well-known brands, all feeding into the consciousness of everyone plugged into the matrix. And just think that regardless of where a timepiece is sold, the manufacturer is still receiving their share.

The Takeaway

If the luxury industry dislikes the discount space they’re doing very little to combat it, and by the same token, if they have embraced it, they are working hard to maintain a discreet distance, and for good reason. Regardless of the platform, the same goals of selling quality goods and creating a profit are primary.

When selling pieces through their authorized dealers the manufacturers will not allow retailers to cut sticker prices for fear of damaging the brand, so when times are hard this results in fewer sales and less profit. This doesn’t happen in the grey market where the restrictions on the retailers don’t exist.

Not all manufacturers have the same view when it comes to the grey market meaning some brands are easier to come by at a discounted price than others. For example, Patek Philippe, Audemars Piguet, and Richard Mille are both keep a tight rein on production.

Brands that are easier to source are Richemont’s Jaeger-LeCoultre, Vacheron Constantin and Swatch’s Breguet together with Swatch’s Omega and LVMH’s Tag Heuer.

My final word would have to be my assertion this is smoke and mirrors designed to pacify the wealthy buyer at the top of the consumer chain, in an attempt to give warm fuzzies about their brand and its worth. However, if we assume everyone is interested in luxury watches for the same reason and, and if we also assume millionaires are not socializing in the same circles as someone buying at a discount store, we see that brand devaluation is a misnomer.

For more information about where to look for your favorite watch brand why not read my watch store reviews to get a better idea where to look?

Read my Best Discount Watch Stores reviews.

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carl scutt
carl scutt
Carl's the founder and editor of discountwatchstores.com. His background's in Technology and Internet Marketing. He currently lives in southern Spain. Learn more about him here, and connect with him on Twitter, Facebook, Google+.

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