Can it possibly be true the Gray Market has become an official partner with luxury watchmakers? Let’s look at the evidence.
As I have noted in the past, the Swiss luxury watch industry has had to come to terms with the Gray Market due to the pressures creating the “perfect storm”, such as the ongoing threat of technology over tradition that threatens to snatch market share from the traditional Swiss brands and into the hands of the purveyors of smartwatches.
What’s the Truth?
We are constantly receiving mixed messages about the situation in terms of the Swiss markets ability to ride the storm, and the recovery of big brands like Omega branching further out into Asia, but what’s it all about?
One side of the story is the China factor where demand for luxury timepieces had previously boomed after the 2008/09 global financial meltdown leading to a short-lived increase in production and retail prices. That came to an end after tourist had became deterred from traveling to Europe for fear of extremist violence, and the Chinese Government cracked down on luxury gift-giving by and to civil servants.
In this situation what short-lived brands do? It is said the Swiss watchmakers loathe the “gray market watch sites” as their high discounts damage a hard fought for and a finely crafted sense of prestige. After all, if anyone can afford the illusion of prestige, buying into the dream for a fraction of the entry price, this represents the death of luxury. Essentially, they are saying buying gray market watches online is reducing their inherent value as a luxury item
Unfavorable Conditions For Authorized Dealers
So, should we feel sorry for the Swiss watchmakers and their authorized dealers? Well, if you look at the way authorized dealers are treated it looks great when the going is good. Before the slump in sales, the industry can take home 20 percent of sales as profit and retailers are left with an attractive margin of up to 45 percent.
The downside to this situation is when the going gets tough, the manufacturers don’t allow authorized dealers the leeway to cut prices, fearing any big discounts will damage their brands.
That doesn’t mean to say the Swiss watchmakers are blind to the unfolding emergency, after all after the trauma the market has seen over the last few years, some of the brand names began working quietly with gray market businesses both in an attempt to claw back some revenue, and exercise some control over the unofficial resellers.
But let’s not forget the fundamental requirements here. Regardless of how the big brands feel about the gray market, the bottom line is profit. For every piece sold, whether, via unofficial or official sources, the manufacturer gets their cut. And let’s not forget all the free advertising they receive as dealers and affiliates market their products via a search engine and social media such as Twitter, Youtube, and Facebook. Besides all this, the gray market stores are now taking customer care more seriously as seen in the case of Jomashop implementing an automated anti-fraud software to protect their customers, allowing them to offer safer shopping for affordable authentic watches.
So the truth, as usual, lies somewhere in the middle. For example, if we can find a diamond-studded Rolex with a 40% discount on the usual $34,000 retail price or an Omega Speedmaster Moonphase for under $10,000, it’s still out of the reach of most people. While it’s a massive discount the relatively high price still means the sense of prestige is retained, which points to a predicament faced by the watchmakers.
Basically, with sales falling in the traditional spaces more unsold Swiss timepieces are finding their way to online stores where they are often offered at steep discounts.
While this is seen more and more, it’s by no means the norm, as some brands are more protective over their products than others. The hardest brands to source at discount prices are Patek Philippe, Richard Mille and Audemars Piguet. Other brands owned by the Swatch group are readily available such as gray market Omega watches and Breguet, together with (LVMH groups) Tag Heuer that are more readily available, as are Jaeger-LeCoultre and Vacheron Constantin.
The Take Away
This all seems like politics and hard feelings and it’s just unnecessary because nobody cares, right? Even with massive discounts, I will never be buying a Rolex because they are just too expensive. For me, it’s a chance to own something that’s a little more in my price range but something I would never be able to afford before the discount. Something like an Omega Seamaster Aqua Terra for $1,690.00 which equates to a 39% saving. This is a real world saving on an affordable luxury watch, which is exactly what discount watch stores is all about.
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