02/24/2020
 6 minutes

What is the gray market and how does it work?

By Mathias Kunz
Graumarkt-2-1

What is the gray market and how does it work?

Many luxury watches on the gray market are listed at prices 20 to 30% below the retail price. Even the popular Omega Speedmaster Professional Moonwatch is available for around 13% less than the manufacturer’s list price. However, other rare timepieces are sold for more than three times the official retail price. In this article, we’ll take a closer look at the gray market for luxury watches and how it works.

The Gray Market: Not a Black-and-White Issue

Luxury watches traded on the gray market circumvent more traditional sales channels. Most brands in the luxury goods sector seek to maintain as much control as possible over the distribution of their products. In the watch industry, manufacturers traditionally deliver their timepieces to licensed dealers and jewelers, so-called official retailers. In theory, these are the only parties permitted to sell the watches in their stores and online shops.

These dealers are often required to accept large orders of watches including less popular models in a single shipment, meaning they often have to sit on excess inventory. Occasionally, they sell their extra inventory to other dealers, who don’t have a licensing agreement with the original watch manufacturer. These dealers, in turn, are able to sell the unworn watches at large discounts via their own sales channels, e.g., their own shops or online platforms like Chrono24.

These so-called gray market dealers frequently source watches from abroad. This offers several advantages; for example, particular models are less popular in certain locations and some countries have lower VAT, meaning it’s profitable to purchase a watch abroad and import it.

Sun ray on luxury watches displayed in shop exposition

There is also a relatively unregulated used watch gray market. In recent years, brands such as Audemars Piguet have been purchasing used watches, servicing them, and reselling them as certified pre-owned with a manufacturer’s warranty. This is somewhat comparable to the used car market, where leading brands buy, service, and resell their own used cars.

In contrast to the black market, all the watches in the gray market are sold legally. The watches are real and often come with their original box and papers. That said, it is often the case with used watches that some original parts and accessories get exchanged or lost over the years, meaning not every set is complete. It is therefore important that you do your research before purchasing a vintage watch and ensure you ask the dealer plenty of questions. Watches for sale on the black market are usually fakes or stolen property. It’s best to stay away from those, considering they are illegal to trade.

Better Than Dealer Prices

Many timepieces for sale on the gray market are priced more competitively than those at licensed dealers. Less popular models often retail for 20 to 30% less than official list prices. Diving and pilot’s watches from the Swiss manufacturer Glycine, for example, can be found for 45 to 57% less than their retail prices.

That is an extreme example and not necessarily indicative of the entire gray market. Things look slightly different when it comes to TAG Heuer watches, for example. The cult Carrera chronograph, ref. CV2A1R.BA0799, has an official list price of 4,650 USD. The price on the gray market, however, is around 26% less. The TAG Heuer Autavia with the in-house Heuer 02 movement costs some 3,800 USD, which could save you approximately 1,300 USD.

Seamaster 300M Ref. 210.30.42.20.01.001

Likewise, standard Omega models are often more affordable. This excludes limited editions. You can purchase the Seamaster 300M ref. 210.30.42.20.01.001 on the gray market for roughly 4,200 USD, which is nearly 1,000 USD less than you’ll find it at most licensed dealers. Even sold-out Rolex watches can be found at lower prices. A two-tone Datejust 41 on a Jubilee bracelet has an official list price upwards of 13,000 USD. You can find the same watch online for under 12,000 USD. Generally speaking, two-tone, gold, and platinum Rolexes are cheaper on the gray market, but the same can’t be said for stainless steel Rolex models.

More Pricey Than Official Retailers

Rolex sports watches have been highly sought after for many years now, causing their gray market prices to soar. Stainless steel editions of the Daytona, GMT-Master II, and Submariner are particularly beloved. The intense demand has lead to empty display cases at most official retailers. If you are desperate for a Rolex, you’ll either have to settle for a less popular gold model or put your name on a several-year waiting list. If you don’t want to wait, expect to pay well above the list price. The 2016 stainless steel Daytona with a ceramic bezel officially retails for just over 13,000 USD. Prices on the gray market, however, run as high as 26,000 USD! Its white gold sister model only costs around 6,500 USD more.

‘Vienna, Austria – July 5, 2012: Salesman preparing Rolex window shop, Vienna, Austria. Reflection of people walking by the street.’

The iconic no-date Submariner diving watch has an official list price around 8,000 USD. At the start of 2020, examples on the gray market were selling for 25% above that. Another impressive price difference can be found with the GMT-Master II with a blue and black bezel, the so-called Batman, ref. 126710BLNR. The 2019 version with a Jubilee bracelet will cost you around 9,700 USD from an official retailer, but 65% more on the gray market.

An even more extreme case is the stainless steel Patek Philippe Nautilus. If you’re interested in this luxury sports watch, expect to be interviewed in the retailer’s side room. You’ll be drilled on why you want to purchase the watch. With a bit of luck, your name will make it onto a years-long waiting list. The official list price for the three-hand ref. 5711 is currently just shy of 30,000 USD, but don’t be surprised if you see gray market watches listed for over 65,000 USD.

What do manufacturers do about the gray market?

Major brands in the luxury sector prefer to be in control of their distribution channels. Large price fluctuations in either direction undermine this. Thus, the gray market is, generally speaking, a touchy subject for watch manufacturers. That said, they are partially to blame for the phenomenon as they control the production numbers. Some manufacturers, including Rolex, Patek Philippe, and Audemars Piguet, have developed strategies to try to dry up the gray market for their timepieces.

Family-run Audemars Piguet, known for the legendary Royal Oak, has opened its own boutiques in recent years to interrupt the traditional distribution chains. This has led to fewer never worn watches ending up on the gray market. Moreover, some manufacturers blacklist certain customers who are found reselling brand-new luxury timepieces. If your name makes this blacklist, expect to drop to the bottom of any future waiting lists. Some official retailers go so far as waiting several months before giving buyers their new watch’s warranty card, thus preventing a quick turnaround.

Can I buy a watch on the gray market?

The good news is, yes! All the watches on the gray market are real and legally sold. Nevertheless, you should always do your research before buying any vintage or pre-owned watch. Find out if the case, movement, strap, dial, hands, and watch glass are all in original condition. Older vintage watches often have their glass or strap replaced. Also, certain manufacturers like Rolex replace any damaged parts during servicing (done every five to seven years) or polish out scratches. Some die-hard watch fans consider this a deviation from the watch’s original condition.

Be aware that some manufacturers don’t honor warranties on gray market watches. Brands know which watches go to each country and therefore can trace their origins to some degree. Manufacturers will likely also know if you’ve purchased your watch at an official retailer or on the gray market. That said, buying a gray market watch shouldn’t prevent you from paying for a manufacturer’s service or repair.

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About the Author

Mathias Kunz

Since starting as a copywriter at Chrono24 in 2015, watches have been part of my daily life. I'm most fascinated by the fine mechanics and their ability to reflect …

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