Christmas is coming and while the goose may well be getting fat, this is the time of year your wallet starts to shed pounds like they’re going out of fashion. It seems crazy to mention this at the start of November, almost a whole month before Thanksgiving in the US, but the festive season is getting underway earlier and earlier each year. With people evermore keen to limit the stress of the holiday season, big spending for yuletide presents starts now, and with belts tighter than in years past, finding the best price for your gift is paramount. Some may consider the gray market. But this is a risky pursuit for retailer and consumer alike…
The gray market presents a threat to brick and mortar retailers, end consumers, and the luxury industry in general. Over the counter discounts by authorised sellers of luxury goods are – as far as the party line would have you believe – frowned upon, but generally tolerated provided the discount is not excessive, and is used to foster trust between the trading parties.
A Gray Market, not Area
Gray market products are those purchased by an authorised dealer from a manufacturer and then sold to a third party at a small profit.
Instead of making, for example, a 40% margin on the sale, an authorised retailer may choose to shift the product to a gray market retailer at a 10-20% profit, for example, leaving the gray market retailer space to add their 10-20% to the end consumer price while still undercutting the intended retail value.
So on the surface this backroom dealing sounds awesome for the consumer, right? You basically get the same product, brand new, often with the stamp of an authorised dealer validating the guarantee for less money. So what’s the drawback?
Gray market retailers are unregulated points of sale. They have not been vetted for quality of practice or knowledge by the manufacturers who are seeing their products devalued by a sector of the industry interested only in making a quick buck, and not the continuation of the industry and the maintenance of its reputation. Now, you might think ideologically that the luxury industry deserves to be brought down a peg or two, and that its democratisation is a good thing for the world and her people. But it’s a short-term strategy that stifles development and growth, and would eventually bleed the whole industry dry.
Luxury watches are expensive. They are a luxury. But they need to be priced accordingly so your purchase is protected in the long term. When you buy a luxury watch, you’re committing to the upkeep of a mechanical marvel that will, with proper care and attention, last you a lifetime. Truth is, that upkeep will likely cost you more than the initial purchase price of the watch over the duration of your ownership. So the most important thing to a consumer is not how many bucks you can shave off the ticket price, but what the absence of trust in the relationship between buyer and seller will cost you further down the line.
Despite many manufacturers finding themselves forced to tolerate the existence of gray market retailers, paying that little bit extra for a product that is already very expensive is a smart move, if it means you can stand across a counter and look another human in the eye, ask them questions, receive reassuring and honest answers, shake their hand and walk away in the confidence that they, and the manufacturer of the product you’ve just bought, have got your back. After all, with a gray market retailer, you cannot even be 100% sure if the product is 100% genuine, or genuine at all. And that, for a watch lover, is surely the point.
Provenance is everything with new or vintage purchasers. You wouldn’t buy a car from a chop shop to save 10%, so why take the same risk on a wristwatch that’s prime function in 2017 is to express an element of your personality and taste to the world around you? It’s just not worth it.
About the Author: Fell Jensen is a Swiss-trained watchmaker working as an industry analyst.