The gray market contains an endless selection of used and new watches at prices not bound to the MSRP. It’s also a thorn in the side of many a luxury watch manufacturer. In the Chrono24 article “What is the gray market and how does it work?” we already took a look at the phenomenon, also known as the secondary market. In a second article by Thomas Hendricks, “The Gray Market: Not as Gray as It Used to Be”, we dove even deeper into the subject.
The two articles discuss the forces at work on the gray market and the motivations of dealers and private sellers. Authorized dealers have an overfilled stock of new watches that they want or need to move. Private sellers are usually looking to make a quick profit selling sought-after used models. Some luxury watch manufacturers like Audemars Piguet and Breitling have also recognized the potential profits to be gleaned from selling used watches themselves.
CPO (certified pre-owned) are the magic words for watch manufacturers looking to maximize their share of the used watch market. After all, a watch that lasts for many years or even decades, and changes hands several times, offers a number of opportunities for profit.
Rolex announced in December 2022 that it would enter the CPO market and got started right away with its authorized dealer, Bucherer. What do these moves from manufacturers – especially Rolex – mean for the gray market? And what changes will they bring for customers in the medium- and long-term?
The Rolex Gray Market: Why CPO?
Like all luxury watch brands, Rolex’s primary focus in the past has been on bringing as many new watch models as possible to the people. The motivation is clear: The manufacturer of a watch (or any other product) can usually only make a profit once, through a direct sale to a customer or through official dealers. The auto industry is a good comparison: Car companies try to convince their customers to buy a new car as often as possible. Once the car or the watch has been sold, the manufacturer doesn’t want to have anything more to do with it (with the possible exception of servicing, which brings in additional money).
Coming back to Rolex, it’s well known that a price spiral has developed on the secondary market in recent years that evades rational explanation. This is true of both new and used watches. The phenomenon is fueled by the cult following that certain models have gained, leading Rolex fans as well as newcomers to invest large amounts of money in a single watch. Rolex could never have guessed in 1954 that, 65 years later, someone would spend 1,000 times the original price on an old Submariner or Daytona. Just like with classic cars, dealing in vintage watches has become a lucrative business.
What does certified pre-owned mean for Rolex and its customers?
Authorized Rolex dealers – especially Bucherer – are now permitted to buy back Rolex models that are at least three years old from their current owners. Rolex (not Bucherer) will then authenticate the watches, refurbish them, fit them with a seal of authenticity, and then send them back to Bucherer with a two-year warranty.
Selling used watches is nothing new for most official retailers, but now they can offer customers two new selling points, CPO certification and a two-year warranty. Bucherer is, however, only allowed to sell the certified watches in its own stores or online shop. Rolex has prohibited the sale of CPO watches on the secondary market, which is a logical decision from the manufacturer’s point of view.
This move gets the watches off of the gray market and gives the manufacturer control over the used models. It’s the dealer, by the way, who pays for the refurb and then adds that cost to the price of the watch. According to Bucherer, their prices are based on current market prices, that is, on supply and demand.
CPO vs. Gray Market: How do prices compare for unworn models?
After taking a closer look at extensive data from Chrono24, it’s clear to us that Rolex isn’t concerned with bringing prices back down to earth. It seems to be much more about keeping prices as high as possible, and higher than prices for comparable watches on the gray market.
A price check in mid-January 2023 revealed that official Rolex CPO watches are notably more expensive than identical unworn references sold by reputable gray dealers. And keep in mind that the popular question about box and papers or the coveted “full set” shouldn’t even enter into the equation with brand-new models. Three examples:
A Rolex Submariner Date ref. 116610LN CPO cost $19,400 in mid-January 2023, whereas the same watch brand-new cost only $15,700 on Chrono24. That gives us a CPO markup of around 25%.
A Submariner ref. 116618LB in yellow gold comes in at over $55,400 CPO, whereas an unworn model goes for $45,600 on the secondary market. CPO markup: almost 22%.
The third example is a Rolex Datejust 36 ref. 116200 with a silver dial and bar indices. While mint condition models go for around $8,700 on the secondary market, CPO models cost closer to $10,900. That’s a markup of 25%.
CPO Prices Compared with Pre-Owned Watches from the Gray Market
The difference in price is even more pronounced when we compare Rolex CPO watches with used watches from the gray market. The Submariner ref. 116610LN, for example, is available used on Chrono24 for an average of $13,600. This means that the CPO price of $19,400 comes with a 43% markup.
The Submariner ref. 116618LB in yellow gold is 32% more expensive CPO than used from the gray market, with used models going for $41,900.
If you decide to buy a Rolex Datejust 36 ref. 116200 with a silver dial, you can pay 40% less on Chrono24 than you would with a CPO model (as of January 2023).
So on average, you’ll pay around 38% more for a CPO Rolex than for a used model from the gray market.
Of course, it’s only fair to mention that there is a wide range of used Rolex models on offer, in varying condition. Some watches will come without a warranty and without a box or papers. So the kind of deal you get will vary greatly depending on the offer, so you should always take a close look at the listing.
Summary: CPO Is More Expensive Than Secondary Market
While we’ve only had two months to observe the trends, it’s clear at the time of writing that prices for Rolex CPO watches are noticeably higher than identical unworn models from the gray market. For the models we looked at, they were 24% higher, to be precise. When it comes to used Rolexes from the gray market, the difference is even more marked, with CPO watches costing an average of 38% more.
The British website watchpro.com polled 301 watch enthusiasts in December 2022, asking them how much more they would pay for a Rolex CPO compared with prices on Chrono24 or similar platforms.
The result is interesting – 46% of readers weren’t prepared to pay even a cent more for CPO. 41% of readers said they would pay 10% more. Just 11% of those polled, a clear minority, found a markup of 20% acceptable. And only 3% were prepared to pay 30% more for a CPO than for a gray market watch.
In the long run, the question of whether Rolex fans will accept the substantial markup on CPO watches remains open. The coming months and years will show whether Rolex and other brands succeed at asking higher prices in exchange for “a better feeling.”