Gray Market Watches

Even reputable new watch dealers may be selling 'unauthorized' watches--know the risks and problems you may face after buying

1. What are 'gray market' watches?
2. How can I tell if a watch is gray market?
3. What does it mean to me if I buy a gray market watch?
4. What does it mean if the seller removes the serial number?

What are 'gray market' watches?

There are many places where you can buy fine watches. The most important concept to understand before making a purchase decision is the difference between gray-market versus authorized dealers and how that affects the price, warranty coverage, and resale of a watch you purchase.

All genuine Omega, Rolex and other fine watches come from the maker's factory. The maker only sells them to authorized dealers and distributors. To establish and maintain an authorized dealer relationship and volume discounts, authorized dealers must make large initial investments in inventory and continue to purchase minimum quantities of watches over time. This can involve minimum initial and ongoing inventory purchase requirements as high as US$ 250,000 for a single dealer to carry each major brand.

For smaller dealers, this often forces them to purchase more watches than they can sell directly to their customers and to hold in inventory an excessive amount of merchandise of a single brand. So some authorized dealers sell off at wholesale prices the surplus to the 'gray market' of unauthorized dealers--who then sell the watches at heavier discounts than authorized dealers are allowed to. This is not explicitly illegal, but it usually violates the authorized dealer or resellers agreements with the manufacturer.

The manufacturers, to protect their authorized dealers from the heavier discount offered to the consumer by the non-authorized dealers, refuse to provide in-warranty service on these watches. Unfortunately, this policy usually ends up hurting the uninformed consumer more than it protects the authorized dealers. The reason this policy is an ineffective deterrent is that the customer needs to know this before they buy the watch. But only a small percentage of buyers know this before a purchase. Many do not discover this until after they have a problem and are refused in-warranty service by the manufacturer or an authorized repair center. At that point, the customer sees the manufacturer as the bad guy for refusing to honor a warranty on a watch the customer feels they bought legitimately.

How can I tell if a watch is gray market?

Gray market watches are genuine watches from the original manufacturer. They are not fakes or factory seconds. The only thing that makes them different is that they passed through an unauthorized dealer or reseller on the way to you. (Though occasionally, some less ethical gray market dealer may also sell old stock, returns, or refurbished watches as if they were 'new' merchandise.)

Here are probable signs of a gray market watch:

• Is the dealer's published price more than 20% off the manufacturer's listed retail price?
• Is the manufacturer's warranty card missing or not stamped with an authorized dealer stamp?
• Is the serial number missing off the watch?

What does it mean to me if I buy a gray market watch?

• Gray market fine watches are typically available at discounts of 30-40%, compared to the maximum 20% discount the authorized dealers are usually contractually allowed to give you.

  Note that there are legitimate cases where an authorized dealer may give you more than 20% off current list price on a fine watch. When a dealer has stock they acquired before a manufacturer's price increase, when the watch is a returned or clearance item, or when they bend the rules when really desperate for end-of-month sales (particularly if they have a very large amount of returns after Christmas).

• While some gray market dealers are very honest and forthright about what they are selling to you, others may not mention that their merchandise is gray market or make it clear that you do not have a manufacturer's warranty on the watch.
• Your manufacturer's warranty card will not be stamped with an authorized dealer's name--or you may get no card at all. In either case, you have no valid manufacturer's warranty coverage. Watches described as having 'open papers' means the warranty has not been validated by an authorized dealer.
• If the dealer includes a warranty of their own, it will only be good through them--it will not be honored by any other dealer or the manufacturer's authorized service centers. For this you must trust the reputation and stability of that dealer to repair your watch within the warranty period. Otherwise, any repair will be at your expense.
• Some gray market watches have had the serial number removed from the outside of the case (but not the inside) to prevent the manufacturer from tracing it to the authorized dealer that sold it to the gray market. See the following section for more information on watches that have had their serial numbers removed.

Ultimately, the difference is whether you are willing to risk warranty, resale, and other problems in return for saving another 10-20% off the cost of the watch.

What does it mean if the seller removes the serial number?

Having a watch with its serial number removed has several important implications:

1. Although not often enforced, many states and countries have laws making it illegal to possess an item that has had its serial number removed. Such laws treat watches with altered or removed serial numbers as the equivalent of stolen property.
2. The manufacturer's authorized repair centers may refuse to service the watch even outside the warranty period. Even worse, some manufacturers have been known to confiscate such watches that have been sent to them for service.
3. Lack of a serial number may interfere in getting an insurance claim paid if your watch is lost or stolen.
4. It may interfere with your ability to resell the watch or may reduce what someone is willing to pay for it.
5. Some manufacturers can supply you with detailed information on your watch--such as its date of manufacture, country it was shipped to for original sale, features and movement calibre, and even a copy of the COSC certificate for your watch--but only if you have your serial number.

Yet, a number of unauthorized watch sellers have a common practice of removing serial numbers from watches they sell to protect their supplier who have violated their contracts with the manufacturers by reselling merchandise to unauthorized resellers. So who protects you, the watch buyer?

The answer is that you have to apply the primary buyers rule of 'caveat emptor' -- buyer beware. If you are unsure about the status of a seller you are considering buying a new watch from, ask them specifically if they are an authorized dealer for the specific brand of watch you are buying. If not, you may want to consider shopping elsewhere.

For more detail on protecting yourself when buying watches--expecially Omega--see the Chronocentric article Omega Consumer Alert: New watch dealers with questionable policies.

If you have already purchased a watch and discover that it has had its serial number removed, you should immediately contact the seller and insist they refund your full purchase price or provide a replacement watch with its serial number intact.

The most alarming part of the way these laws are written is that, once you become aware that the serial number has been removed, you effectively become an accomplice to the crime! Here is an example of such laws from the State of Georgia, in The United States:

A person commits the offense of criminal use of an article
with an altered identification mark when he buys, sells,
receives, disposes of, conceals, or has in his possession
a ... watch, watch movement, watch case ... from which
he knows the manufacturer's name plate, serial number,
or any other distinguishing number or identification mark
has been removed for the purpose of concealing or
destroying the identity of such article.

A person convicted of the offense of criminal use of an
article with an altered identification mark shall be
punished by imprisonment for not less than one nor
more than five years.