Rolex announced today that they are launching the Rolex Certified Pre-Owned Programme. Rolex is now offering the opportunity to purchase pre-owned watches that are certified pre-owned from its official retailers. The Rolex Certified Pre-Owned programme now enables retailers in the brand’s official distribution network to sell second-hand models that are certified as authentic and which come with a new two-year international guarantee. Rolex Certified Pre-Owned watches will initially be available at Bucherer boutiques in six countries including Switzerland, Austria, Germany, France, Denmark, and the UK as of today, December 1, 2022. Other Official Rolex Retailers who choose to be part of this program will be able to do so from Spring 2023.
Rolex advocates the durability of its products and its not a surprise that Rolex watches last a lifetime. Of all watch brands, Rolex produces watches with the longest possible lifespans and they go from one owner to another. Launching a Certified Pre-Owned Programme will for sure bring some extra business to Rolex authorized dealers but won’t have much of an impact on the secondary/grey market where I would venture to say that 80% of pre-owned Rolex watches are sold.
With this move, Rolex is trying to protect their authorized dealers and help them increase sales, by allowing them to resell pre-owned pieces that have been authenticated and that come with a 2-year warranty straight from Rolex. What is not clear yet and what has not been expressly communicated by Rolex is whether these pre-owned watches have to undergo a full service before going to market or if Rolex has to re-authenticate them at their premises. Just imagine someone selling an authorized dealer a pre-owned ‘frankenwatch’ with issues that ends up being sold as fully ‘authentic’ and with a 2-year Rolex warranty. My guess is that any pre-owned Rolex will have to come straight from service first, before any ADs are allowed to sell under the Certified Pre-Owned programme.
Per Rolex’s press release:
In concrete terms, the Rolex Certified Pre-Owned programme attests to the authenticity of second-hand Rolex watches —that are at least three years old—at their time of resale by an Official Retailer displaying the special Rolex Certified Pre-Owned plaque. The Rolex Certified Pre-Owned seal that accompanies the watches concerned symbolizes their status as certified second-hand Rolex watches. The Rolex Certified Pre-Owned guarantee card, delivered at the time of the sale, officially confirms that the watch is genuine and guarantees its proper functioning. This card bears the words “Certified Pre-Owned” and serves as an official certificate of authenticity.
Now, how is this new CPO programme going to affect grey dealers? In my opinion, the impact will be minimum. Of course some pre-owned shops and grey dealers might lose a little bit of business from customers that are risk averse and that look for that extra layer of protection buying from an AD, but at the end of the day, the grey market will continue to be the place where most buyers go look for a pre-owned Rolex. The pool of reputable secondary market watch dealers out there is huge and no one other than them will buy back Rolex watches at prices that ADs won’t.
If we take into consideration that an AD has a profit margin of 35% for each Rolex they sell —their cost is 65% of the Retail Price— and some times more if they’re selling through the back door, why would they want to sell a pre-owned watch and just make 10-15% profit on it?
Well, the thing is that most of these ADs will try to buy back these pre-owned Rolexes very low in order to make about the same margin as they make on new inventory. Therefore, pre-owned Rolexes will continue to go to the secondary/grey market dealers —without a storefront— that pay a more fair higher number for pre-owned watches.
The ones that might hurt some, are the pre-owned dealers with a brick and mortar storefront that try to buy almost as low as ADs. These are the guys that better be prepared to start buying pre-owned Rolexes at a higher number and sacrifice profit in lieu of volume.
The current secondary market conditions with pricing fluctuating so much on a weekly basis, might drive incremental business to ADs selling CPO as prices might remain more constant over a longer period of time. The biggest issue will be that when that client that bought a brand new GMT-Master II Pepsi at retail from an AD, comes through the door expecting to be paid ‘market’ price for his pre-owned watch.
Of course, the ADs will not be buying watches at the ‘market’ prices, therefore, that inventory will remain in the secondary/grey area.
Think about it this way, if you are a Rolex AD and you buy a brand new GMT-Master II Pepsi ref. 126710BLRO on oyster bracelet from Rolex at 65% of its retail price —retail is $10,550 USD, therefore, AD cost is $6,858 USD—, why would you even entertain offering someone more than $5,000 USD for their preowned GMT-Master II Pepsi ref. 126710BLRO? In a perfect world, as an AD you’d be crazy to pay more than what you pay for a brand new one straight from Rolex.
Now, if you’re the one selling that watch, would you take the $5,000 USD or turn around and get $10,000 USD from a secondary/grey dealer? Well, there you have it.
In a nutshell, I don’t think that Rolex’s CPO programme will have a drastic impact on pricing or inventory in the secondary/grey market. Now, those wanting to have a 2-year warranty straight from Rolex on a pre-owned watch will for sure have to pay the price or face the lack of inventory.
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