The Breitling Watch Source Forums :: View topic - Court to decide if Costco can sell Omega watches at discount

Kodiak wrote:

Question for anyone:
How exactly are the watches getting to grey market dealers?

1)Is it AD's going out of business and unloading their stock?
2)AD's trying to make their sales "quotas" and selling them to grey market at no profit?
3) ??
There just seems to be a lot of stuff available on grey market. Any explanations would be appreciated.
Thanks.

ADs (usually, sometimes distributors) are selling to grey market dealers in order to maintain turnover. The sales aren't necessarily for no profit, although there won't be much there (but remember that retailers generally only pay arounf 55% of retail - at least for Breitling). ADs have to maintain sales volumes so they need to make sales, and in some cases it's the higher end watches in particular - in Breitling's case you have to have sales at a certain level to be allowed to carry Bentleys, and then have to deliver a certain level of Bentley sales to keep them.

Author:	bozman52 [ Mon Apr 19, 2010 8:15 am ]
Post subject:	Court to decide if Costco can sell Omega watches at discount
The Associated Press WASHINGTON — The Supreme Court is stepping into a legal fight over Omega's effort to stop Costco from offering the Swiss maker's watches for up to a third less than they cost elsewhere. The case has important implications for discount sellers like Costco and Target as well as eBay, Amazon and other companies that form an estimated $58 billion annual market for goods that are purchased abroad, then imported and resold without the permission of the manufacturer. The justices said Monday they will hear Costco's appeal of a lower court ruling that sided with Omega in its attempt to invoke U.S. copyright law to halt the discount sales. Omega owns a U.S. copyright on the Omega Globe Design symbol that is engraved on its watches at the time they are made. http://seattletimes.nwsource.com/html/b ... ostco.html

Author:	Roffensian [ Mon Apr 19, 2010 8:21 am ]
Post subject:	Re: Court to decide if Costco can sell Omega watches at disc
Surprising. I thought that the supreme court would stay out of it. Suggests that CostCo have some solid grounds for the appeal. I don't ultimately think that it will have much practical impact. If the law does clamp down on grey market you'll just see them move offshore. CostCo et al will be impacted but places like PrestigeTime will just set up shop in the Caribbean or similar.

Author:	bozman52 [ Mon Apr 19, 2010 8:48 am ]
Post subject:	Re: Court to decide if Costco can sell Omega watches at disc
We all know dealers are giving discounts constantly, so it's not like Omega's watches are REALLY being sold for less. However, authorized dealers don't advertise discounted prices, as Costco most likely will. I'm assuming that's Omega's issue with it. Like you mentioned Roff, it does seem odd the Supreme Court has their hands in an issue like this. -Craig

Author:	Shadow87 [ Mon Apr 19, 2010 4:36 pm ]
Post subject:	Re: Court to decide if Costco can sell Omega watches at disc
LOL! I'm just surprised its not Wallmart

Author:	Tim S [ Mon Apr 19, 2010 4:52 pm ]
Post subject:	Re: Court to decide if Costco can sell Omega watches at disc
Shadow87 wrote: LOL! I'm just surprised its not Wallmart Give it time

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Author:	sharkman [ Mon Apr 19, 2010 8:30 pm ]
Post subject:	Re: Court to decide if Costco can sell Omega watches at disc
I'm not tremendously surprised the Court accepted cert given the Appellate Court finding of copyright infringement. Had it gone the other way below it's more likely the Court would have left it alone. Using copyright law to quash gray market sales of genuine models to me seems very odd.

Author:	breitlingsource [ Mon Apr 19, 2010 8:53 pm ]
Post subject:	Re: Court to decide if Costco can sell Omega watches at disc
If that's a $58 Billion dollar business, I wonder if they stand to lose more in the long run than they will make from fighting guys like Costco. There are so many implications of something like this that its totally unpredictable. I wonder if they'll try and quash our secondary market buy/sell forums next.

Author:	H2F [ Mon Apr 19, 2010 10:36 pm ]
Post subject:	Re: Court to decide if Costco can sell Omega watches at disc
Shadow87 wrote: LOL! I'm just surprised its not Wallmart Exactly! The main objection here imo is the "DISCOUNT SUPERSTORE" image that Costco has; more so than the price -- which like everyone mentioned, you can probably achieve through typical AD discounts. So no fear to online FS forums me think.

Author:	sharkman [ Tue Apr 20, 2010 5:32 am ]
Post subject:	Re: Court to decide if Costco can sell Omega watches at disc
Quote: I wonder if they'll try and quash our secondary market buy/sell forums next. These things always worry me. One victory gets used by the victor as "precedent" in areas not really covered by the first case. I don't like slippery slopes.

Author:	Roffensian [ Tue Apr 20, 2010 5:32 am ]
Post subject:	Re: Court to decide if Costco can sell Omega watches at disc
This is a little bit of a soapbox for me, so forgive me, but........ Watch brands lose very little in the short term through the grey market. Watches that make it to the grey market are sold by retailers, and by the time the watch reaches that point in the chain the money has already reached the manufacturer. I accept the argument that in the long term discounting can damage brand value, although there is some ability to control that as well through margin management by the manufacturer. Additionally, watch brands can control some of the grey market traffic very easily - tell the dealer network that anyone who sells a watch to grey market will be fired and then buy watches themselved from the grey market dealers to find out where they were sourced. That won't completely kill the business, but the big guys aren't going to go through having individuals buying watches to try and deceive the retailer (and even if they did the margins would make it uneconomic). Remember also that grey market watches are often as a result of ADs being given extremely high sales targets that they have to hit to retain their AD status - the bottom line is that brands have too many ADs in many markets (and are reluctant to reduce in most markets because it makes it harder for potential customers).

Author:	Kodiak [ Tue Apr 20, 2010 5:46 am ]
Post subject:	Re: Court to decide if Costco can sell Omega watches at disc
Question for anyone: How exactly are the watches getting to grey market dealers? 1)Is it AD's going out of business and unloading their stock? 2)AD's trying to make their sales "quotas" and selling them to grey market at no profit? 3) ?? There just seems to be a lot of stuff available on grey market. Any explanations would be appreciated. Thanks.

Author:	Roffensian [ Tue Apr 20, 2010 5:54 am ]
Post subject:	Re: Court to decide if Costco can sell Omega watches at disc
Kodiak wrote: Question for anyone: How exactly are the watches getting to grey market dealers? 1)Is it AD's going out of business and unloading their stock? 2)AD's trying to make their sales "quotas" and selling them to grey market at no profit? 3) ?? There just seems to be a lot of stuff available on grey market. Any explanations would be appreciated. Thanks. ADs (usually, sometimes distributors) are selling to grey market dealers in order to maintain turnover. The sales aren't necessarily for no profit, although there won't be much there (but remember that retailers generally only pay arounf 55% of retail - at least for Breitling). ADs have to maintain sales volumes so they need to make sales, and in some cases it's the higher end watches in particular - in Breitling's case you have to have sales at a certain level to be allowed to carry Bentleys, and then have to deliver a certain level of Bentley sales to keep them.

Author:	Kodiak [ Tue Apr 20, 2010 6:26 am ]
Post subject:	Re: Court to decide if Costco can sell Omega watches at disc
Roffensian wrote: Kodiak wrote: Question for anyone: How exactly are the watches getting to grey market dealers? 1)Is it AD's going out of business and unloading their stock? 2)AD's trying to make their sales "quotas" and selling them to grey market at no profit? 3) ?? There just seems to be a lot of stuff available on grey market. Any explanations would be appreciated. Thanks. ADs (usually, sometimes distributors) are selling to grey market dealers in order to maintain turnover. The sales aren't necessarily for no profit, although there won't be much there (but remember that retailers generally only pay arounf 55% of retail - at least for Breitling). ADs have to maintain sales volumes so they need to make sales, and in some cases it's the higher end watches in particular - in Breitling's case you have to have sales at a certain level to be allowed to carry Bentleys, and then have to deliver a certain level of Bentley sales to keep them. Thanks, makes sense - AD's could still make a little profit (little is better than none to keep the brand ) and grey market dealer makes a little also - everyone is happy (except manufacturer).

Author:	Roffensian [ Tue Apr 20, 2010 6:32 am ]
Post subject:	Re: Court to decide if Costco can sell Omega watches at disc
The other thing to bear in mind is that it's often watches that don't sell that make it to the grey market. If a Breitling AD has had 3 Flying Bs in stock for 4 years then it's better to sell them at a loss to the grey market to free up cash to buy more popular models.

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Author:	sonyman [ Tue Apr 20, 2010 10:16 am ]
Post subject:	Re: Court to decide if Costco can sell Omega watches at disc
some great comments here and I agree entirely with whats been said, I know a local jeweler who used to be A Omega dealer but they took it away as they told him he had to stock at least 45 watches and sell at least 12 a month, for a small shop like him its impossible.He now stocks Orris and Longines as his high end brands.