The mechanism
Brands like Rolex, Patek Philippe, and AP deliberately produce fewer watches than retail demand. The watches are allocated through ADs to existing customers; new buyers face 2-4 year waitlists. The grey market emerges as the resale channel for buyers unwilling to wait: someone who got a watch at retail can resell to someone who wants it now. The grey-market premium is the price of immediate availability.
Why brands tolerate it
From the brand's perspective, the grey-market premium is mostly net positive. It signals that the watches are desirable, supports retail pricing (no incentive to discount when grey market is at premium), creates the cultural status that drives long-term demand, and rewards loyal collectors who have AD relationships. Brands could increase production to eliminate the premium but choose not to; the prestige pricing is a strategic choice, not a supply-chain accident.
The 2021 peak and 2022-2023 correction
Through 2020-2021, grey-market premiums hit historic highs: Patek 5711/1A reached CHF 240,000 (against CHF 35,000 retail), Daytona 116500LN reached CHF 60,000 (against CHF 15,000 retail), Royal Oak Jumbo 16202 reached CHF 130,000 (against CHF 35,000 retail). The market corrected sharply through 2022-2023; most of the most-speculated references dropped 30-50% from peaks. The lesson: grey-market premiums are cyclical; they expand in bull markets and contract in bear markets.
What's actually happening
The grey-market premium reflects three things: (1) the genuine supply-demand mismatch the brand has engineered, (2) the cultural / status premium of the specific reference, and (3) the speculative behaviour of buyers expecting future appreciation. The first two are persistent; the third is cyclical. References with strong (1) and (2) (Daytona, Submariner) hold their premium through corrections; references where (3) was the main driver (some Hublot LEs, certain Audemars Royal Oak Offshore variants) crashed back to retail or below.