In times of economic downturn, mass unemployment, or simply a desire to make some money in your free time. Many people have turned to buying and selling preowned goods. One large section of this grey market economy is flipping watches.
Firstly, there is nothing morally or otherwise wrong with flipping watches. Everyone needs to make money. If you’re able to find a watch for less than market value and then sell it to someone who wants this watch for their personal collection. There is really no harm in doing this. You’ve essentially become a middle man and made some profit for the amount of time you’ve put in.
However, get-rich schemes are dangerous as they do not exist. Flipping watches is NOT a get-rich-quick scheme. There are several pitfalls you will fall into if you take your eye off the ball for even one second. Watch flipping can be a difficult and sometimes dangerous business. It’s best to start off slowly rather than throw yourself in at the deep end. If you do, you will be eaten by sharks very quickly.
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How To Make Money Flipping Watches
Flipping watches is something almost anyone can do. You don’t need a degree, neither do you need an IQ of 150. The basic economics are simple. You buy a watch and then you sell it for more than you paid. On the surface, this doesn’t sound very difficult. However, like many things in life, it might take a short time to become competent. But it will take a lifetime to master the art of buying and selling watches.
Anyone making money flipping watches is very unlikely to tell you exactly how to do it. You are going to have to spend a lot of your own time finding out what works and what doesn’t by simple trial and error.
Watch flipping can either be a part-time or a full-time endeavour. Generally, the more time you put in, the more money you will get out of it.
The Basics
In general, flipping watches is a fairly low-margin business. After taxes and other costs, it would be pretty good if you were to take home 10% of your turnover. For very popular models such as Rolex Submariners. It would not be uncommon to buy these kind of watches for $13.5k and sell them for $15k. This example would only be 10% profit before tax.
For lower-end and rarer watches, these margins can easily triple. You would expect to make much larger profit margins on undesirable and vintage watches since you will almost always have to keep them for longer.
Lastly, if a watch is extremely expensive (6 figures). You will generally make a single-digit percentage on this model. With that being said, your profit should be a high dollar amount due to the price of the transaction. But you must make sure you’re able to sell the said watch and also that the transaction goes smoothly.
One Brand Or Many Brands?
Ideally, when you’re buying and selling watches you should know every scrap of information about every single brand. However, that is not possible since you’re not a computer. If you stick to a brand like Rolex and learn there is everything to know, you will already have a good knowledge base. However, will you be able to make money from only selling preowned Rolex watches?
What if someone brings an unusual brand to you such as Bell & Ross?
B&R isn’t the rarest brand, but they certainly aren’t common. If you aren’t able to distinguish whether the watch needs a service or whether it’s actually real. It’s going to be very difficult for you to become a watch seller if you don’t know many brands. The depth of information you will need to learn is massive.
Authorized Dealers
One questionable way to make money flipping watches in the current environment is to have an insider at an authorized dealer. This way, when the next batch of Rolex submariners or Daytonas are in stock, you will be first in line.
Both of the said watches sell for over list prices on the second-hand market due to a demand surplus and a lack of supply. If you could get your hands on these watches then making money would be easy. It is just that you’re going to have an extremely difficult time getting hold of these models since they’re so popular.
How Much Money Can You Earn Flipping Watches?
This is really hard to say. If you’re a one-man enterprise and are doing this full time, it’s likely that you would make a high 5 figure or low 6 figure salary. The negative behind this is that unless you open a store or some kind of trustable trade-in website, you aren’t going to be able to grow this business.
If you were able to sell 15 watches per month as an individual and profit $500-$1500 per watch, this would leave you with a low 5 figure to 6 figure income after expenses and taxes.
Common Pitfalls
Getting Scammed
There are so many scams in watch flipping I could write an entire article on this itself. Here is a list of some of the common scams you will encounter.
As mentioned earlier, margins are generally fairly low in the business of watch flipping. Therefore it’s pretty devastating if you spent $12k to make $1.5k and you get scammed. You will be out the entire $12k and cannot make the original profit either.
Dial Switching
Dial switching is a very sneaky scam. This will generally be done when one model of watch is worth a lot more than its other closely related model (mostly submariners). Here a fake dial will be switched into a real watch and sold as the rare model. The entire watch will be real, including the movement and bracelet. However, the dial will be fake and you will be out a lot of money.
Frankenwatches
Frankenwatches are almost as scary as they sound. Often they have been repaired from all sorts of various parts that are non-OEM. When you take the back off the movement and have a look inside, you should realize that the watch is not what you thought it was.
Clones
Every year China will release more accurate clones of highly desirable watches. These clones will flood the market and can look very convincing. If you are not a savvy watch dealer who knows exactly what he is doing, it’s likely you will be caught out by a new clone as soon as it hits the market.
Swapping Out Watches Through Slight Of Hand
The oldest trick in the book. But you will truly be surprised about just how fast these people can switch a real watch with a fake. This is literally their profession, to trick honest people by quickly changing watches. Therefore you must have eyes like a hawk and never be distracted or let your guard down.
Stolen Watches
Stolen watches can be very dangerous since if the individual looks like they are a law-abiding citizen, you will not think twice about buying “their” watch from them. When you do find out that the watch is stolen you will be out, both the money and the watch.
What makes this even trickier is that these stolen watches will be offered to you are very generous prices since the person who is trying to sell it to you haven’t paid a dime for it. You will truly need a 6th sense to stay on top of this scam.
Fake Cash
This speaks for itself. It happens in all sorts of other industries, not just watch-flipping. Often real dollar bills will be mixed in with fake bills so that you don’t notice. Even if you put 40% fake bills into a $5k payment. This is an instant gain of $2000.
Other Sophisticated Scams
There are other various bank transfer and credit card scams to be wary of. These scams can either be basic or very complicated. Once again, if I were to write about these tricks, I could fill an entire article on skullduggery.
The bad thing about this type of scam is that it is always evolving. It is never basic and even when you think you have seen everything, a new type of scam will appear and instantly have you second-guessing yourself.
Theives & Muggers
Unfortunately, this is part of life in any industry which deals with expensive products or large quantities of cash. Watch stores and watch dealers have long been a target of criminal gangs. If you live in a state where you are allowed to protect yourself with a firearm, this may mitigate the risk somewhat. However, you are not out of the woods simply because you’re allowed to carry.
If a criminal gang know that you regularly, buy sell and hold luxury watches, you will become a target at some point. You can’t always be on your guard, and if you do not have systems in place to protect yourself then at some point you will be robbed.
The first step to protecting yourself from these people is to minimize your risk of being robbed. You cannot predict the future, but you can discourage these criminals from choosing you as the target and choosing an easier target other than yourself instead.
Hot Models Losing Value
One risky way of making money is buying a lot of “hot” models and then hoping these either increase in value or at least stay the same.
The riskiest of watch dealers are the ones who buy up as many limited edition watches as they can. In modern-day watch selling, this is usually Richard Mille timepieces. As there are a very low amount of each design produced, resellers are able to charge premium prices to their customers.
This can go wrong in a variety of ways. For years Richard Mille has been the most expensive name in watchmaking. At some point however, this is going to change and something else will take its place. When this happens, you do not want to be stuck with 20 RM watches that you spent $200k each to buy. Whilst you may have been enjoying selling them for $220k each in your heyday, you will wish that you had a diversified inventory when the crash comes.
Miscalculation of Margins
This is relatively difficult to do if you’ve been in business for a long time, but can still happen. If you are unaware of state laws and taxes, you could find yourself with a large bill to pay. This may not send you broke, but you might end up making a lot less money than you thought you were going to make.
This can also happen to beginners when they misidentify watches with a similar model. For example, a standard green Rolex submariner will sell for a lot less money than a Hulk. If you confuse the two because you were excited to make a quick profit, you will likely lose money on the deal.
Cashflow & Desirable Models
In business, the first rule of making money is to manage your cash flow. If a cash flow is poorly managed, it can send the most profitable businesses bankrupt.
Whilst you are not a multi-national corporation and unlikely to go bankrupt if you are not buying on credit. Similar rules still apply. If you are filling up your inventory with underpriced watches, this can be a good thing. However, it can also be a bad thing.
Even if you were to pay 50% under market value for a vintage watch. If nobody wants to buy this watch for one year, you may have $10k tied up in a single piece for a lot longer than you wanted. If you keep making this mistake, you will find all of your cash is tied up in inventory which you cannot get rid of. Buying watches under market value is the most difficult part of the industry. However, you shouldn’t underestimate how hard it is to sell watches that are “undesirable”.
Overall Thoughts
In conclusion, you probably shouldn’t get into watch dealing if you don’t love watches, know a lot about watches or just want to make some fast money.
Making money buying and selling watches is a lot more difficult than you would think, it’s likely a lot harder than buying and selling used cars. This is because there might be more complications when selling cars, but far fewer people trying to scam you and no risk of buying a fake Jeep.
It is possible to make money selling watches, but you should only consider this as a career if your heart is in the watch game. Otherwise, you will either become victim to one of the many pitfalls or simply burn yourself out due to a lack of passion for the business.
