The best and probably obvious reason for scarcity

[7enderbender]

Originally Posted by BroncoOne

Wealthy Chinese, Russians and anyone else in a country run by a kleptocracy have been moving wealth out of those countries for years to get it beyond the reach of the rulers.

Look at properties in Europe and the US and some island nations and principalities. See what they have been buying.

Now that the money is liberated, they can spend it freely. I don’t expect Rolex demand to abate at all.

The shortage problem could be simple: I suggest a reverse Lex Koller rule. Just stop selling to non-Westerners. Rolex supposedly has a problem with “flippers” - so why sell to oligarchs and enemies?

[thenewrick]

Rolex is happy to sell to anyone, especially emerging markets. USA and Western Europe are very old markets and low priority. They aren’t sponsoring football and Basketball they’re sponsoring golf, soccer, racing and “international” activities.

Rolex doesn’t care about American consumers at all.

[RealMadrid1988]

Originally Posted by thenewrick

There was a post a few months back showing Rolex production numbers and shipments to which countries.

Originally Posted by thenewrick

The point of the article was that Rolexes are scarce due to demand and low supply. I was just proving him wrong by giving examples of how demand hasn’t increased from consumers only other vendors who have found a way to get high margin profits from a very few people.

Economic merits of your argument aside, where is the evidence for some of these assertions? I am not aware of Rolex ever releasing specifics on its total production numbers — let alone more granular details about shipment numbers to specific countries. As far as I know, this is proprietary information that Rolex has closely guarded for as long as I have been familiar with the company.

Similarly, you say demand for watches has not increased among end users — only among other vendors. Where is your evidence for this?

[7enderbender]

Originally Posted by thenewrick

Rolex is happy to sell to anyone, especially emerging markets. USA and Western Europe are very old markets and low priority. They aren’t sponsoring football and Basketball they’re sponsoring golf, soccer, racing and “international” activities.

Rolex doesn’t care about American consumers at all.

I see. So Americans don't play golf or don't care for racing, boating or tennis. Check.

[thenewrick]

There was a post with the ingot not long ago but I haven’t searched for it. You can if you do some digging.

I think demand has increased, some. But clearly not enough to reduce supply and availability. I’m just using Chrono24 for data as they’re the biggest and most consistent source of availability that I know of.

If demand were increasing we’d see less supply and availability not more. Some of this is due to price increases but demand isn’t affected by price. Only purchase tolerance. If the demand was there, more of these would be on peoples wrists and not piling up in vendor catalogues.

If the price is increasing and the availability is increasing, something fishy is going on. It means less people are buying. The ones who are actually buying are paying a lot more than it’s worth because price is no object for many luxury goods consumers.

[thenewrick]

Originally Posted by 7enderbender

I see. So Americans don't play golf or don't care for racing, boating or tennis. Check.

Some Chinese people love NASCAR. Just an accurate generalization.

[RealMadrid1988]

Originally Posted by thenewrick

There was a post with the ingot not long ago but I haven’t searched for it. You can if you do some digging.

I think demand has increased, some. But clearly not enough to reduce supply and availability. I’m just using Chrono24 for data as they’re the biggest and most consistent source of availability that I know of.

If demand were increasing we’d see less supply and availability not more. Some of this is due to price increases but demand isn’t affected by price. Only purchase tolerance. If the demand was there, more of these would be on peoples wrists and not piling up in vendor catalogues.

If the price is increasing and the availability is increasing, something fishy is going on. It means less people are buying. The ones who are actually buying are paying a lot more than it’s worth because price is no object for many luxury goods consumers.

But we aren’t seeing a huge increase in availability. Take the white Daytona, for example. On Chrono24 (your data source), if you filter for new models, available now in the United States, you’re left with just 39 results. 39! Someone mentioned earlier in this thread the (unverified) million-unit production figure that’s often bandied about. Assuming that were true, 39 examples of a model that has been in production for several years now is not an indication to me of a sudden glut in availability.

[Mendota]

Originally Posted by RealMadrid1988

Economic merits of your argument aside, where is the evidence for some of these assertions? I am not aware of Rolex ever releasing specifics on its total production numbers — let alone more granular details about shipment numbers to specific countries. As far as I know, this is proprietary information that Rolex has closely guarded for as long as I have been familiar with the company.

Similarly, you say demand for watches has not increased among end users — only among other vendors. Where is your evidence for this?

Rolex does not release the numbers themselves, but the Swiss governing body for watch manufacturing does release all of these numbers. Total units produced for each year are listed by each manufacturer. This is common knowledge here and easily found online. The report is issued annually for the prior year's production.

[7enderbender]

Originally Posted by thenewrick

Some Chinese people love NASCAR. Just an accurate generalization.

https://www.fhs.swiss/file/59/watchmaking_2020.pdf

This is all hard to gauge and no usable data is available for Rolex anyway. But as a whole the key markets for watch imports are China, the US, Hong Kong and Japan. You can also see how the Swiss watch industry took a massive hit in 2020 - Rolex probably being an exception. You can also see how even during that dreadful year the imports for watches into China are UP by 20%. I personally find that reason for concern on many levels but don't mind me.

[thenewrick]

I wouldn’t say there’s huge increases in availability. I’d say that more are available for sale because more people are trying to cash in on high margins of pino buyers. The tape a banana to a wall and ask $180k for it effect. As long as a few number of buyers are willing to pay that’s all it takes to list them for yolo or HODL.

I haven’t kept super close data points just my observation. It was just a reaction to the article saying these things were scarce when there’s more available now than there was a year ago because people are all trying to catch a whale.

I’d definitely recommend tracking it yourself if you’re interested in the subject or looking for a trend if you’re buying or selling. I’m not in the market myself so I have no skin in the game.

My prediction is overall prices increase because of inflation/Rolex price increases and that specific high hype models grow more slowly in price or actually go down in price.

To check this find a watch reference, maybe take the average of the bottom 5 cheapest available on Chrono24 that are USA and available now with actual photos not just screenshots from Rolexes website. Then check the average price in 6 months or a year and see how it changes. See how many available references there are in that time.

When prices go down we usually see 2 things; people selling or people holding in hopes the price goes back up. But you don’t generally see people buying the dip on luxury goods. If Pepsis go from $22k average asking price to $20k average asking price in 1 year most people are going to hold onto their money and hope to see it drop further and not buy them expecting it go to back up or attempt a flip

[teck21]

Originally Posted by 7enderbender

The shortage problem could be simple: I suggest a reverse Lex Koller rule. Just stop selling to non-Westerners. Rolex supposedly has a problem with “flippers” - so why sell to oligarchs and enemies?

Most people buying Rolex watches in non-western parts of the world have absolutely nothing to do with oligarchs, crime or corruption.

They go to work, earn their paycheck and decide they want to treat themselves to a Rolex.

These people are your enemies?


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[Old Expat Beast]

Originally Posted by 7enderbender

The shortage problem could be simple: I suggest a reverse Lex Koller rule. Just stop selling to non-Westerners. Rolex supposedly has a problem with “flippers” - so why sell to oligarchs and enemies?

Rolex ADs have been operating in the Far East since the late 1920s and 1930s...selling to "non-Westerners" in place like Singapore, and Hong Kong. That's quite a few years longer than in the USA, just FYI.

[RolexSimon]

Originally Posted by teck21

Most people buying Rolex watches in non-western parts of the world have absolutely nothing to do with oligarchs, crime or corruption.

They go to work, earn their paycheck and decide they want to treat themselves to a Rolex.

These people are your enemies?


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There is a reasonable body of evidence that top-end watches are a reliable way to money-launder and / or move money to USA / UK / Europe. Just look at auction prices at the major houses. You can get the product far cheaper at trusted grey dealers.

[Fleetlord]

Chrono 24?


Most of those are ghost listings.

[TheVTCGuy]

The only thing I don’t understand… well, there are a LOT of things I don’t understand… but let’s go on the premise it is strictly a supply and demand issue. Assuming Rolex manufacturers around a million watches a year, then the demand (obviously) must be much much higher, as the article states (at least) five million want-to-be-buyers a year. This would explain the difficulty in obtaining a SS (or any model) at an AD at MSRP; makes sense. But here is what I don’t understand. WHAT, has happened in the last three-five years to make a Rolex so must-have desirable? Yes, the name Rolex is of course Iconic, but it was just as iconic five years ago. It is difficult for me to believe there has been such a boom of demand for one manufacturer in such a (relatively) short time. What happened or what did Rolex do to make the demand for their product skyrocket in the last three years?

[powerfunk]

Originally Posted by thenewrick

I don’t think there’s any modern Rolex that can’t be bought right now and shipped to your doorstep within 24 hours.

118238 with a cognac dial comes to mind. Been looking for months.

Originally Posted by thenewrick

check anywhere and you’ll see plenty of supply. 160 Pepsis for sale on Chrono24 right now. That’s not scarce in the slightest.

Well that's just Pepsis. Supply of Day-Dates, meanwhile, seems to have plummeted. Bob's Watches only has 2 DD40's for sale on their entire website. It used to be full of them. And there's certainly not "plenty of supply" for turquoise OP41's and OP36's. Even 160 Pepsis isn't very many...there are well over 500 cities in the world with over 1 million people.

Originally Posted by thenewrick

Those who were influenced then get curious and ask their ADs if they can get a Pepsi

The vast majority of people asking about Pepsis aren't doing so because of the markups they heard about on internet forums. That's just not reality. They're asking because it's a sweet watch. Demand is high relative to supply...that's all.

[brandrea]

Originally Posted by Old Expat Beast

Rolex ADs have been operating in the Far East since the late 1920s and 1930s...selling to "non-Westerners" in place like Singapore, and Hong Kong. That's quite a few years longer than in the USA, just FYI.

Always appreciate your level head Adam

[1William]

A very interesting post and discussion. I do see a lot of assumptions being made based on on how the poster wants to view the data and information. Without a clear and agreed upon definition of availability the discussion just circles around. I will follow this thread and continue to enjoy my fellow members thoughts.

[thenewrick]

Prices have gone up because of a lot of new money in the world with younger buyers who are more trend oriented consumers. Essentially new crypto Chinese millionaires and other millennials with new money from crypto or other who follow social media primarily for fashion advice. 10 years ago millennials had no idea what a Pepsi was. Now their favorite entertainers on social media are flaunting their “Pepsi”

Nothing wrong with any of this. And exporting luxury goods to China is a very good thing. I’m happy about all of these things happening.

But no these items aren’t scarce and supply isn’t limited really. Only in the sense that they retain or increase in value some. Which is a good thing.

I’d be curious what a trusted reseller is offering cash for a Pepsi these days. I don’t want to waste their time asking myself if I don’t actually have one. Then you could get a more clear idea of actual investment returns and real supply/demand scarcity.

If a Pepsi has only outperformed inflation and underperformed vs the index then I’d consider it a bad investment and not something I see as increasing in the future.

Never know though. Rolex could discontinue the Daytona and GMT and prices could steadily increase too. Just my opinion.

[IamJacky]

Originally Posted by TheVTCGuy

WHAT, has happened in the last three-five years to make a Rolex so must-have desirable? Yes, the name Rolex is of course Iconic, but it was just as iconic five years ago. It is difficult for me to believe there has been such a boom of demand for one manufacturer in such a (relatively) short time. What happened or what did Rolex do to make the demand for their product skyrocket in the last three years?

Personally I never believed Rolex did much to facilitate this gargantuan surge in demand within the past 5-10 years other than simply being themselves doing what they do best - that is producing the same quality, durable and iconic Rolex watches in relatively similar quantities per annum.

In my opinion what happened in the past few years that caused this crazy surge of a demand has a lot to do with combinations of rapid growth in social media (FB, Instagram, Twitter), information-sharing technology (WeChat, WhatApp, LINE, YouTube, Wikipedia), e-commerce platforms (e-Bay, Chrono24, online/mobile banking etc.) and "new money" from the likes of China and other rising economies and industries.

Information have become more accessible than they have ever been, and watches can be bought and sold more quickly and easily than they ever could, all thanks to the advancement of the internet/social media/technology that have weaved into most of our daily lives.

I remember when I bought my first Rolex in 2012, I had to do a lot more due diligence in research than I ever needed today. Back then I stumbled upon TRF and although it had the wealth of resource I needed, I had to spend time to go through certain threads to learn about a particular watch. Today? I simply type in any reference I want on YouTube and boom I get multiple full in-depth 4K video reviews of a specific watch I'm after, I can also easily learn about its MSRP, market price, specifications, and whatever else I need to know about it (in almost any language), if I want to buy, I can easily WhatsApp/FaceTime/FB the seller, get hi-def photos/videos, and pay instantly with online transfer - all on my phone too.

What the older WIS appreciated about Rolex used to be shared among smaller communities of people, but thanks to the internet and its rapid growth, these information have spread out like wild fire within the past 5-10 years, and so it attracted many new categories of buyers very, very quickly.

Add that to the new money/new riches that spawned within the past few years, people who are getting the first big paycheck or making the big return on their investment etc., they would quickly find out that "Rolex makes super durable, long lasting watches that keep great value and may even increase in value." yet, at the entry level price of roughly $10k range Rolex has practically zero competition for these new consumers to choose from, and so the snowball/FOMO rolls bigger and bigger - and here we are today, in 2021 where an Oyster Perpetual sells for 3X MSRP.

[thenewrick]

^ this is a good take.

I got into watches after being a car enthusiast around 2018. Got an inexpensive watch to experiment with mechanical watches and bracelets and see what I liked and didn’t like about that experience. Found what I liked and decided to get a first luxury watch. Shopped for over a year and ended up on an OP41 because it was a combination of all I could afford and all the specs and design I was looking for. Been very happy with it. I also was on the list for submariner and other models and removed myself from the list because over time I lost interest in them. Some designs are interesting at first and become uninteresting over time. I’m glad I had some time to wait and see how certain designs sat with me. My favorite Rolex design so far is the Z Blue Milgauss. After all this time it’s still my favorite while others became blasé for me.

[dtwer]

Originally Posted by thenewrick

One thing I’ve noticed that is interesting to me is that as prices have increase, supply as also increased but examples aren’t selling as quickly. There’s plenty of supply and models are “sitting on shelves” of used jewelry vendors. They don’t have to sell all of them just one here and there to the person who’s willing to pay the price to get it now.

Because they aren’t scarce or rare and because there are a large supply of watches and prices are being artificially inflated by a select few of people willing to pay extra because of FOMO I see prices going down soon. Especially on models that have lost their social media appeal; Pepsi, Daytona, Hulk.

The game now is to see how long used jewelry vendors are willing to sit on inventory that isn’t moving without reducing prices.

I’m just using Chrono24 and recommended vendors as data points.

When vendors start seeing prices drop they will all begin undercutting each other because nobody wants to be caught holding the bag. The buyers paying 2x 3x retail don’t really care because they’re generally very wealthy to begin with. People paying that much above market value are not concerned with prices outside of a little bragging rights.

If you want a good price on a Rolex just be willing to wait until those holding supply can’t tolerate holding supply anymore. The past few years have been huge profits for used jewelry salesmen so there’s no reason for them to stop the profit party now. So if you’re a savvy buyer just wait.

As an aside when I was young I wondered what would happen if I put a pebble up for sale on EBay for $1 mil. I figured I didn’t have much to lose and you never know. Someone rich might buy it for a laugh or yolo. That’s essentially what’s happening now with certain luxury goods. People are just asking silly prices to see if anyone is willing to pay it. There’s been enough wealthy people willing to buy them here and there to sustain this phenomenon for the past few years but all trends end. These Beanie Babies will lose their Instagram appeal and the extra cash will go towards the new new.

So in short, I disagree with the author. Rolex aren’t scarce. Demand is artificial because models are increasing in supply at used jewelry vendors. Author needed to do more research over time to see the trends. Asking price isn’t actual sales and isn’t sales volume. Pebbles aren’t worth $1mil even if someone buys one for $1mil. Saying something is worth whatever someone pays for it isn’t a truism it’s sort of simpleton economics. A banana taped to a wall sold for $120,000 at Art Basel in Miami recently. This does not mean a banana taped to a wall is worth $120,000. It does not mean if you tape a banana to a wall you will be able to sell it for $120,000. It does not mean in the long run if there are several competing vendors all selling bananas taped to walls they will sell for $120,000.

Hope you enjoyed this mornings Rolex economy lesson. :)

I agree with this; very good analysis.

The grey market for Rolex is now operating under somewhat of a similar principle of the phone scams or phishing. 98% of the phone calls made or phishing emails sent by the scammers may result in no success, but as long as the remaining 2% works, it's pay dirt for the scammers.

[thenewrick]

Also watches don’t really age, don’t take up much space, and lots of other little reasons why it’s very easy to hold onto stock and list for sale for long periods of time without reacting to market pressures. It’s not like a car where if a dealer holds onto it too long it’ll be too old to sell as new.

[bob sims]

Originally Posted by teck21

Rolex has a customer base way larger and way more diverse than these other brands, and this includes (quite obvious from this forum) a large number who don’t accept the brand’s luxury positioning (by insisting it is mass produced etc).

[RolexSimon]

I think the conclusion is 100% accurate. Prices not going down any time soon. Maybe some minor adjustments for certain models but that will be it.

[subdownunder]

Heard an interesting take on this problem on youtube.

As women are divorcing their husbands at ever increasing rates and taking them to the cleaners, watches are one asset they can plough wealth into and keep. Personal items.

Smaller reason buy makes sense

[teck21]

Originally Posted by subdownunder

Heard an interesting take on this problem on youtube.

As women are divorcing their husbands at ever increasing rates and taking them to the cleaners, watches are one asset they can plough wealth into and keep. Personal items.

Smaller reason buy makes sense

Billionaire divorces are but a tiny fraction of divorces happening everywhere. We hear of them only because of how rare they are.

Most women in developed countries who buy Rolex watches can afford them on their own means instead of needing to ‘take their husbands to the cleaners.’


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