7 Reasons and Doubts on Rolex cutting SS Professional/Sport watch production

[Aventura]

Dear Rollei and Forum guys
Your analysis is sensational and I agree on almost everything but with some comments.
Regarding point 3 I think Rolex does not do it to defend themselves but to defend the countless official dealers around the world who have an immense stock of those pieces.
Regarding point 7 I do not know where the people talking about Rolex is an investment. I bought an 116610 in January 2013, the official price was the same as now 8550 + tax = 9150 (it was not the price I paid but that is not relevant now). I just sold it at 6800 a month ago and a little further back when there was no shortage I had been offered 5800 / 6000.- Can you tell me where the investment is? Apart you can only sell to a gray dealer because no private was going to send me that amount of money in advance and expect me to send the watch because they do not know me and we all know that except the recognized gray dealers this is full of scammers.
Again, I reiterate that your comment is very, very good.

[holdtime]

Originally Posted by WhiskeyKoffee

I honestly think it is very, very simple. Rolex is playing hard to get. It's the oldest trick in the book. In a day when your watch will do everything but cook your breakfast, Rolex needs to stay in great demand, so they play hard to get. And it is working.

No need to overthink this.

Agree.

[Fleetlord]

Originally Posted by c41006

So are you saying that Rolex watches are cheaper than most people think they are? Also I think the majority of people prefer SS or PM over TT. Maybe I’m wrong but I can’t imagine too many people walk in to look for a SS piece and walk out with a PM. The difference is almost $20k.

Yes. There are plenty of people with little knowledge about watches and a lotta money. Just go on YouTube and watch all these people buying luxury goods including Rolex, that have money and no idea what they are buying.

There are more ways than ever to have disposable income to drop on PM Rolex.
Rolex knows this and instead of being stunned by it, they are acting on it.

These people will spend whatever it takes. Rolex is just guiding them to where it's best for Rolex.

[q8rolex]

Originally Posted by Fabrice M

I think the issue is that there are too many fairytales about what Rolex is doing or not doing. I feel the answer is simpler, Rolex is a genius marketing machine, which matching logistic, manufacturing and management. They don’t have to raise production, all they have to do is raise prices, it keeps the brand alive and why it makes it so much more special. Omega, for instance have shot themselves in the foot by raising production of their watches, with their endless “special editions” and watch variations which have have lost the great narrative they once had. Rolex doesn’t have to raise production because the have Tudor. I believe they revive Tudor for that exact reason, to be able to continue to grow revenues without compromising the “Golden goose”: Rolex. And what’s amazing is that Tudor doesn’t feel like a cheaper version of a Rolex, they kept the quality, design, integrity, know how of the parent company.

well said

[lucevan le stelle]

Originally Posted by Fleetlord

I'll try to be more blunt.

In one fell swoop, Rolex is:

1) Protecting the Brand. The pricing on grey market watches prior to the limitation in distribution was too low. It was ridiculous and out of hand. Stickered watches were all over the place. It diminished the brand.

2) Going upmarket.. The Rolex brand is already very strong... Stronger than $8,500 submariners.
Non WIS who buy the most Rolex' by far think that Rolex cost more than that, so they settle for SS sports because they are thrilled with how "cheap" they are instead of TT and PM. People will spend more to obtain Rolex if they have limited lower price options. This has been proven already.

This is what Luxury Brands do. It's for the best.

Clear and good summary, makes sense.

[Jason71]

Interesting caveat imho. World population has more than doubled from 3 billion in 1960 to over 7 billion in 2015. Pair that with the recent increase in world wealth and I believe we have the reason for the recent shortage. Add an additional 100 million people to the earth every year and eventually EVERYTHING will become more scarce or harder to obtain.

[c41006]

Originally Posted by Fleetlord

Yes. There are plenty of people with little knowledge about watches and a lotta money. Just go on YouTube and watch all these people buying luxury goods including Rolex, that have money and no idea what they are buying.

There are more ways than ever to have disposable income to drop on PM Rolex.
Rolex knows this and instead of being stunned by it, they are acting on it.

These people will spend whatever it takes. Rolex is just guiding them to where it's best for Rolex.

It makes sense. They are targeting the impulse buyer with lots of disposable income. Meanwhile the people who can’t afford or don’t want to spend the money on a PM piece can still get a SS piece they just have to be more patient.

[Ticknaway]

Originally Posted by karmatp

I have already purchased 2 watches since all this Rolex garbage started and couldn't be happier. I have moved onto different brands and don't long for any Rolex watches any more. Thanks Rolex for pushing me to enjoy other brands. It is nice to log into other brand forums and not hear investment silliness or waiting list complaints.

Eventually a huge swath of Rolex buyers will be at the same point. There are so many beautiful watches out there!

[Bigblu10]

Originally Posted by Jason71

Interesting caveat imho. World population has more than doubled from 3 billion in 1960 to over 7 billion in 2015. Pair that with the recent increase in world wealth and I believe we have the reason for the recent shortage. Add an additional 100 million people to the earth every year and eventually EVERYTHING will become more scarce or harder to obtain.

Wait until it is FOOD and WATER. When these become scarce, SS Rolex will not even be a thought in anyone's mind.

[Bigblu10]

Originally Posted by c41006

So are you saying that Rolex watches are cheaper than most people think they are? Also I think the majority of people prefer SS or PM over TT. Maybe I’m wrong but I can’t imagine too many people walk in to look for a SS piece and walk out with a PM. The difference is almost $20k.

They don't, plain and simple. Someone who walks into an AD looking to spend 8-9K for a stainless Sub is not going to drop 30K for a yellow or white gold Sub just because there are no stainless Subs in the display case or in the vault. PM watch buyers are a much smaller niche.

[c41006]

Originally Posted by Bigblu10

They don't, plain and simple. Someone who walks into an AD looking to spend 8-9K for a stainless Sub is not going to drop 30K for a yellow or white gold Sub just because there are no stainless Subs in the display case or in the vault. PM watch buyers are a much smaller niche.

Yeah I don’t think they do either but I think Fleetlords point was that an uninformed buyer with a bunch of cash walking in to buy a Rolex just because it’s a Rolex might drop that kind of money if there aren’t any cheaper options. (Assuming they don’t want a SS DJ)

[karmatp]

Originally Posted by Jason71

Interesting caveat imho. World population has more than doubled from 3 billion in 1960 to over 7 billion in 2015. Pair that with the recent increase in world wealth and I believe we have the reason for the recent shortage. Add an additional 100 million people to the earth every year and eventually EVERYTHING will become more scarce or harder to obtain.

Jason is right. Mods can close thread now. It 100% comes down to Rolex underestimating the demand for 2017. I have heard this straight from my local Rolex rep and heard it from other AD's that heard the same from their reps. Just give it time and it will be back to normal. Just wait until the next economic downturn, we will all be able to get the hard to get models cheap.

[the dark knight]

Originally Posted by karmatp

Jason is right. Mods can close thread now. It 100% comes down to Rolex underestimating the demand for 2017. I have heard this straight from my local Rolex rep and heard it from other AD's that heard the same from their reps. Just give it time and it will be back to normal. Just wait until the next economic downturn, we will all be able to get the hard to get models cheap.

As a 100% discretionary purchase, luxury watch sales are probably directly correlated with economic cycles. I purchased my watch during the fall of 2008 as Lehman was going under, and the AD was basically begging me to take the watch. I remember pointing out something about the Sub in the display case and they just brought out another one from the back for me to take.

[GradyPhilpott]

Originally Posted by Fabrice M

I think the issue is that there are too many fairytales about what Rolex is doing or not doing. I feel the answer is simpler, Rolex is a genius marketing machine, which matching logistic, manufacturing and management. They don’t have to raise production, all they have to do is raise prices, it keeps the brand alive and why it makes it so much more special. Omega, for instance have shot themselves in the foot by raising production of their watches, with their endless “special editions” and watch variations which have have lost the great narrative they once had. Rolex doesn’t have to raise production because the have Tudor. I believe they revive Tudor for that exact reason, to be able to continue to grow revenues without compromising the “Golden goose”: Rolex. And what’s amazing is that Tudor doesn’t feel like a cheaper version of a Rolex, they kept the quality, design, integrity, know how of the parent company.

[Rollei]

Originally Posted by Aventura

Dear Rollei and Forum guys
Your analysis is sensational and I agree on almost everything but with some comments.

Regarding point 7 I do not know where the people talking about Rolex is an investment. I bought an 116610 in January 2013, the official price was the same as now 8550 + tax = 9150 (it was not the price I paid but that is not relevant now). I just sold it at 6800 a month ago and a little further back when there was no shortage I had been offered 5800 / 6000.- Can you tell me where the investment is?

If you hold it for long enough, I can guaranteed that you will get more of what you have paid for. Look at the 5 digit Rolex sport model, the regular 16610 have gone up on the sale forums than what it was before ten years ago. Okay, let's forget about Rolex and Patek, how about the iconic Omega Speedmaster manual wind. Pre-owned price has climbed up and up. Another good example would be A Lange and Sohne "Lange 1", back in the 90s, you can buy one of those for the price of today SS professional sport Rolex, but the price is now

[jets]

It's probably some silly reason like maintaining as close to an even ratio of dj-dd/dress watches and sport watches out in the wild. We know they could ramp up supply of sport watches if they wished to but they don't. Any DJ you can get in a short time as they're not sought after as much as the sport watches. I mean anyone can walk in and a week or two later have the DJ/DD they want in any configuration. Try that with a SS sport watch. Until the SS BLRO there were only 2 SS GMTII variants. DJ has a myriad of different options from bezel to dial and bracelet but you can get that with ease. How hard could it be to put out a few thousand more SS sport watches per month? We'll never know why but I think it is as simple as not wanting to oversell them otherwise it won't be as desirable. In the luxury game people want what they can't get and it is the way things will be from here on out.

[GB-man]

Originally Posted by the dark knight

Just my theory/opinion. But I think the explanation is rather simple. I believe the Swiss watch industry in general started seeing a slight comeback in 2017, especially towards the latter parts. Demand in mainland China seems to be surging again. I believe I read something that said the corruption crackdowns are easing, but still officials don't want to be seen in anything too ostentatious, so maybe instead of buying a PP they buy a SS Rolex.

2017 also saw an insane runup in most assets. Real estate, stock market, crypto, whatever. Towards the end of the year consumers worldwide were feeling wealthier and more optimistic. A great time to purchase a nice watch, particularly a Rolex.

So I think it's a massive and sudden surge in DEMAND that caught Rolex a bit off guard. And I doubt a company like Rolex can just all of a sudden start ramping up production at the snap of a finger. Nor do I think they'd want to, for fear of glutting the market if/when a recession occurs. So I personally don't think there's any kind of strategy afoot (yet). I think simply, again, there was a massive and sudden surge of demand that caught Rolex off guard (especially after 2015-2016 downturn in the industry).

Yes I agree. It’s not a conspiracy.

[Tomas Eriksson]

Reading the so many threads on this subject has pointed me to these conclusion if Im to believe what is being said. What many here are saying is pretty much that Rolex SS sport models are going towards being targeted to people who can afford and own precious metal pieces. It does make sense if Rolex has a strategy to "adjust" its target towards a higher tier of customer base.
But if that is true, the question then is what about the customers that dream of and has as a end goal to own a SS Sport model? Are they supposed to go with Tudor instead?

[Jason71]

Originally Posted by karmatp

Jason is right. Mods can close thread now. It 100% comes down to Rolex underestimating the demand for 2017. I have heard this straight from my local Rolex rep and heard it from other AD's that heard the same from their reps. Just give it time and it will be back to normal. Just wait until the next economic downturn, we will all be able to get the hard to get models cheap.

It is tough for a bunch of watch fanatics, but this is why I have a watch-fund that I am squirreling-away as much money as possible. The next economic downturn will see a glut of nice pre-owned watches on the market. The current climate of being a seller’s market will be the exact opposite.

I remember in late 2007 early 2008 when this happened and wishing that I had around $50,000 to spend on watches.

[Roger Lococco]

Gut feel. I think that Rolex brought in a management consulting firm during the 2015 downturn and has changed their strategy. Part of the recommendations being based on a view of current and future product mix demand in China. Over time, cede the stainless steel tool watch market to Tudor. In parallel, move more "upmarket" and fill in a void that is the combination of expensive + durable + PM watches at a price point lower than PP, VC, ALS, AP - at the same time leveraging the Rolex scale and mass-production cost advantages, along with the Rolex brand and sales distribution network.

[c41006]

Originally Posted by Roger Lococco

Gut feel. I think that Rolex brought in a management consulting firm during the 2015 downturn and has changed their strategy. Part of the recommendations being based on a view of current and future product mix demand in China. Over time, cede the stainless steel tool watch market to Tudor. In parallel, move more "upmarket" and fill in a void that is the combination of expensive + durable + PM watches at a price point lower than PP, VC, ALS, AP - at the same time leveraging the Rolex scale and mass-production cost advantages, along with the Rolex brand and sales distribution network.

Well thought out

[bigpopaz]

Originally Posted by Roger Lococco

Gut feel. I think that Rolex brought in a management consulting firm during the 2015 downturn and has changed their strategy. Part of the recommendations being based on a view of current and future product mix demand in China. Over time, cede the stainless steel tool watch market to Tudor. In parallel, move more "upmarket" and fill in a void that is the combination of expensive + durable + PM watches at a price point lower than PP, VC, ALS, AP - at the same time leveraging the Rolex scale and mass-production cost advantages, along with the Rolex brand and sales distribution network.

I agree.

[Aventura]

Originally Posted by Bigblu10

Wait until it is FOOD and WATER. When these become scarce, SS Rolex will not even be a thought in anyone's mind.

Well said.

[Aventura]

Originally Posted by Bigblu10

They don't, plain and simple. Someone who walks into an AD looking to spend 8-9K for a stainless Sub is not going to drop 30K for a yellow or white gold Sub just because there are no stainless Subs in the display case or in the vault. PM watch buyers are a much smaller niche.

Of course. Exactly what you say. What also can be is that Rolex is no longer interested in the SS market and wants to compete in the PM. There I do not see it so easy because there are other brands that are strong. AP for example and there must be others but as I am not understood in the subject I do not know. What I do not understand is because Rolex launched SS models in Basel.But this topic I leave for the next comment I'm going to make.

[Aventura]

Originally Posted by Jason71

It is tough for a bunch of watch fanatics, but this is why I have a watch-fund that I am squirreling-away as much money as possible. The next economic downturn will see a glut of nice pre-owned watches on the market. The current climate of being a seller’s market will be the exact opposite.

I remember in late 2007 early 2008 when this happened and wishing that I had around $50,000 to spend on watches.

Excellent comment

[railgrail]

this next crash will be the biggest one. 2008 was literally papered over with globally coordinated QE and ZIRP/NIRP. all by design.

[Easy E]

Originally Posted by Fleetlord

I'll try to be more blunt.

In one fell swoop, Rolex is:

1) Protecting the Brand. The pricing on grey market watches prior to the limitation in distribution was too low. It was ridiculous and out of hand. Stickered watches were all over the place. It diminished the brand.

2) Going upmarket.. The Rolex brand is already very strong... Stronger than $8,500 submariners.
Non WIS who buy the most Rolex' by far think that Rolex cost more than that, so they settle for SS sports because they are thrilled with how "cheap" they are instead of TT and PM. People will spend more to obtain Rolex if they have limited lower price options. This has been proven already.

This is what Luxury Brands do. It's for the best.

Are you suggesting that Rolex wants to drive the grey market prices higher????

[Fleetlord]

[QUOTE=Easy E;8534770]Are you suggesting that Rolex wants to drive the grey market prices higher????[/QUOTE

It looks trashy when brand new Submariners with stickers were all over the Internet for almost 20% off retail.

Now those watches are trading at or over retail on the grey side. Much better look.

Rolex has always seen the grey market as a another distribution channel...just not officially of course. Now it's just a lot more controlled than what it was in terms of pricing.

[lzz73]

First, they’re trying to clear the grey market from any excess inventory. That may take months.

Second, I would guess they’re moving to partially sell online. They will try it out in a systematic way, and it will involve collaboration with ADs. It won’t be the end of the world. It may even be for the better.

Everything we’re seeing now is to get the marketplace ready for these changes. The first subtle step in this was listing prices on their website a year or so ago. Everything else will follow.


Sent from my iPhone using Tapatalk

[Easy E]

Originally Posted by lzz73

First, they’re trying to clear the grey market from any excess inventory. That may take months.

Second, I would guess they’re moving to partially sell online. They will try it out in a systematic way, and it will involve collaboration with ADs. It won’t be the end of the world. It may even be for the better.

I'm inclined to disagree with point one. There are a couple of Trusted Sellers here that have open web sites, you can see what they have available. If you check it with regularity you will see they move a fair amount of product. Let's take a Daytona C for example, I see one TS that has appeared to have turned at least 6 white models in the last 6 months (or so), and still has one black listed today. In that time period i have gone from 4 to 3 on the list at my AD. Yet, this guy seems to have more than enough. I do not lament that, but I am not paying 1.5 retail, and this seems to dismiss any notion that Rolex is "starving" the greys. At least not effectively.

I have two ADs that I work with. One of them told me this past December that during previous years they always have 6-8 SubCs on hand at any moment. This past Dec they received one. ONE! How the hell is that good for anyone. Again, at the same time you couldn't swing a dead cat and not hit a grey market dealer with at least a couple of Subs.