Why should Rolex increase supply?

[jackminny15]

Originally Posted by HiBoost

In a fiduciary sense, how could it not be? If they make a profit on each watch sold then the more they sell the more profit they make. With the insane gap between supply and demand surely they could add another 10-20% to production, still be nowhere near market over saturation, and pocket the extra profit. Even in a world where supply increases dramatically to the point where ADs start offering discounts again, Rolex is still going to get the same per-watch profits because they aren't going to offer lower pricing to the ADs.

The real question is, given Rolex's unique corporate structure (a private trust basically functioning as a non profit) is profit actually a motivator for them?



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This!

[Fleetlord]

This is my opinion as to Rolex upcoming strategy.

1) Consolidation of locations. The small family owned independent AD will be gradually phased out in favor of large chain, national account dealers. There are simply too many Rolex doors in the "West" (NA and Europe) and many of them in cities that are not seen as growth markets or opportunities. Shipping precious references into these "black holes" just isn't tenable any more, so they will be shut down.

2) Production Mix. Rolex production has been reduced due to Covid shutdowns and arguably other factors / decisions. This stated directly on the Rolex website.
Once the factory can overcome Covid limitations, they will produce the standard level of watches...BUT...production of SS Professional will continue to be be reduced in favor of classic references.

The reason is that there are many more permutations of that line in terms of size, dial color, bezel material, PM/TT/SS, Gemstones...etc. Which those are produced at a higher factory margin, so Rolex will make more money on those overall.

The Professional references are "chase" references for the enthusiasts to aspire to own. Limiting these models elevates the overall Rolex brand value and actually supports the AD profitability model by allowing them to "clientele" their customers to maximize spend for their customers in pursuit of the "SS Sports Carrot" The AD's LOVE THIS and Rolex will give them what they want in reward for being good partners.

[ArtNouveau]

The last time I was in the mall where my AD is there was a line waiting to get in, only four clients at a time. Wasn’t much in the cases to see but that doesn’t stop the dreamers. Meanwhile they move LOTS of pieces to their established customers. They are not hurting in the current climate.

[BLNR Nairobi]

Originally Posted by Mystro

I could care less about this newer Rolex “rare prestige” image so many seem to crave.
Open up the flood gates of production and sell watches to customers at msrp like they did the last 50 years. The yuppies of the 80s still found the brand prestigious and they were buying their watches at or below MSRP.

Unfortunately it isn’t the 1980s anymore.

Rolex understands very clearly that mechanical watches became obsolete in the 1970s-1980s (the ‘Quartz Crisis’ that killed almost 63% of Swiss watch companies), and in the last ten years wrist-worn computers (like the Apple Watch) have turned mechanical watches from obsolete baubles to quaint anachronisms.

Where in the next decade many brands will simply cease to exist, and Rolex wants to not only survive but thrive in such an environment.

As a customer, one may want to complain about availability. But from a company’s perspective, it is quite easy to see why blindly increasing supply would be a BIG mistake. Go to any AD that is not Rolex, PP or AP. It will be full of watches that are simply not moving! Go to any Breitling store, or Omega store, or Tag store. Stock is full outside one or two special references (eg the Snoopy is obviously hard to get, but everything else is easily available). Sales move at the speed of jam or treacle on a cold day.

And what’s ironic is that Rolex makes significantly more watches than these brands, and sells significantly more watches than these brands as well. 25% market share by Rolex.

So, from a company’s perspective, why would Rolex in a million years switch from a very successful strategy to one that is (literally) killing most of its competitors?

Especially considering that mechanical wrist watches will be an ever shrinking product category where the only survivors are those that will be supported by their strong brand equity.

Why would Rolex intentionally increase supply and dilute brand equity in a market environment that will be increasingly difficult for most watch companies, with the only clear winners currently being Rolex, PP and AP when it comes to the type of brand equity needed to survive such a market?

Especially in a market segment that by 1983 (talking about the 1980s that you refer to) had been decimated by the Quartz Crisis. Sure, yuppies still bought Rolex then, but it’s because of the brand value Rolex had then. Brand value that enabled them to survive a crisis that culled Swiss watch companies from 1,600 in the 1970s to less than 600 in 1983.

And things have become even more dire with the advent of even smarter technology - from cellphones to wrist computers.

Rolex is likely to leverage off the lessons learned during the Quartz Crisis and ensure they have the type of strong brand equity required to survive the modern ‘Super Technology Crisis.’ PP and AP too.

Most other mechanical watch companies will not survive, and this is supported by any visit to their ADs plus the sale numbers of those companies that were recently reported.

TL:DR version: Rolex would be foolish to shift from a strategy that has given them strong brand equity to one that would be totally suicidal in the modern market.

[Fleetlord]

.

[Fleetlord]

Excellent post.

I have seen the unimaginable for a luxury brand at visits to AD's and high street shopping areas.

I have seen beautiful, new Panerai's sitting in their display cases...with DUST ON THEM. DUST. On the watches. IN the display case. That is a scene from a horror movie for execs of that brand. Same store had a mostly empty Rolex case, but with a line of people waiting just to speak to someone at the store about Rolex....enviously eyeing the fortunate ones who are at the registers paying for their new Rolex...

I have seen wonderful boutiques from the "other guys" full to brim with amazing watches...so many they don't have anywhere to put them all...with no customers and SA dressed up and bored out of their minds waiting to get out of there. Meanwhile, the Rolex boutique has less watches than people waiting in line just for the opportunity to have a chance of getting a Rolex.

Overproduction and Over distribution are absolutely toxic to luxury goods. Brands that can't or won't reel those in will suffer the consequences... if they haven't suffered irreparable harm already.

[sgwatchguy]

Originally Posted by BLNR Nairobi

Unfortunately it isn’t the 1980s anymore.

Rolex understands very clearly that mechanical watches became obsolete in the 1970s-1980s (the ‘Quartz Crisis’ that killed almost 63% of Swiss watch companies), and in the last ten years wrist-worn computers (like the Apple Watch) have turned mechanical watches from obsolete baubles to quaint anachronisms.

Where in the next decade many brands will simply cease to exist, and Rolex wants to not only survive but thrive in such an environment.

As a customer, one may want to complain about availability. But from a company’s perspective, it is quite easy to see why blindly increasing supply would be a BIG mistake. Go to any AD that is not Rolex, PP or AP. It will be full of watches that are simply not moving! Go to any Breitling store, or Omega store, or Tag store. Stock is full outside one or two special references (eg the Snoopy is obviously hard to get, but everything else is easily available). Sales move at the speed of jam or treacle on a cold day.

And what’s ironic is that Rolex makes significantly more watches than these brands, and sells significantly more watches than these brands as well. 25% market share by Rolex.

So, from a company’s perspective, why would Rolex in a million years switch from a very successful strategy to one that is (literally) killing most of its competitors?

Especially considering that mechanical wrist watches will be an ever shrinking product category where the only survivors are those that will be supported by their strong brand equity.

Why would Rolex intentionally increase supply and dilute brand equity in a market environment that will be increasingly difficult for most watch companies, with the only clear winners currently being Rolex, PP and AP when it comes to the type of brand equity needed to survive such a market?

Especially in a market segment that by 1983 (talking about the 1980s that you refer to) had been decimated by the Quartz Crisis. Sure, yuppies still bought Rolex then, but it’s because of the brand value Rolex had then. Brand value that enabled them to survive a crisis that culled Swiss watch companies from 1,600 in the 1970s to less than 600 in 1983.

And things have become even more dire with the advent of even smarter technology - from cellphones to wrist computers.

Rolex is likely to leverage off the lessons learned during the Quartz Crisis and ensure they have the type of strong brand equity required to survive the modern ‘Super Technology Crisis.’ PP and AP too.

Most other mechanical watch companies will not survive, and this is supported by any visit to their ADs plus the sale numbers of those companies that were recently reported.

TL:DR version: Rolex would be foolish to shift from a strategy that has given them strong brand equity to one that would be totally suicidal in the modern market.

It is refreshing to read “common sense” posts if you don’t mind me calling it that. It is scarce indeed.

[sgwatchguy]

Originally Posted by Fleetlord

Excellent post.

I have seen the unimaginable for a luxury brand at visits to AD's and high street shopping areas.

I have seen beautiful, new Panerai's sitting in their display cases...with DUST ON THEM. DUST. On the watches. IN the display case. That is a scene from a horror movie for execs of that brand. Same store had a mostly empty Rolex case, but with a line of people waiting just to speak to someone at the store about Rolex....enviously eyeing the fortunate ones who are at the registers paying for their new Rolex...

I have seen wonderful boutiques from the "other guys" full to brim with amazing watches...so many they don't have anywhere to put them all...with no customers and SA dressed up and bored out of their minds waiting to get out of there. Meanwhile, the Rolex boutique has less watches than people waiting in line just for the opportunity to have a chance of getting a Rolex.

Overproduction and Over distribution are absolutely toxic to luxury goods. Brands that can't or won't reel those in will suffer the consequences... if they haven't suffered irreparable harm already.

Well said!

There’s an abundance of over paid suits in Switzerland responsible for over production of junk. (Junk = stuff no one wants, apart from the ‘loyal’ WIS type).

It amuses me that people want Rolex to borrow from their book. Actually blows my brains to think why anyone would think that is a smart strategy.

[Fleetlord]

Originally Posted by sgwatchguy

Well said!

There’s an abundance of over paid suits in Switzerland responsible for over production of junk. (Junk = stuff no one wants, apart from the ‘loyal’ WIS type).

It amuses me that people want Rolex to borrow from their book. Actually blows my brains to think why anyone would think that is a smart strategy.

I know. I mean it's plain as day to see the difference between high performing brands and those who are struggling (and that happens to be the majority)

I remember I visited a Breitling boutique pre Covid and I asked the SA how things were going...etc. He said it would better if they made a watch that anyone actually wanted to buy! I was surprised at the candor, but they are fighting the battle and they know how screwed up their brand is. This was before their rainbow Superocean, so I thought after that was released, things were getting better...but there is so much overproduced "junk" that Breitling had to turn them into RENTALS to try some way to get use of them. It's preposterous...renting to own Breitling??? This was a major luxury watch brand...reduced to a shaky business model that hasn't worked for anyone who has tried it....now they have to resort to that...They simply ignored the demands of the market and that market is punishing them with almost complete indifference. Shame...

[sgwatchguy]

Originally Posted by Fleetlord

I know. I mean it's plain as day to see the difference between high performing brands and those who are struggling (and that happens to be the majority)

I remember I visited a Breitling boutique pre Covid and I asked the SA how things were going...etc. He said it would better if they made a watch that anyone actually wanted to buy! I was surprised at the candor, but they are fighting the battle and they know how screwed up their brand is. This was before their rainbow Superocean, so I thought after that was released, things were getting better...but there is so much overproduced "junk" that Breitling had to turn them into RENTALS to try some way to get use of them. It's preposterous...renting to own Breitling??? This was a major luxury watch brand...reduced to a shaky business model that hasn't worked for anyone who has tried it....now they have to resort to that...They simply ignored the demands of the market and that market is punishing them with almost complete indifference. Shame...

This is an industry that faces an existential threat, yet if you were to look at marketing/social glossies and the new product launch parties and cocktails on which marketing $$ is spent, you would fooled into believing otherwise.. that it’s all sunny and the industry is doing well. The product and marketing zombies continue to borrow from failures of the past, while the boards are asleep on the job.

Case in point... Breitling launches the “endurance pro” for over $3k... lots of marketing spend, and now the AD’s are openly offering a discount. Why they would launch an overpriced quartz watch masquerading as “sports” when Tissot has them beat at a fourth of that price point, is inexplicable. This is one recent example but almost every other new product launch from the Swiss has the same themes. Poorly researched, poorly positioned and poorly messaged in the market, over produced, and finally dumped.

I tip my hat to the Germans and Japanese who’ve figured out how to stay relevant, survive, surprise and take away share from the Swiss.

[jcapulet786]

Originally Posted by BLNR Nairobi

Unfortunately it isn’t the 1980s anymore.

Rolex understands very clearly that mechanical watches became obsolete in the 1970s-1980s (the ‘Quartz Crisis’ that killed almost 63% of Swiss watch companies), and in the last ten years wrist-worn computers (like the Apple Watch) have turned mechanical watches from obsolete baubles to quaint anachronisms.

Where in the next decade many brands will simply cease to exist, and Rolex wants to not only survive but thrive in such an environment.

As a customer, one may want to complain about availability. But from a company’s perspective, it is quite easy to see why blindly increasing supply would be a BIG mistake. Go to any AD that is not Rolex, PP or AP. It will be full of watches that are simply not moving! Go to any Breitling store, or Omega store, or Tag store. Stock is full outside one or two special references (eg the Snoopy is obviously hard to get, but everything else is easily available). Sales move at the speed of jam or treacle on a cold day.

And what’s ironic is that Rolex makes significantly more watches than these brands, and sells significantly more watches than these brands as well. 25% market share by Rolex.

So, from a company’s perspective, why would Rolex in a million years switch from a very successful strategy to one that is (literally) killing most of its competitors?

Especially considering that mechanical wrist watches will be an ever shrinking product category where the only survivors are those that will be supported by their strong brand equity.

Why would Rolex intentionally increase supply and dilute brand equity in a market environment that will be increasingly difficult for most watch companies, with the only clear winners currently being Rolex, PP and AP when it comes to the type of brand equity needed to survive such a market?

Especially in a market segment that by 1983 (talking about the 1980s that you refer to) had been decimated by the Quartz Crisis. Sure, yuppies still bought Rolex then, but it’s because of the brand value Rolex had then. Brand value that enabled them to survive a crisis that culled Swiss watch companies from 1,600 in the 1970s to less than 600 in 1983.

And things have become even more dire with the advent of even smarter technology - from cellphones to wrist computers.

Rolex is likely to leverage off the lessons learned during the Quartz Crisis and ensure they have the type of strong brand equity required to survive the modern ‘Super Technology Crisis.’ PP and AP too.

Most other mechanical watch companies will not survive, and this is supported by any visit to their ADs plus the sale numbers of those companies that were recently reported.

TL:DR version: Rolex would be foolish to shift from a strategy that has given them strong brand equity to one that would be totally suicidal in the modern market.

Your sir are a legend


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[No SUBctitute]

Originally Posted by Mystro

I could care less about this newer Rolex “rare prestige” image so many seem to crave.
Open up the flood gates of production and sell watches to customers at msrp like they did the last 50 years. The yuppies of the 80s still found the brand prestigious and they were buying their watches at or below MSRP.

+1 Mystro!

I bought my Rolex ten years ago because:

1) Its tough, waterproof, accurate, and reliable
2) I like the way it looks
3) It was more comfortable than the Planet Ocean
4) No other watch fit the bill for the money.

I wish that every Rolex was available to everyone who could afford it. I mean, every Rolex used to be available at a discount, but they were still seen as a status symbol. So, I'm not sure why that still wouldn't be the case.

Rolex watches don't need to be veblen goods for Rolex to thrive as a company. Rolex is doing great now (i.e., selling all the watches it makes), but I'm not sure it wouldn't continue to sell all the watches it makes for the next decade even if it increased the availability of steel professional models.

[drfrankenstein]

All of these arguments re: Rolex’s model are valid but they are also competing against luxury conglomerates now, not individual watch brands. Omega, Cartier etc. still sell plenty of watches though, I don’t think they are going away anytime soon so the idea that this is a strategy to bleed them dry is a bit silly, especially in the luxury goods category where trends can change as fast as the wind shifts and you can go from a zero to a hero in a season by making the next aesthetically pleasing thing that gains traction on social media. We are also 11 years+ into a global economy which has basically done nothing but go straight up and people have now long forgotten about 2008. I think Rolex is riding the wave and aren’t going to get off until it crashes. Though I agree that significant increases in production wouldn’t be good overall, there is probably a level of increased production which could be tolerated by the hot market if they choose.

[Asumer]

Some wise words about this, it takes a lifetime to build a reputation and 5 mins to ruin it.

I think Rolex's recent actions to restrict supply will be a major black mark on the brand. I want to wear a watch and not speculate on it as an investment.

What makes rolex so great? The watches themselves were built tough, astronauts, scientists, explorers, and divers all flocked to brand. Think any of those people are going to pay $20k for a gmt master, or $15k for a sub. Nope, so who is your pedigree today? John Mayer, flippers/showboaters on instagram? A far cry from what the brand stood for.

Another thing is rolex seems to prefer the existing owners compared to newer ones. I feel like this is a fatal mistake, the newer generation is making alot of money and their first impression with rolex is rude AD salesfolks, cases empty and talk of spending 100's of thousands of dollars on useless jewelry to "get on the list".

In addition it seems the latest movements 32** have serious issues that Rolex is not addressing. And people want to pay 100-200% markups on a watch that needs multiple services?

A lifetime to build a repuation, in rolex's case a few years to ruin it.

A lifetime building a rep

[BLNR Nairobi]

Originally Posted by Asumer

Some wise words about this, it takes a lifetime to build a reputation and 5 mins to ruin it.

I think Rolex's recent actions to restrict supply will be a major black mark on the brand. I want to wear a watch and not speculate on it as an investment.

What makes rolex so great? The watches themselves were built tough, astronauts, scientists, explorers, and divers all flocked to brand. Think any of those people are going to pay $20k for a gmt master, or $15k for a sub. Nope, so who is your pedigree today? John Mayer, flippers/showboaters on instagram? A far cry from what the brand stood for.

Another thing is rolex seems to prefer the existing owners compared to newer ones. I feel like this is a fatal mistake, the newer generation is making alot of money and their first impression with rolex is rude AD salesfolks, cases empty and talk of spending 100's of thousands of dollars on useless jewelry to "get on the list".

In addition it seems the latest movements 32** have serious issues that Rolex is not addressing. And people want to pay 100-200% markups on a watch that needs multiple services?

A lifetime to build a repuation, in rolex's case a few years to ruin it.

A lifetime building a rep

If I may genuinely ask you a question - in today’s environment, how many “astronauts, scientists, explorers, and divers” are going to be buying a GMT Master II or a Submariner Date? Whether it is at $20K or at $9,500? Most of those people will be buying modern professional tools for their respective professions, not mechanical watches - and while Rolex still makes superlative tool watches (and that are even better than they used to be - a modern Submariner is more capable than one from five decades ago), the fact still remains that they are obsolete as tool watches.

The astronaut, scientist, explorer or diver is not the target market of the modern Rolex, and hasn’t been for several decades. All of those professionals have specialized modern tools for their respective trades, and a mechanical watch would be a really poor choice for all of those (even though it can work) in the same way modern doctors do not use bone density scanners from the early 1980s but instead rely on modern equipment.

The current situation Rolex (and PP, and to some extent AP) find themselves in where demand far exceeds supply is one that is a Godsend for them. As I mentioned in my post above, mechanical watches have been obsolete for several decades now, and that is a fact that will be increasingly more evident. There are some very good watch brands that make amazing products that are unfortunately not selling. A number of which are ‘better’ than Rolex, and a few even comparable to PP.

But they face an existential crisis simply because there is limited (for some, very limited) market demand for those watches. Some watches I love - such as Breguet, JLC and even VC - are struggling. In my eyes a Blancpain is more than a peer to a Submariner Date, and they have the heritage to match, but they’re struggling. Even bigger brands (bigger as in better known by most people) like Omega, Breitling, Tag and IWC are 8.8%, 2.4%, 3.0% and 2.7% of market share respectively.

Future survival for mechanical watch companies in the face of 1) cheaper Quartz alternatives, 2) ubiquitous cellphones that are basically hand-held computers, 3) cheaper and by CRAZILY capable wrist-computers (best name for them) like the Apple and Samsung watches, and 4) maybe most importantly, changing tastes when it comes to wearing a time-telling (only time-telling) instrument in your wrist ....means that they will need to focus on brand value.

In the same way Birkin and Kelly bags are a result of brand value (some call it hype, but it’s more than that) and are desirable even though they don’t do anything that a MUCH cheaper bag cannot. Or how Ferrari demands certain premiums even when there are faster/prettier/better/more exclusive sports and super car brands out there.

You see Rolex as losing its reputation.

I see them as strengthening their reputation in the hope it will help them survive in an industry that is the modern equivalent of a horse buggy manufacturer sector.

[Fleetlord]

Originally Posted by Asumer

Some wise words about this, it takes a lifetime to build a reputation and 5 mins to ruin it.

I think Rolex's recent actions to restrict supply will be a major black mark on the brand. I want to wear a watch and not speculate on it as an investment.

What makes rolex so great? The watches themselves were built tough, astronauts, scientists, explorers, and divers all flocked to brand. Think any of those people are going to pay $20k for a gmt master, or $15k for a sub. Nope, so who is your pedigree today? John Mayer, flippers/showboaters on instagram? A far cry from what the brand stood for.

Another thing is rolex seems to prefer the existing owners compared to newer ones. I feel like this is a fatal mistake, the newer generation is making alot of money and their first impression with rolex is rude AD salesfolks, cases empty and talk of spending 100's of thousands of dollars on useless jewelry to "get on the list".

In addition it seems the latest movements 32** have serious issues that Rolex is not addressing. And people want to pay 100-200% markups on a watch that needs multiple services?

A lifetime to build a repuation, in rolex's case a few years to ruin it.

A lifetime building a rep

In today’s luxury market, what you are labeling as a mistake is actually a vital part of the exclusivity of a luxury brand. Inaccessibility.

https://fashionbi.com/newspaper/main...uxury-branding

Rolex is clearly a luxury brand more than a tool for astronauts, spelunkers, military...that’s now Gshock and Timex (ironically are having some upscale ideations themselves).

Luxury brands require the exclusivity component and “high” pricing isn’t enough to create inaccessibility. People these days have lots of money to spend...from sources never dreamed of 30yrs ago. That money wants and craves luxury goods that separate them from the masses...and when the masses have money, a high price of entry isn’t a high enough barrier.

[Boaters]

They love to be in control.

[Marcjvr]

There is an ideal balance to everything.

I was watching the WGC match play event on Friday on the golf channel. I saw 3 Rolex commercials during the time I watched.

So I thought about the non-WIS new customer out there who sees the ad and decides it is finally time to reward himself with a nice Rolex. He heads to a store excitedly to ask for the Submariner like James Bond used to wear.

He walks up to the Rolex case to find it mostly empty. The AD tells him “unfortunately there is a long waiting list for these things. We can sell you a Sub now as a bundle along with that diamond ankle chain. Otherwise don’t call us, we’ll call you.”

So the current situation is good for Rolex. But at the same time is it optimal if it is putting new customers off of the brand...

[Robf52]

I think there's a significant percentage of Rolex buyers who are attracted to the brand because of (among lots of other positives) the long term value appreciation of their watch in the Rolex aftermarket. Despite not being fashionable to admit that reason, it's a fact. Rolex is very aware of the residual long term value of their watches, and undoubtedly view that as a critical part of their brand legacy. They support it with carefully balancing the supply/demand equation, not by flooding the market to satisfy the short term.

[HiBoost]

Lots of these comments seem to treat supply as if there were only two options: keep levels where they are, or ramp up to the point that everybody on earth can have a Daytona. The latter would obviously be bad for the reasons pointed out. But clearly there is room for a modest increase. Each year developing nations are introducing millions of new people with the ability to buy these products. Therefore keeping production constant is actually decreasing supply on a per capita basis.

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[drfrankenstein]

Originally Posted by BLNR Nairobi

If I may genuinely ask you a question - in today’s environment, how many “astronauts, scientists, explorers, and divers” are going to be buying a GMT Master II or a Submariner Date? Whether it is at $20K or at $9,500? Most of those people will be buying modern professional tools for their respective professions, not mechanical watches - and while Rolex still makes superlative tool watches (and that are even better than they used to be - a modern Submariner is more capable than one from five decades ago), the fact still remains that they are obsolete as tool watches.

The astronaut, scientist, explorer or diver is not the target market of the modern Rolex, and hasn’t been for several decades. All of those professionals have specialized modern tools for their respective trades, and a mechanical watch would be a really poor choice for all of those (even though it can work) in the same way modern doctors do not use bone density scanners from the early 1980s but instead rely on modern equipment.

The current situation Rolex (and PP, and to some extent AP) find themselves in where demand far exceeds supply is one that is a Godsend for them. As I mentioned in my post above, mechanical watches have been obsolete for several decades now, and that is a fact that will be increasingly more evident. There are some very good watch brands that make amazing products that are unfortunately not selling. A number of which are ‘better’ than Rolex, and a few even comparable to PP.

But they face an existential crisis simply because there is limited (for some, very limited) market demand for those watches. Some watches I love - such as Breguet, JLC and even VC - are struggling. In my eyes a Blancpain is more than a peer to a Submariner Date, and they have the heritage to match, but they’re struggling. Even bigger brands (bigger as in better known by most people) like Omega, Breitling, Tag and IWC are 8.8%, 2.4%, 3.0% and 2.7% of market share respectively.

Future survival for mechanical watch companies in the face of 1) cheaper Quartz alternatives, 2) ubiquitous cellphones that are basically hand-held computers, 3) cheaper and by CRAZILY capable wrist-computers (best name for them) like the Apple and Samsung watches, and 4) maybe most importantly, changing tastes when it comes to wearing a time-telling (only time-telling) instrument in your wrist ....means that they will need to focus on brand value.

In the same way Birkin and Kelly bags are a result of brand value (some call it hype, but it’s more than that) and are desirable even though they don’t do anything that a MUCH cheaper bag cannot. Or how Ferrari demands certain premiums even when there are faster/prettier/better/more exclusive sports and super car brands out there.

You see Rolex as losing its reputation.

I see them as strengthening their reputation in the hope it will help them survive in an industry that is the modern equivalent of a horse buggy manufacturer sector.

No one ever used those watches based on their intended branding. In fact the essential differences between the Sub, GMT and Explorer are what? The color and numbers on the bezel? The branding was always bogus but it was part of the appeal. Their current advertising doesn't cater to that heritage but it is still the doctor, lawyer, entrepreneur who is going to be buying those watches and were the primary customer of Rolex for decades.

[dtwer]

Originally Posted by zaphod777

I think this is already happening. I bought a Datejust 36 blue dial because I could get it pretty close to retail but I'm not going to beg an AD so that I can spend $10K on a watch or spend thousands over retail to get a sports model.

If I could walk into an AD and pickup a Sub or a GMT tomorrow I would but until then there are lots of other brands who are willing to take my money.

No, the opposite has happened. As Rolexes become harder to obtain, the desires for them shoot up.

This is the nature of a positional good: exclusivity. Positional goods like Rolex would lose market share and value if they cater to the masses by making them more affordable and readily available.

The main utility a consumer acquires such goods comes from the fact that few other consumers have them, thus conferring the sense of exclusivity to the owners. That's why the fewer people can get them, the better it is for the brand image.

[Tavli3]

Rolex AP PP RM are playing the exclusivity game plan. The availability strategy whether planned or not is for Omega Panarai Longines Breitling Tag and Tudor to execute and compete against each other.


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[watchwatcher]

Another way to look at it: Why fix something that's not broken?

Or, to be more accurate: Why fix something that's hugely successful beyond anyone's wildest dreams?

[evo63]

Exclusivity and being perceived as very difficult to obtain are clearly driving the Rolex market. Remember when the only pieces that this applied to were the SS Daytonas? This strategy, when carefully manipulated, is perfect for a luxury brand perspective. I see this trend continuing for the foreseeable future.

[alphadweller]

Rolex should absolutely not increase their production. It would be a disservice to the brand.

800k a year is more than enough, far too much if you ask me. The more they produce, the more they dilute the brand's equity. I'll be bold, I think they should cut back production by half, if not more. I’m sorry for those who would love to get into the brand and are not prepared to pay secondary market prices. The way I see it, Rolex is a luxury product no one actually needs. Therefore, let it remain so for the generations to come.
Look at Patek, they make 50k pieces a year. When they release a steel watch, it’s in very limited quantities. They’ve recently discontinued their most successful stainless steel model, the Nautilus reference 5711/1A. What does that tell us? Their mission is not to offer a watch to everyone. Without exclusivity, there’s no luxury business.

Let Tudor be the brand for the masses and cater to watch enthusiasts looking for available quality pieces. Let Rolex be the “unavailable” one.

[sgwatchguy]

Originally Posted by Marcjvr

So the current situation is good for Rolex. But at the same time is it optimal if it is putting new customers off of the brand...

People want what people can’t have. There is a multiplier effect on demand when something is that much harder to obtain when speaking of Veblen goods.

I’ve had more people speak to me about wanting help to buy a Rolex in the last 12 months, than in the last 12 years.

[HiBoost]

Rolex has done something no other brand of any product has ever pulled off. They are known worldwide (they have the third highest favorable brand recognition behind Lego and Disney), have been readily available for decades, and yet they are still broadly regarded as exclusive and special. It's hard to speculate on where they should go from here because there are no other data points to reference, no peers in this or any other industry.

But I still say an extra 10% production isn't going to bring the house of cards down :)

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[MasonDixon]

It would be nice if people could walk into an authorized Rolex dealer and actually purchase a watch. Is that an unreasonable expectation? If it takes a production increase to make that happen, then maybe they should consider doing so.

[Fleetlord]

They will make more higher factory margin references when Covid restrictions resolve.

Those will be available to buy @ AD...but some of those will still be waitlist references.

The Professional references will be reduced and will serve as chase watches for enthusiasts or those brand established.

In other words, the consumer will encounter a selection of Classic references in AD showcases and will buy those either to simply obtain ROLEX or in the climb to acquisition of a professional model.