Rolex Prices and PS5 parallels

[Madison1]

Some musings. I was one of the many that wanted a PS5 when they were released (insert hot Rolex here). At the time the demand massively exceeded the supply and there was also a shortage of parts. Fast foreward to today and whilst not easy to get a PS5 is achievable (insert Rolex incoming stories here). With the rarity of PS5 availability scalpers bought them and sold on for big mark-ups (insert flippers here).

So , some people that want a PS5 are happy to wait and pay retail, the people that were impatient and couldn't wait paid over list and there are still some people buying and trying to flip.

In Rolex terms will we reach a point where flipping becomes less profitable due to the people buying over list diminishing and more watches will be available for those who, and I know this is crazy these days, want to actually wear them?

[Wahlberg]

No.

Next.

[beshannon]

Originally Posted by Madison1

In Rolex terms will we reach a point where flipping becomes less profitable due to the people buying over list diminishing and more watches will be available for those who, and I know this is crazy these days, want to actually wear them?

No

[Fenrira]

The difference here is that Sony is trying to produce as many PS5s as they can to meet demand, whereas Rolex won’t increase production to do so. There will always be fewer watches produced than number of people who want them at retail, barring some black swan event.

[Robf52]

Originally Posted by Wahlberg

No.

Next.

[turkeysub93]

Apples to oranges...one item is an electronic that will be dust ridden in a decade and obsolete...the other a mechanical wristwatch that will last decades upon decades.

[Soultime]

No doesn't work.....
A games console is more akin to a new iPhone or other flavour of the day gadget.
Sought after today, worthless tomorrow.

Opposite of Rolex.

[whiskyrolex]

Originally Posted by Fenrira

The difference here is that Sony is trying to produce as many PS5s as they can to meet demand, whereas Rolex won’t increase production to do so. There will always be fewer watches produced than number of people who want them at retail, barring some black swan event.

Exactly this. They sold 10 million units already and would sell another 10 million today if they could produce them quick enough.

[Potawatomi]

No

[Kyle3130]

Originally Posted by turkeysub93

Apples to oranges...one item is an electronic that will be dust ridden in a decade and obsolete...the other a mechanical wristwatch that will last decades upon decades.

Agreed, asset vs liability.

[stewester]

There are clearly some parallels as both scenarios are a result of demand outstripping supply.

I think one big difference is the Veblen/Birkin bag effect where (to some people at least) Rolexes become more desirable purely as a function of their secondary market value and unobtainability. I can't see that effect ever really applying to consumer electronics, at least not to the same extent.

The consensus here now seems to be that Rolex supply will never again get even close to demand. As things stand it's hard to disagree with this sentiment.

[gretch6364]

What!?! lol

[johnwigan]

Yes, there are some parallels. Both suffering supply issues due to the pandemic. Flippers are buying both so they are harder to obtain at retail. Personally, I think both will become more available after the pandemic is over. I think both companies will sort out their supply issues. Some Rolex models will remain hard to get but I predict we will get back to ADs having rolexes on display for people to try and some rolexes in stock to buy. May take a bit of time to adjust but I think it will.

I think some people think because Rolex have had supply shortages in the last few years somehow that will just continue indefinitely. I think you've got to look at Rolex over a much longer time period. And why wouldn't Rolex increase production if they think they can sell more watches and make more profit? I don't think they care about grey Sellers' profits or if you paid an inflated price for your watch or if you think your watch is an investment whose value can only go up. If they care at all it is only to the extent of how it impacts their sales of new watches and their own profits. Really, once they've sold you a watch that tells the time they've completed their side of the bargain. Little benefit to them to restrict their own sales and hence profits. I am sure that they want customers who want to buy a Rolex to be able to do so, rather than buy another brand.

And I am sure they do not want flippers/grey dealers pocketing cash that could be going to Rolex themselves.

[1665fan]

Ps5 is a plastic piece of junk compared to a green dial Daytona or gold gmt…..ps5 eventually was overproduced after all the demand dropped….Rolex will never overproduce a SS daytona(insert many other models) so that can’t happen

[derekhayden]

The simple parallel is supply and demand. Right now Rolex is hotter then ever so the demand is through the roof giving more room for grey dealers to operate at insanely inflated prices.

Just the other day I heard a group of mid twenty year-olds talking in a restaurant about how they wanted to start flipping watches. This same group probably has conversations about their diamond hands in their Robinhood accounts. This is the new type of people in the watch world.

You also can't expect realistic answers on a forum where every other post talks about investment and retaining value. If I just dropped $25K on a $10K watch you bet I would hope this lasts forever.

Will we ever see stores full like we did ten years ago maybe not but the market like it is now wont last forever. The vast majority of Rolex owners are one and done so once the hype dies down we should see supply increase.

[DC116710LN]

Originally Posted by Madison1

In Rolex terms will we reach a point where flipping becomes less profitable due to the people buying over list diminishing and more watches will be available for those who, and I know this is crazy these days, want to actually wear them?

An economic recession will diminish demand. It's difficult to say when that will be however

[inadeje]

Definitely NO

[MILGAUSS88]

Originally Posted by johnwigan

I think some people think because Rolex have had supply shortages in the last few years somehow that will just continue indefinitely.

There was no supply shortage pre -COVID, just excess demand.

Originally Posted by johnwigan

And why wouldn't Rolex increase production if they think they can sell more watches and make more profit?

Increased production would lead to less demand if the aftermarket price dropped below their MSRP. They may increase production, but never enough to meet demand again. And only in small increments.
They are a non-profit company.
If everyone can have one, what makes it special?

Originally Posted by johnwigan

If they care at all it is only to the extent of how it impacts their sales of new watches and their own profits. Really, once they've sold you a watch that tells the time they've completed their side of the bargain. Little benefit to them to restrict their own sales and hence profits. I am sure that they want customers who want to buy a Rolex to be able to do so, rather than buy another brand.

And I am sure they do not want flippers/grey dealers pocketing cash that could be going to Rolex themselves.

They HAVE restricted the sales of their watches, (to increase the value of their watches) through the closing of hundreds of AD's. I can remember when they were selling for a discount.
I think no one has done more for the profit of flippers than Rolex themselves.


Luxury items do not operate on the same supply and demand curve as normal purchases do.
If i remember right, it's termed "exclusivity through pricing". The higher the price, the more exclusive it is, the more exclusive it is the more desirable it is.

[brucethemanlee]

no

[Oystersteel92]

Originally Posted by Madison1

Some musings. I was one of the many that wanted a PS5 when they were released (insert hot Rolex here). At the time the demand massively exceeded the supply and there was also a shortage of parts. Fast foreward to today and whilst not easy to get a PS5 is achievable (insert Rolex incoming stories here). With the rarity of PS5 availability scalpers bought them and sold on for big mark-ups (insert flippers here).

So , some people that want a PS5 are happy to wait and pay retail, the people that were impatient and couldn't wait paid over list and there are still some people buying and trying to flip.

In Rolex terms will we reach a point where flipping becomes less profitable due to the people buying over list diminishing and more watches will be available for those who, and I know this is crazy these days, want to actually wear them?

I'm a little surprised PS5's continue to be so hard to come by. I guess I shouldn't be with Covid having changed just about everything and I think it will be many years before supply chains are what they were pre-2020. It used to be so easy to scale up production to meet demand and we took for granted just how easy it was to obtain most consumer products in great variety (Rolexes excepted of course, as those are a different animal).

I work for a company with many facilities across the country and we used to be able to buy 20-30 replacement 20-ton air conditioning units to remodel a facility in 6 weeks or so. Currently the manufacturer can't deliver units until the first quarter of 2022. Everything sucks right now.

[TonyD]

I disagree with most of the comments above. Of course we are talking about apples and oranges, durable goods vs depreciating assets but there are more parallels than you might think.

Yes scalpers grab as many as possible and sell them for a profit. Yes people call stores all day long looking for them.

The main difference is adults cry about Rolex scarcity and mostly children cray about PS5's.

One other parallel. I've been on the lookout and scored one last week. How did I do it? Bundle. Yup, when GameStop gets them in they bundle them on the website. You have to buy the bundle and you can't return the bundled stuff. The good news is they bundled it with 2 games I actually wanted, a 2nd controller which I actually wanted and a $50 gift card which I will actually use.

So yes I paid $700 for my PS5 but I actually got $700 worth of stuff so I am happy.

[TonyD]

Originally Posted by Oystersteel92

I'm a little surprised PS5's continue to be so hard to come by.

Chips my friend.... I saw a huge line outside BestBuy a few days ago. People in folding chairs and umbrellas with coolers etc like they had been there for many hours. I asked the worker at the front door if there was a new iphone or game coming out and he said they got a case of graphics cards. They were going to sell them at a certain time.

My company builds industrial automation. We are randomly seeing lead times for pretty normal stuff extended by months. Things like sensors and PLCs etc.

Anything with a computer chip is going to be a problem very soon.

[Bryan81]

Big difference in the fact that the end customer will get a PS5 at some point and then their demand is met. They stop trying to buy another one. With Rolex, many people get one and their demand isn’t met. They will keep trying to acquire another.

The number of “collectors” is a factor with the Rolex shortage. Only one factor, but a significant one. No one is out to buy 5-10 PS5s for their home.


Sent from my iPad using Tapatalk

[Pandos]

Responding to the OP:

No, but I don't think the accurate conclusions are being drawn here.

Sony needs to increase its supply not to just catch the demand that's out there, but because they need to recoup their cost.

Console life cycle historically is about 7 years, so in 7 years you need to recoup not only your cost of production and setup of production, but also all the R&D you spent.

Most consoles (except notably Nintendo) usually sell at a loss for many years, before their production efficiencies kick in and they can spend R&D money on how to produce more units at a more economical cost.

This is why console makers come and go, because it's a do or die market. So you get either technology and consumer product monoliths like Sony and Microsoft who can lose money on hardware but push technology forward, or you get folks like Nintendo who make sure they can make money on hardware AND software as a soon as possible.

As for Rolex, I doubt they have the same issues when it comes to cost of R&D needing to be recouped within a definite life cycle of a watch.

It's a different product market with different dynamics.

[Chester01]

At some point (and already is happening) Rolex is/will become only really significant/attainable for a dwindling number of people, perhaps the oligarch crowd, and there is marketing data that the younger generation is not as interested in spending on luxury goods. The Instabooks and photos that get passed around create this false belief that everyone wants them, but that's because the algorithms feed the masses what they want and they believe this skewed sample is actually representative of the population,....its not. Yes sure people can identify what celeb wore what watch to what event, but what of it. Celebs are like .000000001% of the population.

That said, this is big business and sheep easily manipulated and most here believe there is a real scarcity and massive demand, when its fabricated by the ever growing number of greys gobbling up whats out there. Picasso's, those are scares, GMT's and Daytona's uh, not so much.

[watchtabs]

It’ll go back to normal. At some point… what you see now wasn’t as bad two years ago… hell, 3 years ago I walked in to a Miami AD and walked out with hulk… a few before that I got a GMT ceramic black (2016)… just walking in… I didn’t buy a pre-ceramic Daytona cause I didnt want to… yea… those days existed … My AD would offer me PM Daytona’s (including the green dial and the PN dial) cause they wouldn’t sell…

Anyway… I’m sure lots of old dogs here have seen these cycles ebb and flow. And the newer folks are only seeing this one cycle and think “this is how it is”.

Economic cycles will continue.

Look up “how economic cycles work by Ray Dalio”.

Cycles of greed and fear. We are in a strong greed cycle. That’s all.


PS link is here: https://youtu.be/PHe0bXAIuk0

Sent from my iPhone using Tapatalk Pro

[Soultime]

Originally Posted by johnwigan

Yes, there are some parallels. Both suffering supply issues due to the pandemic. Flippers are buying both so they are harder to obtain at retail. Personally, I think both will become more available after the pandemic is over. I think both companies will sort out their supply issues. Some Rolex models will remain hard to get but I predict we will get back to ADs having rolexes on display for people to try and some rolexes in stock to buy. May take a bit of time to adjust but I think it will.

I think some people think because Rolex have had supply shortages in the last few years somehow that will just continue indefinitely. I think you've got to look at Rolex over a much longer time period. And why wouldn't Rolex increase production if they think they can sell more watches and make more profit? I don't think they care about grey Sellers' profits or if you paid an inflated price for your watch or if you think your watch is an investment whose value can only go up. If they care at all it is only to the extent of how it impacts their sales of new watches and their own profits. Really, once they've sold you a watch that tells the time they've completed their side of the bargain. Little benefit to them to restrict their own sales and hence profits. I am sure that they want customers who want to buy a Rolex to be able to do so, rather than buy another brand.

And I am sure they do not want flippers/grey dealers pocketing cash that could be going to Rolex themselves.

Bit confused here?