Patek Philippe has a long history of juicing prices for their vintage pieces by selectively placing pieces in the auction market and creating a buzz for them through 'influencers' in the trade. They have been doing this since at least the 80's with great success, they are now actively doing it for their steel sports line and it seems to be working well, too. For years the Nautilus was a slow seller compared to the Royal Oak, it was basically a dead line and then, over a few years, it is one of the most sought after watches. It didn't happen by accident or without PP's involvement in the process. Other makers like VC, AP, Breguet and others have been trying to replicate this kind of price pumping but with far less success. Rolex has done well in the game, though. Omega would like to be a player, too, but I'm not sure they have the depth in its history in particular lines (other than the Speedmaster) to make it work, but they are trying.

 

I feel it's the opposite. There has always been a grey market, but it has not been like this ever (for Rolex) until they cut supply. Now it's just not the traditional grey market dealers, it's anyone who manages to get lucky and get a watch at MRSP is flipping them for a profit. Make enough to meet demand and all these ridiculous premiums go away...

 

Or, raise the prices to what the market values the watch at. For decades a steel Daytona was always worth more than what Rolex said was their list price. Back when they were $5,000 the market said $10,000, now Rolex says $13,150 and the market says $22,000+. What if Rolex raised the price to something like $18,000 to $20,000, I suspect you would find steel Daytona's more often sitting in dealer's stock.

 

That is the whole point of cutting supply - to eventually raise prices.

 

As always, I value your views as a 'vet' of this industry, and give them a good deal more weight than my own. But the quoted assertion above does still surprise me and I'd like to be pushed back on more about it.

While I'm sure there's always been a grey market, I can't fathom that it has always been what it's become in the past 10 years. 10 years ago, there was no Hodinkee (to speak of), there was no Instagram, and the globalization of individual market places (e.g., eBay, PayPal, Chrono24, etc.) wasn't quite at infancy, but at best was at preschool. Also 10 years ago was the beginning of the most unprecedented decade-long bull market in history (the indexed market as done 5X since 2010).

I work in the oil and gas industry; when capital was flowing free, and oil priced high, any Joe-Blow with a pickup truck and shovel became "an O&G company." And in that price/capital rich environment, many Joe-Blows with a shovel could even succeed. Cut to the past two years, however, and it starts to separate the men from the boys.

It certainly feels like watch scalping has increased at the same pace as the general market, and that any Joe-Blow with a pickup and shovel are now in the wristwatch grey market...

 

It's only in the past 2+ years or so that the Rolex grey market has gone the way it has...this coincides with when the supply dried up.

It wasn't all that long ago that you had to wait for a Daytona, but most other sport watches were readily available (until someone started a rumour that the Rolex de jour was being "discontinued" and then everyone went looking for one). Even over the last couple of years, the Subs and GMT's weren't there, but the Exp. 1 and 2 were still easily obtained. Then those became "scarce" and now in some places even finding a SS DJ isn't easy.

It's complete madness. People have no problem believing that Patek manipulates the market, and restricts the number of sport watches produced, but somehow they go blind when Rolex does it. Haven't quite figured out why that is yet...

 

Since this is about Rolexes, I'd advise people to invest a little time looking at rolexforums.com. I've been following this closely over there for a couple of years. Opinions go both ways, of course, but the overwhelming consensus is that Rolex is NOT restricting supply. The apparent shortage is the result of a market bubble, which itself is the result of flippers and gray marketers buying up the supply and reselling at huge markups. There are lots of SS Daytonas out there, for example, not at ADs but at eBay, chrono24, DavidSW, etc.

 

That’s certainly an opinion, but one I don’t share.

Chatter in the business indicates that AD’s are not getting the supplies of sport models they did a few years ago.

 

I've stopped in at a few ADs in Milwaukee, Boston, Chicago, and San Francisco over the past month looking for a stainless steel OP 39 or DJ 41--nothing to be had.

 

Whatever the reason for the seeming shortage of steel Rolex's in AD showrooms, I don't think a magical dam is ever going to break to find these watches flooding the market. According to the Brookings Institution (a liberal think tank) about 50% of the world's population was middle class or above in 2018 (3.8 billion souls), and is expected to increase by another 1.8 billion by 2030. There is a huge untapped potential for goods and services now, and coming down the pike in the decades to come. Rolex's production will be easily taken up by these new arrivals with the means to purchase a status symbol like a Rolex watch which is seen as one of the worlds most recognized luxury brands. I seriously doubt Rolex is holding back the watches from the market, perhaps they are changing WHO is getting the watches but they are getting out there.

My opinion is the market values these products much higher than Rolex suggests (MSRP), ergo they don't end up in dealer stock. They are shuffled around and find buyers on the grey market for their perceived value. There is no physical shortage of any of these watches if you are willing to pay the current market price. This upsets many people, I don't know why. It's how any free market works. Ignore Rolex's MSRP, it doesn't mean anything in the real world, what matters is what people are willing to pay for a particular watch. If the price is perceived as too rich, then move on and buy something else. An Omega chrono with superior auto movement are mostly available at great discount from their MSRP because the market values them at a lower price than a Rolex Daytona even though the raw quality is probably better in the Omega.

 

Where does Brooking institution get their stats from, do they mean 50% of the USA

how can 50% of the population be middle class when over 80% live on less than $10 a day

Nearly 1/2 of the world’s population — more than 3 billion people — live on less than $2.50 a day. More than 1.3 billion live in extreme poverty — less than $1.25 a day

 

Chicken v egg. The market didn’t put the sort of premium on these watches that there is currently, say 4 years ago. So what changed? Supply...

 

I think we are seeing a microcosm of a larger unsustainable global issue which parralea with both @Evitzee and @STANDY who are actually having the same conversation even if it seems that are at odds- a growing population, a shortage of resources, a growing divide between upper and lower class with new found short money (credit) on the backs of those who are being forced down.
I am actually starting to side with the belief that Rolex isn’t restricting production- they just aren’t increasing supply and have lost control of their distribution. They know the bubble will burst- why ramp up production when it’s working in their favor. Like our planet- there are a finite amount of resources and too many people vying for them. The elastic economy will snap back and the new found money will be gone, and things will stabilize in the luxury goods market. The essential resources are the ones that will become harder to afford in the coming years...like food and water.

 

I’m about to step into the same boat. Thanks for the insight!

 

You bet. Totally anecdotally speaking but I feel like a lot of the "long wait" stories come from really wealthy metro areas where there is probably more demand; I'm in nowhere NJ, had no prior relationship with the dealer, and it was still really painless. I'm sure everybody's mileage varies though. Good luck.

 

People like to find reasons other than the most obvious...

 

It’s easier to think we are being individually screwed rather than realize we are all part of a much scarier problem.

 

Trust me I'm well aware of the larger issues...

I'm not being screwed in any way, because I have zero interest in anything that Rolex currently makes. However I very much dislike the way they do business, and most people are either oblivious to how they operate or are willfully blind about it (citing the fact that they are a charitable trust).

They are by far the most ruthless company I've dealt with in the watch business...and that's saying something.

 

I did my college internship with The Department of Housing and Urban Development in the Fair Housing EEO office- as an intern I was responsible for reviewing grant applications to make sure all the paperwork was in order before they went through the approval process. It was shocking to see how these “charitable” organizations did business, what their financial priorities were, and how little charity they had to perform to qualify as a not for product charity...shocking.