I don't understand the recent Rolex SS craze/shortage. What am I missing?

Dan S · Feb 18, 2021

JwRosenthal
So as someone who has only purchased one new watch in my life (all others have been used), what is the allure of buying a new GMT when Rolex has been making a version of this watch for over 60 years? I would think you can have instant gratification with any vintage/era GMT if you have the money to spend.

cvalue13
... Which of course is all to say I’m on “the list” for a new GMT but also currently saving for a 16750 😬

cjoedaniel
Yes! All good points. I think a new SS at MSRP is way cheaper than vintage with the added robustness of a warranty.

Vintage takes knowledge. However, if new Rolex sport models appealed to me (they don't), I would just buy one that's 10-15 years old. They are cheaper than new, readily available, and look almost identical.[/QUOTE]

DoctorEvil · Feb 18, 2021

Dan S
Vintage takes knowledge. However, if new Rolex sport models appealed to me (they don't), I would just buy one that's 10-15 years old. They are cheaper than new, readily available, and look almost identical.

[/QUOTE]

Have you checked out the prices on Chrono24 recently? Most listings for a GMT2 16710 are well over the current retail price for a ceramic bezel "Pepsi". In this case a vintage model may be readily available but not always cheaper than new.

Dan S · Feb 18, 2021

DoctorEvil
Have you checked out the prices on Chrono24 recently? Most listings for a GMT2 16710 are well over the current retail price for a ceramic bezel "Pepsi". In this case a vintage model may be readily available but not always cheaper than new.

The prices for everything on Chrono24 are silly. Anyway, I think you get my point.

rfcs · Feb 18, 2021

cvalue13
I wouldn’t assume that. Could be true, but it would require some work and info none of us have to assume it.

People also assume it about Nike’s margins on its shoes, but since it is a public company more reverse engineering can be done to find:

Not to say this is gospel or that Rolex’s finances necessarily mirror Nike’s, but instead only to say that an armchair view that commodities must have huge profit margins to the manufacturer isn’t a particularly intuitive assumption

All we can do in this forum is put forward our best educated guess. Rolex hasn’t opened its books for anyone to know its margins. But it’s counter intuitive to assume that its margins would be lower than its AD’s. To your point, if Rolex’s margins were not healthy as they are, all it had to do was raise prices high enough to minimize grey market sales (haven’t seen that yet) or lower costs.

cvalue13 · Feb 18, 2021

rfcs
But it’s counter intuitive to assume that its margins would be lower than its AD’s

Perhaps intuition is not a good guide to manufacturing margins - see again the example from Nike.

From friends in other manufacturing spaces (mostly luxury furniture, or automobiles), I understand it’s the usual case not the exception that the manufacturers gross margins are lower than the retailer’s gross margins

But more important than your possibly misleading intuition on gross margins, it seems you’re also possibly forgetting or confusing gross margins with net profit:

rfcs
Remember, the AD makes a 30% markup on these pieces which are sold at no discount. I assume that Rolex’s profit margins exceed the AD’s and are quite healthy.

Out of the ADs headline margin also comes all, overhead and expenses. Then retailers take inventory risk and in some sectors rarely realize the MSRP of all inventory, which results in blended net profit, that after CapEx, can be something pretty alarmingly low.

cvalue13 · Feb 18, 2021

Dan S
Vintage takes knowledge. However, if new Rolex sport models appealed to me (they don't), I would just buy one that's 10-15 years old. They are cheaper than new, readily available, and look almost identical.

[/QUOTE]

but with respect to new, are you focused on a grey market value, or the MSRP?

there’s not a 12 year old watch lower than MSRP, or that has up to a 100% disconnect with market value

not to suggest there’s any rational decision to be made here - but to scope only the minutiae of the bad rationales 😁

rfcs · Feb 19, 2021

cvalue13
Perhaps intuition is not a good guide to manufacturing margins - see again the example from Nike.

From friends in other manufacturing spaces (mostly luxury furniture, or automobiles), I understand it’s the usual case not the exception that the manufacturers gross margins are lower than the retailer’s gross margins

But more important than your possibly misleading intuition on gross margins, it seems you’re also possibly forgetting or confusing gross margins with net profit:

Out of the ADs headline margin also comes all, overhead and expenses. Then retailers take inventory risk and in some sectors rarely realize the MSRP of all inventory, which results in blended net profit, that after CapEx, can be something pretty alarmingly low.

I’m fairly educated on the difference between gross and net margins. I don’t pretend to know what are their net profit contributions. My only point was a rebuttal to someone else that speculated that Rolex is intentionally restricting production of SS pieces, which makes no business sense in a highly competitive luxury goods market.

cvalue13 · Feb 19, 2021

rfcs
My only point was a rebuttal to someone else that speculated that Rolex is intentionally restricting production of SS pieces, which makes no business sense in a highly competitive luxury goods market.

No sense? On the contrary.

What are “limited editions”?

What are “non-limited editions produced in low numbers” such as the SS 321 and Snoopy?

Why is the multi-billion dollar collectibles segment in sneakers ran exclusively in limited productions of style runs?

Why doesn’t Hermès produce enough of its collectible purses that everyone who wants one can simply purchase it online?

On the contrary, exclusivity is a key ingredient especially to the highly competitive luxury goods market.

Jockywilson1 · Feb 19, 2021

Rolex in my opinion are completely complicit in the shortage of desirable models/increase grey market prices. Forgetting the supply / demand issue that undoubtedly exists, by insisting that their products can only be sold in store it effectively allows ADs to decide who they want to sell to. If Rolex sold online like Omega it would guarantee at least some stock to be bought for RRP. Never going to happen, well not in the short term. (Interestingly Tudor have dropped the in store only policy recently, so it’s not beyond all comprehension)

DoctorEvil · Feb 19, 2021

Jockywilson1
Rolex in my opinion are completely complicit in the shortage of desirable models/increase grey market prices. Forgetting the supply / demand issue that undoubtedly exists, by insisting that their products can only be sold in store it effectively allows ADs to decide who they want to sell to. If Rolex sold online like Omega it would guarantee at least some stock to be bought for RRP. Never going to happen, well not in the short term. (Interestingly Tudor have dropped the in store only policy recently, so it’s not beyond all comprehension)

They are complicit in the sense that they have chosen not to increase supply to meet demand. From what I've read in some opinion pieces, it's probably not in their best interests to do so. Their reading of the situation is that the current demand for SS Rolex watches is most likely a short term trend. So if they ramped up production by training more staff, acquiring more factory space and equipment etc and the Insta crowd decides to move on to the next big thing, they could then be left with a bunch of surplus watches and they would not get a return on their investment. Staff would have to be laid off, production lines shut down etc which would be expensive. Also, by making their watches more readily available it would tarnish the brand's image of exclusivity which is something their bosses would not want.

DoctorEvil · Feb 19, 2021

cvalue13
No sense? On the contrary.

What are “limited editions”?

What are “non-limited editions produced in low numbers” such as the SS 321 and Snoopy?

Why is the multi-billion dollar collectibles segment in sneakers ran exclusively in limited productions of style runs?

Why doesn’t Hermès produce enough of its collectible purses that everyone who wants one can simply purchase it online?

On the contrary, exclusivity is a key ingredient especially to the highly competitive luxury goods market.

Couldn't agree more. Rolex got lucky when everyone decided that they needed to have one of their sports/professional models on their wrists and they are milking it for all it's worth. Right now, their priority is boosting the brand's image rather than boosting sales. They probably already make a decent profit each year so no need for more sales, and with no shareholders to answer to they can do whatever the hell they want.

BlackTalon · Feb 19, 2021

But they do increase sales. Instead of reallocating production to make more of the 'in demand' watches they continue to pump out models that many are not interested in. And these models are often more costly due to the use of precious metals. So they want you to buy one or two of those (spending what, USD $25k+?) before you can by what should be a $5k-$6k watch. And this actually seems to work! So they sell $30k+ to a single buyer instead of only $6k.

And while this is going on, those who would rather not buy those $$$ watches from Rolex instead pay >>$6k for the one they really want from a reseller, so Rolex winds up with a lot of resellers who are more than happy to see their stuff.

Jockywilson1 · Feb 19, 2021

I can understand that Rolex might see the surge in demand as a blip and subsequently not want to invest in increased capacity. I also understand that the scarcity of product actually boast demand / hype if marketed in the right way. But what annoys me and fuels the fire is Rolex effectively allowing AD to decide who to sell too, and it’s a problem of Rolex’s making. As soon as you put quotas in then it’s in the ADs interest to shift whatever they can, and that means leveraging SS against underperforming models and selling them as a bundle to grey market dealers.
The grey market is of Rolex making, supply is only part of the issue, there are models that no ‘normal’ person will be able to buy at RRP.

rfcs · Feb 23, 2021

That's why Rolex and their AD's have opened the door for me at least to look at other brands, including Omega and Grand Seiko. However, I wouldn't think they intentionally would want or plan for that result with any customer. But heck, there's room to think that some manufacturers are illogical and contrarian.

cvalue13 · Feb 23, 2021

It’s funny to be on watch sites and sneaker sites both, seeing both sides “puzzle” over the same things as though there’s only a single company in a single industry acting “irrationally.”

From moments before this:

I’m sure Rolex, Nike, Hermès, and the like, are all embarrassed for not knowing the basics of business as well as folks on Internet forums...

STANDY · Feb 23, 2021

cvalue13
It’s funny to be on watch sites and sneaker sites both, seeing both sides “puzzle” over the same things as though there’s only a single company in a single industry acting “irrationally.”

From moments before this:

I’m sure Rolex, Nike, Hermès, and the like, are all embarrassed for not knowing the basics of business as well as folks on Internet forums...

Posts like this make me feel glad I’m not young..... $30 is my flip flop limit

cvalue13 · Feb 23, 2021

STANDY
Posts like this make me feel glad I’m not young..... $30 is my flip flop limit

funny, $30 is also my pocket knife, pen, and flashlight limit ... 😁

Rhone1 · Feb 24, 2021

I gave up on Rolex a couple of years ago. The silly games they and the AD's play are ridiculous.

JwRosenthal · Feb 24, 2021

STANDY
Posts like this make me feel glad I’m not young..... $30 is my flip flop limit

When I was a teenager I went school shopping with my father, we got to the cash register and my Levi’s 501’s rang up at $24.95- he almost had a heart attack! He said when he was in high school they were $5.

cvalue13 · Feb 24, 2021

Cross-posting/quoting this here, because I think it more relevant to this thread:

cvalue13
The vid has a rather specific “1,658” models cited [for Omega].... Then, the vid goes on to break down to 4 top brand families [at Omega] as follows:

• Constellation: 524 models
• De Ville: 447 models
• Seamaster: 570 models
• Speedmaster: 118 models

That adds to 1,659 (not 1,658) 👎

.

O OmegaBHR
Actually, put into context, Rolex makes quite a few variations at the moment as well, 1,392 to be exact,

Day-Date - 168
Date-Just - 728
Lady Date-Just - 324
OP - 32
Pearl Master - 4
Cellini - 30
Sky-Dweller - 18
Sea-Dweller - 4
Sub - 9
Daytona - 47
GMT - 6
YM 1 & 2 - 16
Explorer - 3
Milguass - 2
Air King - 1

Rolex also makes small design changes quite often, they are just better at being discreet about it and keeping maintaining the sense of scarcity and being special.

cvalue13
yes, and it goes to show that on forums such as these we have a myopic view of these company’s business model, average consumer, and most profitable watch segments.

They don’t have all these lines on accident, or as loss-leaders.

In the same way, Nike makes most of its money off of “dad shoes,” “outlet models,” and the like sold at scale, despite the inordinate marketing focus on its hyped “halo”/collector products that are limited in numbers.

Rolex’s business model does not turn on hurting the last feeling of someone who wants a SS GMT but can’t get one.

I don't understand the recent Rolex SS craze/shortage. What am I missing?

Dan S

DoctorEvil

Dan S

rfcs

cvalue13

cvalue13

rfcs

cvalue13

Jockywilson1

DoctorEvil

DoctorEvil

BlackTalon

Jockywilson1

rfcs

cvalue13

STANDY

cvalue13

Rhone1

JwRosenthal

cvalue13

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