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

and this part is different from Rolex how, you think?

see again Rolex’s ~1,300 models, of which - what - what, 80? are truly hard to get?

I suppose we don’t have competitive production numbers.

but, I’m not drawing the Nike analogy to suggest it’s anything more than analogous



this is just an armchair opinion. there are different ways to “sell the most product,” chief among them: (1) sell as many as possible as soon as possible at risk of a future market weakness, or (2) sell in a way that ensures continued demand over time

the latter approach can result in selling more watches in total than the former - a luxury a private company has

this is not to suggest that *I* know Rolex’s business model any better than you, but instead only to say that the armchair view that “Rolex is not about swing the most product” is a weird view

You had said “Rolex is not about selling the most product [but Nike is]” and that seemed a strange thing to say - even from the collective armchair.

(1) we should assume Rolex’s ~primary goal is to ‘maximize long term company value’ (and this appears particularly true of a privately held corp that need not have myopic next-quarter focus)

(2) there is zero reason to think that maximizing long term company value involves selling the maximum number of [commodity product] in the shortest possible time frame (and this appears particularly true in the luxury commodity market, where “exclusivity” both (a) underpins brand desirability and (b) allows for a maximization of price per unit)

So: no one should be surprised or butt hurt to find out Rolex does not seek to sell the maximum number of watches in the shortest time frame; we might even expect Rolex to “limit” production of at least some products precisely because it can maximize long term company value.

perhaps we’re in violent agreement on the above.

But if so, I don’t see how this is any different (in the main), from either Nike or Omega. Isn’t this why Omega does not shut down its De Ville manufacturing lines to instead make more SS cal.321s (and why Omega can demand $14k for the cal.321)?

Fortunately (for Rolex) there are plenty of people willing to do what you won't. In the past, that 28 mm (I assume you didn't mean cm) DJ would have sat on the shelf for who knows how long, and now they are "moving" those to the people who are willing to play the game. This is why Rolex isn't going to do anything to "solve" the supply problem, because for them it's not a problem. They are simply selling more watches than ever, so are not leaving any money on the table here...

+1, obviously

And to that gem to add only one facet:

I think people could also be surprised to learn which Rolex (model or materials), on a global scale and to the broader non-watch-nerd population, are most produced/sold.

I’ve over the last few years heard enough about e.g., buying preferences in Asia, demographics of luxury watch buyers, etc., to at least definitively say I should not assume my watch-nerd perspective or assumptions at all reflect reality.

consider also another and synergistic downstream effect for Rolex’s economics:

If Rolex is selling effectively all units, and the aftermarket is trading at all in excess of MSRP, then Rolex can continue increase MSRP with very little risk.

So not only do they have a higher confidence in the salability of each unit produced, but also an open field to increase MSRP per unit.

Which collectively is of course wildly more “valuable” to the company than just pumping up unit production of high demand “halo” models.

I might think that’s a distorted proxy. The people who want to display a Rolex affect without paying Rolex pricing/willing to buy fakes and know where to purchase them, seems unlikely to represent the average Rolex buyer population.

On the contrary, a different, but obviously also totally anecdotal view: the times I’ve been in an AD/RB and seen another watch-nerd I can count on one hand; whereas there are uncountable times I’ve been in an AD/RB and seen a couple shopping for a lady date just for the Mrs., or “any Rolex will do” for the Mr.

Just as anecdotal: I’ve heard time and again that in Asia (>60% of the luxury watch market by value), precious metal pieces are wildly more popular and sought after than SS models. Could be incorrect anecdotal info.

—————

But we can get more particulate and objective on these anecdotal observations:

Let’s look at Morgan Stanley’s 2020 yearly report on the 2019 Swiss watch industry (ignoring 2020 which isn’t out yet and also so we don’t get static from the surely odd 2020 COVID year). The typical top 7 companies all achieved growth in 2019.

But as to the topic of this thread, check out the relative turnover in value:



And then check out the relative market share from any perspective:



So, if this data is to be believed, Rolex is indisputably selling a lot of units on a value basis (if not a pure unit basis).

And so, if you are a person that further believes that Rolex is not selling a lot of desirable SS sports models (which are at MSRP far cheaper than precious metal versions), then you might be forced to agree that Rolex is selling a majority of units on a value basis that are not SS sports models.

Is this deduction supported by any objective info?

——————

Let’s look the 2019 analysis by the Federation of the Swiss Watch Industry regarding the relative value and number of Swiss watches sold in 2019 by materials. I think we can assume for present purposes that general market demand for Swiss watches by materials might roughly reflect Rolex’s general demand profile as well, at least in rough order, by materials:



Basically, precious and bi-metal sales account for only 8% of sales by unit, but 52% of sales by value.

Used as a proxy for Rolex’s sales, it would suggest that at least 1/2 of Rolex’s income are not derived from “SS sports models” whatsoever.

Moreover you may be forced to agree that Rolex’s income attributing or to precious/bi-metal is far in excess of 50% if you’re a person who assumes Rolex is limiting production units of SS sports models.

——————-

Remembering again that by retail value Rolex is selling 3 times as many watches-by-value as Omega, this all seems to result in a catch 22 of sorts. It seems one might be forced to agree with only one of the following contradictory views:

(1) Rolex sells 3 times as many watches-by-value as Omega by selling inordinate numbers of SS watches (which is contrary to the view Rolex is limiting SS supplies) - far more SS in fact that Omega manages to sell; or

(2) Rolex sells 3 times as many watches-by-value as Omega, all while restricting sales of SS sports models, in virtue of inordinate sales of precious metal/bi-metal watches accounting for >>50% of the company’s sales by value (contrary to the view that Rolex’s bread and butter are SS sports watches).

The take-away being this: the market statistics appear to suggest an inherent contradiction in simultaneously maintaining that SS sports models are both being restricted in number, while also accounting for a principle source of Rolex’s value.

Indeed, if Rolex’s sales-by-value are 3X that of Omega, it would seem Rolex is either selling far more SS than Omega, or instead SS sorts is for Rolex more of a “halo” product with the bulk of its annual sales value tied up in precious/bi-metal watches.

Then there’s the law of the excluded middle, which may be most uncomfortable for forum quips to swallow: the answer could be somewhere in between, where Rolex is neither materially restricting SS sports sales nor having a significant majority of sales-by-value in precious metals, but instead simply selling the everloving sh*t out of all kinds of things, to the tune of 3X as many watches-by-value as the next runner up in industry, Omega.

I think it's pretty widely accepted (but of course not proven) that overall it's the TT DJ that sells the most. That's not exactly news.

To me that is far less shocking than the claim that Omega's most popular watch is the modern Constellation, which is often cited as their best seller in many parts of the world.

Where does Morgan Stanley get the data re: Rolex?

In this consultant-investor type analysis, they’re doing surely a lot of consultant-investor type extrapolating and estimating. For example, with intel from FH about gross exports, together with public info on other brands to back out, together with SKU#s and sales required to be reported publicly in some countries extrapolated, plus a dash of consulting magic, they arrive at what they believe is investment-grade intelligence. Eh, not perfect, but better than a lot of other “intelligence.” 😁

I can’t find a PDF link to the 2020 report, but to answer the question of the nature of the report and it’s sources of information, see both

This copy of the MS 2018 lookback (from 2019h, and

This analysis/critique of same by Ariel Adams

This critique and Morgan’s analysis regarding “bullwhip” in the industry raises an interesting point relevant to a conversation about Rolex’s production numbers.

In short, the industry’s “bullwhip” problem is that sales at register (for various reasons) turn into over-production of units at manufacture, which then can have drastic ill effects at both the company and industry level.

Applied to the Rolex discussion (though admittedly and hopefully obviously still over-simplified), one might have the view that to avoid the ill effects of the bullwhip it is prudent to error toward underproduction while hoping to hit perfect production.

I wasn’t aware of this bullwhip topic in the industry until finding this analysis by MS and critique by Ariel A., but it raises a deeper industry issue that may relate to features Rolex’s perceived business model.

Did you read the underlying assessment by Morgan Stanley?

this is about 2020 only - a rather tough year for all watch manufacturers

Rolex’s 2020 reduction in production (19%) was less than the average of all brands ( ~35%)

Rolex sold more watches than any other brand, selling ~800k units in 2020, whereas Omega sold ~500k

Coming hot with a “read ‘em and weep” to demonstrate that (1) Rolex’s production was down in a pandemic year, (2) down less than other manufacturers, and (3) still out selling all other manufacturers by a factor of at least 1.6/1 (Omega being #2)...

... is a little * sad trombone*