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

Andrew C
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cvalue13 cvalue13
This goes a little too far I think, although I sympathize with the point. But the discussions above about analyst views of these companies show that shareholders can and should be concerned with the correct balance of supply/demand. As I read it, the analysts say (in short) there’s a death spiral created by the following feedback loop: (A) over produce a watch, then (B) 2ndary market prices fall below MSRP, then (C) further over production occurs, then (D) further 2ndary market fall...

If analysts like MS get it, I assume the companies can and should be responsive: they need either (I) and exact 1-to-1 of supply to demand, or (ii) supply just below demand ... the latter being the realistic option but not easy to achieve
100% fair and valid points.

Makes total sense to me. Nothing worse than finding things below MSRP on Jomashop to dissuade you from buying at full price from an AD ever again.

Really hard to judge what that level is though, as 2020 will have proven.
 
wsfarrell
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Archer Archer
Rolex doesn't sell watches to end consumers.
This is the most obvious--and most ignored--truth in this years-old discussion. Rolex has been making roughly the same number of watches every year for decades, and they are sold to dealers. Rolex doesn't give two craps about what happens in secondary/tertiary/etc. markets. Rolex punishes dealers who don't toe the Rolex line. And Rolex *may* allocate more watches to some dealers than others, based on an algorithm known to perhaps 5 people in the world--and they're not talking. And that's the end of that story.
 
Archer
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cvalue13 cvalue13
Didn’t go well?

This response from you extends your own pattern.

I answered directly, and concluded with a moment of levity. Your responses ignore the direct answers, and instead misdirect and cherry pick a moment of levity (misplaced as it may be) in order to not really say anything at all to the direct response.

Let’s take it back: you ask why I have sometimes framed my questions/observations about Rolex’s sales alongside comparisons with Omega’s sales. I’ve answered.

This is what I was referring to...

Untitled.jpg


As you can see, I snipped out the "levity" and directly responded to the part of your post that was substantive. I only brought up the hyperbole when you used the "Rolex doesn't make watches anymore" line a second time in your next response.

So back to the main point I guess...

Let's assume for a moment that the data from MS is all valid, has been gathered from sources with equal reliability across brands, etc.

The fact that it doesn't explain why there is a dearth of Rolex at AD's, and plenty of Omega (anecdotally speaking, but I believe this is an accurate representation of the current state) would tell me that this data isn't terribly relevant to what is going on.

"So why would this be?" is the question.

Please correct me if I'm wrong, but you appear to be suggesting that this is possibly evidence that Rolex is not holding back watches. Is that right?

My own perspective is that this is a very incomplete picture. One thing that the data doesn't take into account is supply chains, and how full of product they are. The reason I asked about what sold meant to you is that it doesn't mean "sold to the end user" for Rolex. It means sold to whoever is next in line in the supply chain. That could be a distributor for a country or region - these may or may not be under the control of Rolex (I don't know enough about their structure to say for sure).

Since Rolex has been "scarce" at the AD level now for some time, can we assume the supply chain is empty? What about Omega's supply chain? Is it a stretch to say that their supply chain is more full? I don't think so.

So when you make this comparison between Omega and Rolex based on 2020 data, that really isn't the larger picture that is solely responsible for what is seen at the counter of the AD.

Cheers, Al
 
Jockywilson1
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In simple terms, Rolex don’t make enough watches to meet demand, Omega do. Just the demand for Omega is smaller than it is for Rolex. Why Rolex don’t make enough watches is open to ones own interpretation. Personally the importance of secondary market multiplier that has been discussed before seems like the route Rolex has taken.
 
cvalue13
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Andrew C Andrew C
Really hard to judge what that level is though, as 2020 will have proven.

It’s part of why the analysts also say these brands have to move to DTC models: so they can have real time and direct line of sight from manufacturing to point-of-sale, and allow for near real time throttling of unit numbers.

Archer Archer
So when you make this comparison between Omega and Rolex based on 2020 data, that really isn't the larger picture that is solely responsible for what is seen at the counter of the AD.

My original (recent) post stated my conundrum correctly, and the extent of my observation: people who suggest Rolex is “constraining production” seem to need to square that assertion with the analysts who ascribe Rolex a larger market share than any other brand, by as much as 2X the 2nd runner up. I don’t have the answer.

To your suggestion there’s significant stranded stock (roughly speaking): that may be true, and if so it also draws into question the idea that Rolex is “constraining production.”

Of course, if all people mean by Rolex is constraining production is “Rolex is [producing]/[selling] more watches than anyone else, but should be producing even more” it’s not very interesting or controversial.

But instead many seem to suggest Rolex’s are rare as hen’s teeth, which - stranded, sold, or otherwise - seems contrary to a lot of data.
 
E
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What about the rumors of activists looking into how watch parts are gathered trying to ruin the industry?
 
STANDY
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@cvalue13 how do you explain. Rolex Boutique in Australia that used to sell 250 subs a year only getting 20-25 a year for the last 3 or 4 years. ??

This is happening in nearly every airport I have been in around the world in the last few years ??

Am I just going the wrong days. Are all these empty watch displays that were full 5 years ago at every Rolex store I looked at just imagination.

The financial world is not as healthy as it was I can tell you that, and someone that works at a airport a few times a month I see more wrists than many and to me Rolex is scarce compared to years ago.
 
nzshadow
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Andrew C Andrew C
The brand leader gets the benefit of this (see the price of Jeff Koons, or Bitcoin, or vintage Ferrari, or primo condos in NYC - it's all the same damned trade)
...They are trying to imprint hype on the current generation of newly-minted 25 to 40-year-olds who have high disposable income to turn them into customers for 30 years.

...the hype is imprinted on you - you're a future customer.

Exactly this.
 
Jockywilson1
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Donn Chambers
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I have only been following this thread a little over the last few months, it it really seems to me there isn’t a “shortage” of Rolex watches, just a shortage at ADs in display cases. Look at any grey market dealer, and they have dozens of these supposedly hard to get models available — all at inflated prices. Even brand new models that have just been released show up almost immediately.

presumably, they aren’t getting these directly from Rolex. Which means they are either getting them directly from the AD or from someone who purchased them from the AD and then flipped them for a profit.

All of this really points to demand being the main problem. People want a Rolex because its perceived status, they are willing to pay exorbitant prices to get one, and the cycle keeps feeding itself.
 
Archer
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cvalue13 cvalue13
My original (recent) post stated my conundrum correctly, and the extent of my observation: people who suggest Rolex is “constraining production” seem to need to square that assertion with the analysts who ascribe Rolex a larger market share than any other brand, by as much as 2X the 2nd runner up. I don’t have the answer.

This goes back to my original question to you. Market share is not a measure of pure volume, only a share of the overall volume.

It's quite possible for both things to be true - Rolex could be producing less and still have the largest share of the market. This is why using Omega as a comparison doesn't really make any sense to me, and why I asked you about it in the first place.

Comparing relative market share doesn't tell you if either seller has gone up or down in pure sales numbers on it's own. Rolex could be producing less and gaining market share, or producing more and losing market share. If I remember correctly, the MS data (or one of the articles based on it) did suggest that Rolex produced fewer watches last year, by something like 14% (or maybe it was 19% - can't remember the exact number but somewhere in that range).

To be clear I'm not arguing about constrained Rolex production here at all really, but I don't think this "relative market share" argument does much to disprove the idea that it is not being constrained.

cvalue13 cvalue13
To your suggestion there’s significant stranded stock (roughly speaking): that may be true, and if so it also draws into question the idea that Rolex is “constraining production.”

In my view it has nothing to do with Rolex constraining production, either proving or disproving it. It's only a suggested reason why Omega appears to have more stock on the shelves than Rolex. The key point is that using just one year of data doesn't really reflect reality, because dealers and distributors don't clean out the entire pipeline at the end of the year and start with zero watches.

cvalue13 cvalue13
But instead many seem to suggest Rolex’s are rare as hen’s teeth, which - stranded, sold, or otherwise - seems contrary to a lot of data.

I don't know what you mean by rare - I just see people talk a lot about empty shelves.
 
cvalue13
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STANDY STANDY
@cvalue13 how do you explain. Rolex Boutique in Australia that used to sell 250 subs a year only getting 20-25 a year for the last 3 or 4 years. ??

I’m as baffled as you, it seems.

I’m also looking at the lack of apparent stock in AD cases/inability to easily acquire many models - but rather than conclude I understand what’s going on, looking also at market analysis about Rolex and becoming MORE uncertain of WTF is the real answer.

I suppose it’s understandable to have seen a few of my posts in isolation and think maybe I’m suggesting I have any answers; but on the contrary my intent, clear or not, is to say I feel a helluvalot less certain than other people seem to be.
 
cvalue13
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Archer Archer
This goes back to my original question to you. Market share is not a measure of pure volume, only a share of the overall volume.

There are different ways to measure market share (eg by units sold, by value of units sold, etc.) - the report addresses these. Right or wrong, the various analysts all suggest Rolex is out front by an order of magnitude on all accounts.

Again, I’m not defending those conclusions as flawless - but trying to account for them at all amongst all the other “data” available, and recognizing at the same time that such analysts are professionals as compared to some of the more outspoken on this thread: which to me means I really can’t dismiss the analysts data out of hand.

Again, that doesn’t leave me confident in anything other than not being confident that AD’s cases tell me anything wholistic.


Archer Archer
The key point is that using just one year of data doesn't really reflect reality, because dealers and distributors don't clean out the entire pipeline at the end of the year and start with zero watches.

It’s not one year: the same report has Rolex on top by a significant margin going back to at least 2017 (when the current charts stop reporting historical).

Meanwhile, as another mentioned just above, while AD cases are empty, Chrono 24 is PACKED FULL of Rolex. And, I assume that for every 1 on Chrono 24, there are at least a handful more in safes “to appreciate,” in other sales platforms (eg IG), etc.

One of the main points made by the same analysts we’re discussing is that an element of Rolex’s success vs other Swiss brands like Omega is that Rolex has a tighter grip on its manufacturing tolerances and controlling secondary values, while Omega and other brands are (in analyst’s views) overproducing stock due to a bullwhip effect between point of sale and factory.

Their point, if anything, is that it’s expected Rolex cases are empty while Omega cases are full, which does not reflect their being fewer gross Rolex available (quite the opposite) but instead fewer net Rolex available after accounting for demand and manufacturing overages.

So I’m left feeling like I still might not fully understand the thrust of your point about supply chain in comparing Rolex vs Omega based on AD’s cases. If there’s a surplus of stock somewhere explaining Rolex’s “exports,” and it’s not in ADs cases, and it’s not been “sold” - where is it?
 
Archer
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cvalue13 cvalue13
There are different ways to measure market share (eg by units sold, by value of units sold, etc.) - the report addresses these. Right or wrong, the various analysts all suggest Rolex is out front by an order of magnitude on all accounts.

The unit of measure doesn't matter. Market share isn't necessarily a reflection of sales going up or down, or production going up or down.

If the market is 1000 units, and Rolex sells 500, that is their share of that market. If the market is down as it was last year, and the market is now 800 units, and Rolex sells 400, their market share hasn't changed, but they sold less. So comparing market share of one brand against another, and saying it has to be "squared" against the observations that Rolex AD displays are empty, doesn't seem to be relevant to me.

I'll say it again, I'm not arguing that Rolex is restricting supply, only that using market share as some sort of "proof" that it isn't doesn't make a lot of sense.

If you want to quote pure production numbers, all good - market share and Rolex's dominance of the market, not so much.

cvalue13 cvalue13
So I’m left feeling like I still might not fully understand the thrust of your point about supply chain in comparing Rolex vs Omega based on AD’s cases. If there’s a surplus of stock somewhere explaining Rolex’s “exports,” and it’s not in ADs cases, and it’s not been “sold” - where is it?

I'm only speaking about the fact that if Omega sales are slow, and there's more stock in their pipeline, it makes sense there would be more on the AD's shelves than any other brand that is in high demand.
 
cvalue13
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Archer Archer
If you want to quote pure production numbers, all good - market share and Rolex's dominance of the market, not so much.

Sorry, I’m still not following the point. Confused I guess because I know you’ve seen the production/sales number estimates behind the market share calculations.

Moreover, when there’s a thread of conversation that goes (in summary), “you can hardly find Rolex watches but Omegas are easy to obtain, so it must be Rolex isn’t making many watches” then it is relevant to say, “well wait, it’s strange these analysts suggest there are 1.6 Rolex being exported/sold for every Omega exported/sold - it suggests the issue is demand for Rolex vs Omega, not that Rolex’s aren’t being made.” That relative comparison is true regardless whether the numbers are 800 vs 500, or 800k to 500k.

But speaking of 800k to 500k, again we’ve seen the relative numbers that backstop their “market share” calculations we’re actually talking about, too:


A0D1A80A-FF68-437B-960E-E8434F314D51.jpeg


And to the previous comment, of it being one year of data:

34AFB411-C3A5-45E7-A932-8314DEA5F476.jpeg



Archer Archer
I'm only speaking about the fact that if Omega sales are slow, and there's more stock in their pipeline, it makes sense there would be more on the AD's shelves than any other brand that is in high demand.

Agree, and this seems noncontroversial to me but lost in some others. So perhaps we’ve been talking past each other and in violent agreement.

My questions/confusions are more directed toward folks who tend to suggest the reason there are more Omega available than Rolex is proof that Rolex isn’t making many watches.

(Which btw is different than saying “Rolex isn’t making enough to meet demand” - which is noncontroversial, in a way.)
 
Jockywilson1
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This really is just going round and round in circles. That’s pretend there are a million people in the world who want to buy a Rolex but Rolex only make 800k watches. This scenario goes on for a number of years, so much so that it starts getting discussed on forums. The numbers might be hypothetical but I think the scenario is pretty accurate. Demand has out stripped supply. But the real discussion is around Rolex’s response to this demand. Some consider it a conservative and sensible business approach, others that it’s a more machiavellian attempt at controlling the market. In 47 pages I don’t think there is a smoking gun to prove either position, people’s opinion seems to be aligned to whether they trust the brand or not
 
Archer
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cvalue13 cvalue13
Sorry, I’m still not following the point.

Market is 1000 widgets, and company A makes 500 of those, company B makes 300, and company C makes 200.

Market drops to 500 widgets, and company A makes 250 of those, company B makes 150, and company C makes 100.

Therefore market share remains the same, and production has dropped for all, including the one that is still the market leader. Therefore market share is not an indicator of production levels or sales levels. So saying that production of widgets from company A hasn't dropped because they still make more than company B or C, isn't the case.

Can we agree on this scenario then?
 
cvalue13
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Archer Archer
So saying that production of widgets from company A hasn't dropped because they still make more than company B or C, isn't the case.

Can we agree on this scenario then?

So much so, that I still don’t even understand why we’re (you’re?) talking about it. 😁

Because if you’re suggesting that *I* said anything like your sentence above, it was lost on me/unintentional.

[BTW, the same analysts we’ve been discussing pretty clearly describe everyone’s production went down in 2020 (for what should be pretty obvious reasons), but least of all Rolex - which resulted in the increased market gap between it and #2 (a gap that’s been growing since before 2017).]

Instead, as a separate matter from and moving past the one we’ve just agreed on:

When someone says/suggests in effect “the thing I don’t like about Rolex is they don’t make enough watches, and they don’t make them in order to carry out a malicious plot to deceive customers” - it’s relevant to ask, I think, what exactly do you mean by “don’t make enough”? How many watches would be “enough” to satisfy your moral compass?

Let’s take for example the quote that I responded to that then prompted your questions toward me:

Kmart Kmart
Here's the really interesting part though. At the last sales meeting that he went to with Rolex, they were obsessed with what they call the "secondary multiplier". This is the ratio of a watch's value on the secondary market vs. its MSRP. The Rolex company rep said that prior to constricting the supply of the datejust, for example, the secondary multiplier was 0.9, meaning that it sold for LESS than retail on the secondary market. This was unacceptable to them, so they simply stopped shipping Datejusts and now they trade for well over retail. The same goes for various other references.

So this confirms that Rolex is artificially constricting supply in order to inflate the perceived value of their brand.

Since Rolex “stopped shipping Datejusts [and] various other references,” what exactly are they selling so F’ing much of?

Just imagine: Rolex is no longer selling its most popular models, but still manages to keep outselling its next closest competitor’s entire catalogue by an order of magnitude, and growing the gap each year.
 
Archer
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cvalue13 cvalue13
So much so, that I still don’t even understand why we’re (you’re?) talking about it. 😁

Because if you’re suggesting that *I* said anything like your sentence above, it was lost on me/unintentional.

Well, this is what you said in response to someone saying that Rolex was limiting production back on page 46:

cvalue13 cvalue13
This bit is the confusing part, as it doesn’t square with the industry data showing that Rolex produced and sold 800k watches last year while Omega sold only 500k

And then in a subsequent post on the same page:

cvalue13 cvalue13
Yes, these stories of this-AD-or-that no longer receiving as many watches seem like they have to be reconciled with the industry data showing Rolex has a 25% market share (compared to Omega's 8%), and in 2020 sold 800K watches (compared to Omega's 500k).

This second one is where I questioned why you kept making this comparison to Omega, and here we are...it seems we agree that nothing needs to be squared, so it can remain whatever shape it currently is. 😀

So it’s good that we now apparently agree that market share relative to, and the numbers that Omega sold aren’t really relevant to the question of Rolex cutting back on capacity/supply. Hope I’m not overstating our agreement here.

How many watches should Rolex make? As many as they want I guess. If there’s one thing I can say for sure, Rolex doesn’t need to satisfy me in any way at all, because I’m not interested in anything they currently make. 😜

Having said that, I feel for the people who truly want one, but can’t get it because of the current situation. Aside from the obsession over this whole situation, which is sort of an ugly side of the watch world right now, I see plenty of people on various forums saying they are exploring other brands because of this, and that’s a good thing.
 
DoctorEvil
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Jockywilson1 Jockywilson1
Demand has out stripped supply. But the real discussion is around Rolex’s response to this demand. Some consider it a conservative and sensible business approach, others that it’s a more machiavellian attempt at controlling the market. In 47 pages I don’t think there is a smoking gun to prove either position, people’s opinion seems to be aligned to whether they trust the brand or not
Agree strongly with you on this one. I think the "truth" is probably a bit of both of what you assert. It's a sensible business approach because if Rolex ramped up production of Subs, GMTs, Daytonas etc and demand drops because trendsetters have moved on to another brand then the price of these watches on the secondary market will drop. This then cheapens the brand's image. They will also be left with a lot of idle workers and machinery that they have invested money in. Is it an attempt to control the market? Fairly sure that it is. As another poster has said earlier, it appears that Rolex is obsessed with secondary market values, brand image and the perception of exclusivity. How to preserve it? Ensure that supply never meets demand, no matter how many watches they produce. They also don't appear to care about short term profits because they don't have shareholders to answer to and pay dividends to. In terms of their long term goal (brand image), it's not in their interests to increase production even if they can.
 
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