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

Archer
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AAAKK AAAKK
I saw this the other day as well, interesting for sure. Especially the psychology aspects of it, pure frenzy to get their hands on the newest or a retired beanie. Also the rise of the internet coinciding with the mania, or even acting as a catalyst. Early internet chatboards and marketplaces for these things.

Just pondering the psychology of it that you mentioned. That's probably the biggest take away for me really. How what collectors valued because they really liked them, turned into a money grab for a huge percentage of the market. After the crash the collectors mostly still had their Beanie Babies, but they were not enough to sustain the prices since they were such a small percentage of the market. It was the people in it for money who sold out, many losing a ton of money in the process.

Really the brand involved doesn't matter for those people, because all along it was just about the chance to make a profit off a widget, and for those people once the money wasn't there, the interest in the item was just gone. I think the same could be said for the watch market right now - does anyone think vast majority of people are really paying these prices based on the brand's strength? Or is it more likely they buy at these numbers because they believe they can sell at a profit anytime they want? Once these people can no longer do so, that's when the trouble starts. I don't think any brand is immune to these market forces...
 
Davidt
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Archer Archer
Really the brand involved doesn't matter for those people, because all along it was just about the chance to make a profit off a widget, and for those people once the money wasn't there, the interest in the item was just gone. I think the same could be said for the watch market right now - does anyone think vast majority of people are really paying these prices based on the brand's strength? Or is it more likely they buy at these numbers because they believe they can sell at a profit anytime they want? Once these people can no longer do so, that's when the trouble starts. I don't think any brand is immune to these market forces...

Agree but surely this is the exact reason Rolex won’t increase production numbers in response to demand.

Yes they’re leaving money on the table now with secondary prices being where they are but when all the “I’m looking for a Rolex, what’s the best from an investment perspective” idiots jump ship as the instant profit isn’t there, they’ll still have that core demographic they had pre-2015 to prevent their brand strength and value from plummeting
 
Archer
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Davidt Davidt
Agree but surely this is the exact reason Rolex won’t increase production numbers in response to demand.

Yes they’re leaving money on the table now with secondary prices being where they are but when all the “I’m looking for a Rolex, what’s the best from an investment perspective” idiots jump ship as the instant profit isn’t there, they’ll still have that core demographic they had pre-2015 to prevent their brand strength and value from plummeting

I understand all that, and I'm not suggesting that they should (I never have). That is exactly the point I've been making - Rolex won't increase production or prices, because they know this isn't sustainable. The question is though, is this core demographic enough to sustain the secondary market where it is now? I think not.

Others will disagree, but before all this madness happened you could pretty much go in and buy the watch you wanted (SS Daytona's excepted, at least at certain times), and often at a discount from retail. Watches dropped in value on the secondary market after purchase, just like other brands - I think we are heading back there at some point. People talk as if it's impossible for this to happen, but it wasn't that long ago we were in exactly that place.

It won't hurt people here, because even if you bought above retail and you love the watch, the secondary market value won't matter - just like the Beanie Baby collectors who still have theirs. If you are really a true watch fan, you probably would welcome this - get all the speculators out of the market and let prices go back to normal.
 
Davidt
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Archer Archer
I understand all that, and I'm not suggesting that they should (I never have). That is exactly the point I've been making - Rolex won't increase production or prices, because they know this isn't sustainable. The question is though, is this core demographic enough to sustain the secondary market where it is now? I think not.

Completely agree. There’s absolutely no way Rolex secondary prices can be maintained at this level.

Sure they may carry on increasing for a while, but it’s surely a reflection of increasing inflation (which really started several years ago, not in the last couple of quarters) on the back of cheap/free money. As soon we get back to real life, the markets re-gain a sense of reality and we see a few months of Rolex secondary prices dropping, plenty of people won’t be able to offload them fast enough.
 
Scooterino36
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Archer Archer
get all the speculators out of the market and let prices go back to normal.

Fingers crossed. Although I'm worried that the speculators will spill into other brands as "investment opportunities" dry up.
 
Archer
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Scooterino36 Scooterino36
Fingers crossed. Although I'm worried that the speculators will spill into other brands as "investment opportunities" dry up.

They can stick with Rolex as far as I'm concerned...just not the watches...



😉
 
marcn
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Archer Archer
They can stick with Rolex as far as I'm concerned...just not the watches...



😉

Is no one else concerned by the ratio of paper to tube here!?!
 
cvalue13
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Archer Archer
One question - do you believe the prices currently seen on the secondary market are sustainable long term (say 5 years out)?

If we clarify that we’re interested specifically in the “current” multiples were seeing on the secondary market (e.g. 2-3X), and we further assume no large-scale broader economic collapse, then two main responses jump out:

First, from my armchair, I believe Rolex has risk-adjusted the “current” frenzy to include some volatility that they don’t want to over-extend into (in either unit numbers or unit pricing). Appetites in Asia, pandemic shifts toward luxury apparel spending, and the global availability of manufactured cash without a “home” are surely just a few variables that a prudent company like Rolex would see as presenting temporary effects.

So here first, I don’t think anyone would be prudent to bank on the “current” 2-3X multiples to be shock-proof - and Rolex appears to agree. I think you and I agree that Rolex’s behavior suggests it sees a lot of possible volatility in the present 2-3X secondary multiples. When people here say “Rolex is leaving a lot of money on the table” I think you and I both agree Rolex’s response is something like, “not on a risk-adjusted basis we’re not.”

Perhaps where you and I might diverge, though, is in the narrow instance of how deep a brand “correction” could be?

Rolex has been so careful to not over-extend into the current multiples, that I think Rolex can be agile in ensuring that some material premium over MSRP continues indefinitely (again, barring the effects of some broader economic/social collapse). That is, if present tail winds start to die down and 2-3X multiples begin to soften, I think Rolex can at this point make supply-side changes to ensure that there remains at least a still healthy 15-30% premium over MSRP for at least its key lines. That “retreat” position would still leave Rolex head and shoulders above its similarly-sized competitors in terms of having taken control of its market economics.

While it is true that not long ago this demand environment didn’t exist, I think these types of demand environments for blue chip brands can be rather sticky if/once achieved. Getting there at is the hard part, but once there the inertia is strong.

All that background said, my answer then: assuming no broader economic collapse, whether 5 years from now we’ll still be seeing 2-3X+ multiples on Rolex is to me: who knows, but the pessimist in me - and apparently Rolex too - wouldn’t “go all in” on that bet.

But separately I give very high likelihood that in 5 years there is still at least a commercially advantageous degree of premium (15-30%) on moat of Rolex’s key models. Rolex can fairly efficiently throttle supply-side forces to all but control this.

If there is instead ever a day once again where Rolex showcases are full of product, I think it’s going to take a good while more than 5 years for Rolex to lose that much advantage from its present high ground.
 
Jockywilson1
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If the grey market prices start to fall, which I’d agree is likely to happen, the companies that will get hurt are the companies like Omega, who undoubtedly are receiving custom from people who are priced out of the Rolex. There must be thousands and thousands of Rolex’s sat in grey market safes that if become more reasonably priced will have a massive knock on effect to the rest of the industry.
 
Archer
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cvalue13 cvalue13
Perhaps where you and I might diverge, though, is in the narrow instance of how deep a brand “correction” could be?

Yes we disagree - I think we are going back to retail. When is the only thing I'm not sure of...will it be 5 years? Yes I think that's possible, but not a certainty. If we take the Beanie Baby example, there are still some that are expensive (mind you these are now not being made, so the comparison isn't great in that respect), but it's a limited number. The same could be said for Rolex - I don't expect that the Daytona will go to retail for example. Do I think in 5 years time people will be paying multiples for the lowest level SS watches? Not a chance.
 
Archer
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Jockywilson1 Jockywilson1
If the grey market prices start to fall, which I’d agree is likely to happen, the companies that will get hurt are the companies like Omega, who undoubtedly are receiving custom from people who are priced out of the Rolex. There must be thousands and thousands of Rolex’s sat in grey market safes that if become more reasonably priced will have a massive knock on effect to the rest of the industry.

As long as Omega keep their heads about them, yes there will be pain for all sellers, but it won't be as catastrophic as the dealers who are left hanging with inventory they are under water on. I will have zero sympathy for those guys...
 
Davidt
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cvalue13 cvalue13
When people here say “Rolex is leaving a lot of money on the table” I think you and I both agree Rolex’s response is something like, “not on a risk-adjusted basis we’re not.”

.

If you’re quoting me there you should include my entire post for context. I was saying that Rolex are (rightly so IMO) leaving money on the table in the short term, precisely in the interest of protecting their brand strength and value in the long term.
 
Archer
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cvalue13 cvalue13
glass half empty sort of guy, eh 😁

seems like we mostly agree

I tend to think of it more as being a realist, but that is debatable I'm sure.

As in politics, the "sides" tend to agree on more than they disagree on...at least up here. 😉
 
cvalue13
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Davidt Davidt
If you’re quoting me there

I was instead intending to ‘quote’ the imaginary posters in this thread that go: “if Rolex isn’t making a watch for every person that wants one, they’re clearly not as smart as me” 😉
 
Z
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JwRosenthal JwRosenthal
Well that’s rather subjective, now isn’t it.
How could it be. It’s the dictionary’s definition, not mine.
 
JwRosenthal
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Z Zanzibar
How could it be. It’s the dictionary’s definition, not mine.
No, the concept of “comfort” and “expensive” is subjective. The whole concept of luxury is subjective
The definition itself lends itself to subjectivity
 
Z
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There you go, starting to grasp the idea don’t you feel ?
Carry on.
 
sonicosa
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JwRosenthal JwRosenthal
No, the concept of “comfort” and “expensive” is subjective. The whole concept of luxury is subjective
The definition itself lends itself to subjectivity

Absolutely. My wife gets seasick quite easily, so the luxury cruise example from the definition would be anything but a comfort to her, subjectively 😉 (Actually, I can objectively say she’d be miserable. If we can ever get this GTG off the ground, ask me about the surprise ferry ride on our honeymoon in Denmark).

Also, I wore Nikes in the Hermes boutique today. Seems relevant to this thread. My wife was not offered a Birkin, but my feet were comfortable.
 
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