A column I wrote last week about Rolex no longer being able to claim it is a retail brand clearly struck a nerve.
Over 125,000 people read the article in a few days (half of WATCHPRO.com’s page views last week) and industry executives contacted me to tell me how stupid/brave/accurate it was in roughly equal measure.
One authorised dealer, who asked not be named, called with a particularly interesting insight on how Rolex is approaching the issue of soaring demand leading to unprecedented supply problems.
First, he said that I should not fear Rolex legal team feeling my collar because they broadly agree with my analysis.
The brand is highly sensitive to the potential damage current shortages are having and want to do something about it, he shared.
“Rolex wants to see 40% of watches on first time customers’ wrists,” I was told.
“But they are not in the business of telling authorised dealers what to do and who to sell to, that is a matter for the retailer.”
Even with all the stresses and strains of the current drought, losing Rolex would be extremely damaging to this retailer.
He estimates that the brand accounts for 30% of his top line, but that over half of his business — including jewellery and other watch sales — is strongly influenced by his status as an authorised dealer.
Aiming to sell almost half of his Rolex stock to new customers comes with risk because no authorised dealer wants to be accused of selling to flippers, so it is much safer sticking with regular customers with a strong purchase history.
However, authorised dealers have been told recently by Rolex that they should be “less afraid of selling to flippers”.
He inferred that Rolex would not close an account if watches occasionally appeared on the secondary market within weeks of leaving an authorised showroom.
This is not an invitation to intentionally sell to flippers, but a recognition that ADs have become too risk-averse.
They will not take the risk of selling to genuine new customers because they are terrified that they have failed to identify somebody only interested in turning an instant profit.
“The problem is that flippers travel around the country pretending to be first time customers. They look and sound the same,” I was told. “They talk about their family, their recent promotion or anniversary. Some come in with their young families,” he describes.
Ultimately, this dealer said, the issue would only be resolved with a major economic downturn that causes a flood of pre-owned product onto the market, deflating the inflationary bubble of Rolex prices and making them unprofitable for speculators.
In the meantime, it is at least encouraging that Rolex is searching for solutions in partnership with its loyal authorised dealer network.
No sane AD will ever sell anybody off the street a 6k RRP watch with a street/grey value of 15k.
New customers are the lifeline of any business. When I read the AD’s reply to selling to new customers: “they will not take the risk of selling to genuine new customers because they are terrified that they have failed to identify somebody only interested in turning an instant profit”. I would have asked this follow-on question: where do you think the supply on the grey market is coming from in the first place? If the AD’s are most comfortable only selling to their existing customers, then the supply on the grey market can only come from these same customers they are already selling to in the first place. Most of us watch collectors are intelligent enough to know that what the anonymous AD really meant to say is “we are more risk adverse of offending our large customers by saying no to give another customer a chance to wear a sports steel model, so we allow them to flip Rolex steel products without any restrictions since Rolex doesn’t do anything to us when we do”. My solution is have everybody order online direct with Rolex, and deliver through the Authorized Dealer. The ordering terminal could be located in the AD’s showroom. Rolex starts to build a relationship with the customer directly, and distributes the product more fairly.