close

CORDER’S COLUMN: Re-balancing Rolex supply and demand

corporate

2019 was dominated by discussions about how the world’s biggest luxury watchmaker, Rolex, could maintain its near impeccable brand image at a time when so-called waiting lists were making it almost impossible to attract new customers using its entry-level priced steel models.

There are risks to Rolex’s reputation if a better balance between supply and demand cannot be restored.

You only need to read comments on WatchPro stories about the Rolex shortages to see how frustrated some serious watch collectors have become.

Story continues below
Advertisement

Patek Philippe and Audemars Piguet faced similar challenges for its Royal Oak, Nautilus and Aquanaut models, but these are much more expensive watches that appeal to a narrower market.

There is something different about a 10 year waiting list for a £30,000 watch compared to a £7,000 Rolex that might once have been bought by somebody celebrating a big commission cheque or pay rise.

The biggest consequence of the shortages for what WatchPro coined 2019’s unicorn watches, was that retailers had to choose which of their customers could buy these in-demand models.

This will continue to be the biggest challenge and the greatest opportunity authorised dealers of these brands will face in 2020.

On balance, it is a great problem to have. Even the very best and most loyal customers know that they need to maintain a strong relationship with their favourite retailer of find themselves frozen out of opportunities to buy the watches they want.

This means customers have to keep spending, and that can become a habit.

While waiting for a Daytona or Batman, customers should be aware that they will not rise to the top of a waiting list unless they continue to spend on other jewellery and watches. This makes it easier to sell watches that are instantly available. The likes of Omega, TAG Heuer and Cartier could benefit.

Even if they are not always shopping, customers know they need to maintain great relations with their favoured store, and that means dropping in for a chat about new options and attending social events where subliminal marketing messages are piped through a room.

Although the shortages have dominated discussions on online forums and the comment sections of sites like WatchPro, my feeling is that Rolex ended 2019 even stronger than it began, not just in sales, but it brand reputation.

A company that makes almost no public statements was all anybody was talking about last year, and that cannot be bad for business.

But extreme shortages are a challenge that needs to be addressed when potential new customers’ first contact with a brand like Rolex is to be told that they cannot buy the watch of their dreams.

Rolex has to understand the psychology of disappointing pretty much every customer who has plucked up the courage for the first time to drop serious money on one of its watches, only to be told they have wasted their time and emotion on an unattainable goal.

The good news is that there are signs that the bubble in prices for steel tool watches from Rolex is deflating … slightly.

Secondary market traders say there was a lot of product coming on the market at the end of 2019 as people attempted to maximise profits by selling at what they perceived as the top of the market.

That peak was probably in summer last year and, as any stock market trader will confirm, you only have to go slightly past the peak for prices to weaken significantly because sellers can quickly outnumber buyers.

The difference between recommended retail prices and the prices that the secondary market sets for key models has already narrowed significantly, and as profit margins drop we may see more collectors and investors cashing-out and creating a deflationary spiral.

There is zero chance that Rolex will bring demand and supply back into balance this year, and secondary market prices will remain well above retail. But there will be a tipping point when there is too much risk and not enough reward for flippers to keep targeting the key steel sport watches and this will take much of the heat out of the market.

Rolex and its authorised dealers may face challenges with the current shortages, but they will miss them if they ever vanish entirely. The objective now is to close the gap between supply and demand so that waiting lists are no more than a few months for mass-produced, uncomplicated, models.

4 Comments

  1. Tempting though it is to pay over the odds for the watch I want, I am not going to, I am going to be patient and just keep the money to one side and one day somewhere, probably when I least expect it I will find one.

  2. Usual story for me. Have owned Rolex for years and decided I’d like to get a new Sea Dweller. My local AD (despite being a customer of 20 years) can’t put me on the actual ‘list’ – only record me as interested with no guarantee of ever getting a watch. So I’m now looking at the Omega Deep Black Seamaster GMT – and I’m thinking it’s more advanced and should never scratch. If I decide to get the Omega, is that good news for my Rolex AD (who’s also an Omega AD)? Probably not, because I can 17% off elsewhere on the Omega. In my case Rolex’s lack of supply is diverting my money to another brand and possibly a non-Rolex AD.

Leave a Response

Tags : Corder's ColumnRolexUnicorn Watches
Rob Corder

The author Rob Corder