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How Scalpers & Speculators Are Ruining The Watch Purchasing Experience For Many Consumers

How Scalpers & Speculators Are Ruining The Watch Purchasing Experience For Many Consumers Featured Articles

Imagine the following scenario. It probably happens on a daily basis, and the issues which are at the root of it are both complex and far-reaching. Put yourself in the shoes of an average man ready to buy his first Rolex timepiece. You aren’t a watch collector, but for years the strong marketing power of Rolex has romanced you on the notion that when you make it, you should tell the world about it and remind yourself of your success by buying a Rolex timepiece. Maybe you closed an important business deal or just want to reward yourself for any number of personal achievements – you know what you want to do with a Rolex.

Most men have a practical approach to things and let’s say the same applied to you. Dress watches and those which communicate status in a flashy way with gold and other precious materials probably aren’t your thing. Steel, sports-style watches speak the loudest to you. After browsing the Rolex website you feel assured that the company whose logo you’ve been seeing for years has more than one model that will satisfy your needs. Not knowing much about shopping for a watch, you decide that going to a Rolex store is the best idea. There happen to be two dealers in your town according to the Rolex website. Next step: visit the store.

How Scalpers & Speculators Are Ruining The Watch Purchasing Experience For Many Consumers Featured Articles

Now, I am about to describe a situation that just a few years ago wasn’t happening, and it is my hope that in a few years from now it will no longer be happening. As you enter the Rolex store you begin to stroll around looking for a Rolex Submariner. It’s the most classic model you can imagine, and it has pretty much everything you want in a timepiece. Looking through vitrines and showcases you can’t seem to find one. Rolex has plenty of Datejust models and other watches, but you can’t seem to find a single Submariner – or anything like it. Time to ask for help.

The sales person is pleasant but proves unhelpful. “You don’t have a Submariner?… Well, when will you get one?… Waiting list? How long is the wait?… You can’t tell me? Are we talking days, weeks, months? This is like your most popular product, well at least I thought it was. Can you check the inventory of other stores?… No one has it in stock? Do you have any other steel sports watches? Not one? Does anyone? Above retail price? I don’t understand…

You leave the Rolex store a bit dejected and rather disappointed. Not giving up yet you proceed to go on the internet to check prices. Even on Rolex’s most basic timepiece, you can’t seem to find any at retail price – which is what you are willing to spend. The internet seems to have a lot of these watches available, but all seem to be in the hands of private dealers – not Rolex stores who appear to be missing entirely from these online marketplaces. After an hour of searching online for the watch, you get frustrated. Paying above retail for a watch whose origin isn’t clear to you doesn’t make you feel right. What began as a sincere desire to walk into a Rolex store and reward yourself has turned into an unpleasant exercise in futility. “Maybe Rolex watches aren’t for me. Is buying any popular watch like this? Should a watch be what I reward myself with if the system to sell them seems to be disinterested in my money?

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How Scalpers & Speculators Are Ruining The Watch Purchasing Experience For Many Consumers Featured Articles

Watch Speculators & Scalpers

This article is a thematic follow-up to a piece I wrote a few months ago on why some Rolex and Patek Philippe steel watches are impossible to find at retail. The resulting feedback of that article, as well as the many people who shared their experiences with me, taught me even more about a situation in the watch industry that I consider dangerous. How? Dangerous for the image of the watch industry today, dangerous for the satisfaction of the lay luxury consumer who keeps the industry going, and dangerous for the future of the watch industry which is embroiled in a series of uncomfortable transitions at many large brands and groups. This article attempts to explain the types of individuals as well as market forces which got us to this point, ending with what I feel is a sensible recommendation on what concerned consumers can do.

There are two types of entities which really got us to where we are today – and for once one can’t really blame the watch industry itself. Surely they can be accused of not acting fast enough to protect their own market and the experiences of consumers, but the situation we are in is not actually one that the brands themselves attempted to create. This is a story of hyper-conservatism among watch buyers, as well as the predatory unscrupulousness of salespeople ranging from private dealers to well-organized auctioneers.

How Scalpers & Speculators Are Ruining The Watch Purchasing Experience For Many Consumers Featured Articles

Let me begin by explaining what I mean by watch speculators and watch scalpers – because they be can the same person at once. Watch speculators are consumers who purchase a wristwatch with the intention of selling it for profit. These aren’t consumers interested in wearing the watches for themselves (at least not for that long), but rather those who feel they can purchase them and resell them at a later date to someone else at a profit. Watch scalpers are those who purchase timepieces at retail prices only to re-sell them later at a markup. Watch scalping works with popular models that aren’t as easily available in stores. The method is for a range of scalpers all over the world to purchase up as much product at retail as possible – often posing as normal consumers. Instead of being normal consumers they are dealers who sell these watches to other dealers, or who sell them direct to customers. The internet has empowered all of this, or at the least vastly inflated existing issues found only in small pockets of the industry. Today almost anyone who has purchased a popular watch in the last few years has likely had some experience actively dealing with or coming across a watch speculator or scalper. There is a good chance many of these “dealers” are probably reading this article right now. No hard feelings, but you guys aren’t helping anyone but yourselves.

Watch scalpers either are speculators themselves or sell directly to them. These people comb watch retail stores and often have direct relationships with sales staff. In some parts of the world, the actual salespeople at stores conspire with these dealers to sell them product immediately when it gets into a store. Understand that Rolex (for example) doesn’t inform its retail partners what watches they will be receiving. This means that each time a new shipment comes, only then will the person opening the box know whether or not a hot model just came in. Those salespeople conspiring with the scalpers sell the watches to them, likely earn a small commission on the side, and then go about their business. That watch which could have been sold to the type of person who keeps Rolex going strong has now just been deprived of that experience. Instead, the watch in question will be listed somewhere for a price above retail – sitting there until someone chooses to buy it. At the time of writing it isn’t uncommon for a new Rolex steel sports watch to go from between 10% to more than 100% above retail price. Normally none of this is supported by contracts watch brands have with their retailers. This conduct is generally considered rogue, and not authorized by the brands.

How Scalpers & Speculators Are Ruining The Watch Purchasing Experience For Many Consumers Featured Articles

Watch scalpers only exist because there is a market. It is a role entirely dependent on the economics of supply and demand. Watch scalpers exist because of watch speculators. Or rather, buyers who for whatever reason forsake other suitable products not priced over retail for watches which are priced at over retail. What is among the few reasons consumers will spend more than retail price on a product? If they feel it can be resold for even more. Very few consumers are known to actively stomach the embarrassment of paying over retail for a product because they really, really want it. There are just far too many high-quality watches available at or under retail for consumers to be widely paying price premiums at the rate which is being asked by scalpers these days. My experience and interviews with consumers and retailers alike suggest that paying over retail is the result much more of manipulation rather than an earnest desire to have a rare product no matter the cost.

I’d very much like to hear about our readers’ experience with watch speculation and scalping. I’ll tell you a personal experience that I find interesting – related to the notion of manipulation. It actually has to do with older, even pre-owned watches, but the logic is applicable. In most industries the best deals are on no longer made recent models which stores and companies want to move. “Last year’s model” means today’s discount, and for the most part this is exactly what the watch industry was like. The best deals for timepieces were for recently discontinued watches that didn’t have much chance of going up in demand. A few years ago in Hong Kong I recall seeing loads of older watches, still in their factory sealing at impressive discounts which marked them as “priced to move.” That was then.

Today the same watches, at the same stores are going for above retail price. Many of these watches aren’t even new – still, they go for above retail price. Let me correct that, they are priced at above retail. What they are actually selling for is different. The dealers also seem far less motivated to sell. At the very least they weren’t motivated to sell to me. I later learned that they were seeking a totally different type of consumer altogether. So what was the stated reason for all the new, higher prices? “No longer made.” Yes, these retailers suddenly seemed to collectively agree that a watch that was no longer in production merited a price premium for this fact. Forget that most of these watches could be purchased more cheaply online (often by thousands of dollars). The interesting reality was that the new strategy of these third-party dealers was to position older watches as valuable rarities because they were no longer made. I’m experienced enough as a watch collector to know their logic was not only flawed but 90% of the time total hogwash. So where was the behavior coming from? The scrappy Hong Kong watch dealers were learning from speculators and turning into a form of scalpers. In many of those windows were brand new Rolex watches priced at thousands above retail – that should have been purchasable at retail around the corner at any number of authorized Rolex stores.

How Scalpers & Speculators Are Ruining The Watch Purchasing Experience For Many Consumers Featured Articles

While Hong Kong is a particularly dense market for watches, the same is happening all over the world in all major watch buying markets. Scalpers and speculators have in many ways totally ruined the watch buying experience for common consumers.

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  • Sure, don’t feed the beast by paying over retail. But I still hold watch brands responsible for a lot of the problem by intentionally not producing high demand watches when they easily could.

    • JosephWelke

      Preach!

    • Tempvs Mortvvs

      Yes, stop buying their wares altogether and see how they turn around and grovel for some attention. But if one’s ego compels one to give away money and dignity, then keep taking it up wherever one enjoys it the most. Pride and vanity have less weight than air, except on the prideful… Anyhow, the abuser exists for as long as the abused allows or endures.

      • It’s just voting with dollars my friend.

    • egznyc

      What I don’t get is how this is such a great strategy for the brand. They’re leaving money on the table that could go into their pockets. Instead it’s going to the scalpers and speculators.

  • Ron-W

    Maybe PP and Rlx are selling straight to the non AD`s and grey market dealers ( scalpers you call them ?? ) at (close to) Retail prices to profit from the much higher revenu and fill their own pockets ? Smart move and no surprise.

  • Harrystc

    I think I get your point. An authorized AD can charge want they want. Grey market sellers can charge what they want. Watch shows are great because the public is not allowed entry. Celebrities are allowed to be a brand representative with no one writing about the brand they used to represent. A major new watch is hyped by the watch press even though the manufacturer is intentionally making fewer than demand to create hype, Major resellers are models of good capitalism. watch reviewers can publish an article without ever having had the watch in its hands. But if the little guy tries to jump on the whirling machine of watch retailing he is labeled a ‘scalper’ and is to be driven out of business. Your point is that capitalism has its limits and the line is drawn to keep the individual seller out of the profit from image, hype, and snobbishness.

    • Not to speak for other watch review websites, but ABTW labels their articles as to being “Releases” or “Reviews” or “Hands On Reviews”. So the inference the watch reviews have never had the subject watch in their hands is certainly possible but does not happen on this website when the post is a “Review”.

  • Zhege

    Seems pretty simple. Some manufacturers (esp. Rolex and Patek) are simply not interested in satisfying the existing demand for the current hot watches. Prices will rise to whatever level it takes to satisfy the willing buyers. It benefits the manufacturers because having hot, hard to get models creates further buzz; plus it will drive someone who always wanted a Patek or a Rolex to seriously consider their other product offerings. I don’t think there was EVER a shortage of two tone datejusts 🙂

    But Ariel’s focus and condemnation of the speculators and flippers rather than holding the manufacturer’s feet to the fire… well, I guess there is advertising revenue at stake if you criticize brands too much. So while that doesn’t make ABTW part of the problem, you also aren’t part of the solution, either. “Just say no” was not fabulously successful in regard to drugs, and much less so for watches.

    Auction houses are a whole ‘nother story. Questionable provenance, invented stories, frankenwatches (undisclosed), etc – whatever it takes to get people with more money than sense to shell out huge amounts for a “named watch”. Yikes.

  • Orntwo

    Rolex continues to use consciously limited supply to drive retailers from discounting. speculators only exist because of this supply demand imbalance. Rolex uses the steel models as a carrot that has largely ended discounting on everything but the diamond and precious metals watches. A retailer found discounting will find the it supply of hot models diminished (at best). most other brands can’t do this financially or don’t have the discipline. Rolex figured this out in the early 2000s with the Daytona and has spread the strategy across most steel models. It has gotten absurd, no point in aspiring to a brand you can’t buy.

  • cluedog12

    Ariel, this is a great discussion for the weekend. From my point of view it seems that all parties are at least partially satisfied with the current arrangement. Yes, this includes the “helpless’ consumers too.

    We’re all part of an ecosystem. We all play a role.

    When the Patek 5976G was released in 2016, select collectors had an opportunity to purchase this special watch for $96,390. Despite being of limited taste, the opportunity to purchase the watch for $96,390 was a gift from Patek to its most loyal clients. A metaphorical brick of gold. If the cost of owning a Patek 5976/1G could be expressed as a formula, it might look something like this:

    P(n) = 96,390*(1.06)^n + 500*n – 155,000*(1.02)^n for 2 < n < 10.

    Whereas the Vacheron Overseas Perpetual Calendar, a competitive watch from a lesser known brand, has a cost of ownership that looks more like this:

    V(n) = 91,400*(1.06)^n + 600*n – 88,000/(1.02)^n for 2 < n < 5

    People want the stainless steel Rolexes and Pateks for reasons that extend beyond their merits as wrist watches. They are hard-to-obtain status symbols, which makes them far more valuable than status symbols that can be purchased through authorized channels by anyone that shows up with a sack of cash. Equality is not desired in the luxury goods industry.

    • James

      I realize this is an old post, but it’s worth pointing out that it’s not actually hard to obtain a steel Rolex – you simply need to be prepared to pay more for the privilege if you don’t want to wait for an authorized dealer (AD) to obtain stock.
      There are a few second-hand watch dealers in my city who have steel Rolex for sale, some of them brand-new-in-box (BNIB) with the stickers and hang-tags still on the watches – but they’re asking more than the list price because they know people are willing to pay a premium for those watches.

  • David Martin

    An eye-opening article, Ariel. I didn’t know this was happening so had to check. I took the no date Submariner 114060 as the example. Looking at the UK Rolex website it shows £5750 as the retail price. I then looked at all examples of new no date 114060s on Chrono24 and they are all above retail price! Outrageous. So I thought I’d look at retail price in my local Rolex dealer. They are actually showing the 114060 at the recommended retail price, so well done them. However, I haven’t checked to see if they can really sell me one at that price!

  • Hannibal

    Wonderful article, Ariel!
    It was about time that somebody finally start speaking about the subject that severely corrupts the watch buying experience (maybe even the watch industry itself), and you did it in a classy, unpretentious and, above all, in a very honest way!

    I’ve been around a lot and dabbled in watches for decades and current situation pretty much makes me sick in my stomach.

    Once a Rolex lover, nowadays I became almost completely disinterested in one of my favorite brands, and just for the reasons named in the article.

    So, again, awesome read and big thumbs up from my side!

  • Berndt Norten

    Sir Alexander Tilloch Galt?

    • egznyc

      Who is John Galt? I gather he was a fellow who had little patience for those working for the redistribution of wealth. And found himself in a love triangle competing for a supremely capable woman … who chose him over the other fellow.

      Another one was ATG’s dad.

  • Jimi

    Funny you mention Denver. We live in Cap Hill (Denver for others reading) and when we started looking at houses in the area, we were seeing Town Houses for $600k… Condos for $400k… we ended up outside of the Denver area all together with an actual house (you know, garage, yard, etc). It has gotten ridiculous. I don’t understand how people in places like N.Y. and S.F. have done this for years.

    As for watches, I just got in to watches this year. Currently have a very small collection. But none of my watches are investments. I buy them because I like them and plan on wearing them. When Rolex holds back inventory, they simply don’t get my money. Just like when the classic Nintendo console came out. Make it so damn hard for me to find one, I eventually give up. Now you can find them much easier, but I’ve lost interest. I’m slowly losing interest in Rolex as well. My next “expensive” watch will most likely be a Nomos.

  • Harrystc

    Comparing watches to underwear is a very mixed metaphor sir.

  • I largely agree with your points. I do however blame the “corner gas station” when they raise the price of gas sitting in their tanks the moment there is news of an increase in the price of crude. And they are slow to lower prices when the price of crude goes down. But I get your point. BTW – Ariel does (or did) own an Sub.

    • Gokart Mozart

      Did Ariel pay over retail???

      • Ha ha, no. And not purchased in retail setting either.

  • Timestandsstill

    A couple of anecdotes that relate to some of the issues and situations mentioned in the article:

    1) I know of a business associate of my wife who has wanted to get his first nice watch for sometime now. Being a relatively successful young businessman and not yet really being into watches not surprisingly he chose a Rolex. The one he wanted was the Batman BLNR. He got on the waiting list at an authorized dealer well over a year ago. He was getting married in the end of this last August (and wanted the watch before this event) and since the authorized dealer could not tell him for sure when they might receive one (because Rolex does not tell their dealers when they will get any of the steel sports models that are in demand) he began to get very antsy before his wedding date and was actually willing to go online and pay over retail and researched a couple options. Happy ending however as serendipitously a Batman showed up the week before his wedding and the dealer delivered it at the suggested retail price.

    2) I don’t know why a reputable AD with long term customers would miss an opportunity to continue to foster their relationship with that customer by shuttling a hard to get (Rolex?) piece to a third party (gray/speculator) at the same retail price the customer would pay them.

    3) My wife and I have an excellent long term relationship with a very reputable authorized dealer in another state who we buy most of our watches and jewelry from.
    Over the years we have also purchased watches (mostly Rolex and Omega) as gifts or graduation presents for our children or for busineuss associates. Up until the last year or so we never had a problem getting a Submariner by the way although this is no longer the case. I do believe that Rolex does intentionally limit production and/or delivery of their steel sport watches. However I also believe Rolex is recently taking some fairly extreme steps to control distribution of their watches and eliminate some of the speculation market as illustrated by this last anecdote.

    4) Last month we contacted the above referenced AD to purchase a Datejust as a gift for one of my wife’s business associates. We were told that Rolex was now requiring that any sales of their watches only be to clients who had actually come into the store to see the watch first and that they are actively monitoring this…..even though we were previous customers and had purchased multiple Rolex watches through this retailer. The sale was ultimately accomplished by having a friend/associate of the dealer go to the store and purchase the watch in his name before it was shipped to us and we then sent payment by check in the name of this purchaser to reimburse him thereby technically keeping the AD clean.

    A lot of good points brought up in this article (which was indeed well written) regarding a valid and multifaceted issue that probably won’t resolve any time soon.

  • Menace Reynolds

    I think the objection is to the blatant rent-seeking of the scalpers who have it in with the employees at the AD to get their hands on the hot models before the public has a chance to. That’s where the impropriety comes into play.

  • Garrett Hu

    Great article as this has been happening for a while now. While flippers are indeed not doing anyone any good, if there is a dollar to be made someone will do it. That’s just the way it is. Who allows this? Rolex does and if it’s really a problem then they would have done something about it already. They have not because to Rolex it’s makes no difference where the money comes from. Their product sells by itself. Walking into a store only to be literally laughed at because the wait list is X years long is not a luxury experience and to me kills the deal. If I go in 3 times looking for that watch and I am told no then I forget it, and never look back….plenty of watches out there. Until Rolex has a problem (and they won’t) it’s never going to change unless we stop buying Rolex and that will never happen either.

    Guys, move on and stop being obsessed by Rolex, they don’t have the product for you so why keep trying to buy what doesn’t exist? Lol

    Rolex? Who’s that?

  • commentator bob

    An unprecedented tax cut for the rich was passed when the economy was already hot, leading to massive stock market and real estate gains. And it is hard to get a Rolex? Shocking. Except actually is not just the gold and two-tone Rolexes that are going at or below retail. The Oyster Perpetual 39 mm is also going below retail. It is basically just the GMT Master Pepsi steel (a massively anticipated model, and THE Rolex to have), Daytona steel (particularly white dial), and Sub that are going at premiums.

    Rolex could raise prices, but then it would put the GMT Master, Daytona, and Submariner out of line with both the precious metal models and base steel Oyster Perpetual and Datejust models. And there is not support to raise prices across-the-board.

    Alternatively it could boost production of the GMT Master, Daytona, and Submariner, but then it would put even more downward pressure on the rest of the Rolex lineup, which is selling at or below retail, and could even risk those three iconic models selling below retail.

    What Rolex hopes is that you will buy a Datejust when the Submariner is missing. They want to remain a full range brand, and not become the GMT Master/Daytona/Sub company like AP is the Royal Oak company. The risk (if the retailer even sells other watches) is that you will buy an Omega.

    For now Rolex is willing to take that risk.

    • Swiss_Cheese

      Gad damn, I wish I could find a 39mm OP for below retail, I’ve been trying to get one of the white face ones recently released from my local AD, they want about a $1k premium on it…

  • Boris N. Natasha

    The major brands (Patek, Rolex, …) are all failing on basic consumer experiences that have standard solutions:
    1) Deceptive marketing: official online websites list retail prices for watches that are not available. Generally, you would not expect to see a price, but, ‘Out of Stock’, or, ‘Quantities limited’… something more honest than setting the expectation that it is readily available
    2) Instore: it’s a deflating experience for both the official boutiques and the customers… have you been to a Patek or Rolex boutique lately? They are empty of product. ie. not even enough product to fill the display case. The consumer doesn’t want to hear we don’t have that and the sales staff don’t want to deliver that message. No one wants what they have in the display case or it would have already sold.
    3) Made to order: it’s a simple model used by luxury brands that could solve the problem equitably. Every boutique has a current model to view but is not for sale. You place your order, put down a deposit, and you are told how long you will have to wait before you buy. Simple supply chain management guarantees delivery on the date or they don’t take your order. It just doesn’t have to be this hard.
    I just wanted a Rolex GMT II because my life and travel is always a minimum of 3 timezones and it’s at the price point you can afford to forget it in a hotel, get mugged, … and your life isn’t over. No Rolex boutique in Los Angeles could sell me one. Got a new unworn, tags, box, papers, in one week from Chrono24 sourced from Spain with no sales tax. Took it to the Rolex Service Center in Beverly Hills for authentication and sizing the bracelet. With no sales tax I got it for less than list. How does this make sense for anyone?

    • johnmac

      So you’re praising the Grey Market for selling you a watch under list price.
      The same Grey Market that everyone hates for selling some watches for double list…

      • Boris N. Natasha

        I said ‘how does this make sense for anyone’? I went to three Rolex Boutiques in LA, also in San Francisco, Miami, and Honolulu willing to buy the watch — including with California sales tax in LA. I was told ‘we have none and don’t know when or if we would ever get one. Finally, gave up and bought on Chrono24 for less for same product since I bought out of state. This is the point of Ariel’s article no one expects this consumer experience from Rolex and its a huge black eye on the brand. I was not praising the gray market I was criticizing Rolex and PP as delivering poor consumer experiences. I no longer think of Rolex and PP as grail brands — I think they make fine watches but deliver sad consumer experiences — not sustainable and open to disruption.

  • Larry Holmack

    Nice article….and if you’re like me and don’t have the available discretionary funds to spend on a Rolex, or any other $5000 + watch…well… I something I don’t worry about. . I love expensive watches ..but my watch budget is in the $300-500 range…so I don’t even bother looking at them.

    • Like women (I’m married), I still like to look at unobtainable watches.

      • Larry Holmack

        What I meant was not looking at a watch in hopes of buying it! I get iWatch magazine and it is some of the best watch porn around!!!

  • Ashish Patel

    Thank you for saying what needs to be said. I have read a lot on this topic and observed the ridiculous prices for rolex sport watches past and present being asked everywhere I look. Many think rolex are brilliant but fail to see the critical time in the industry that should be an opportunity to cultivate the next generation of watch buyers/enthusiasts.

  • Yanko

    As long as snobs continue to chase Rolex and Patek Philippe articles (beautifully written by the way Ariel) like this will be written very often.

  • Dec

    I only own watches for fun. Who needs one or two or more anyway? But shopping for a Rolex lately hasn’t been fun… I just liked the Pepsi bezel because of its smile shape on the wrist, and I was after a pop of colour, plus the jubilee is a killer in real life. I tried to like other blue and/or red watches, but I didn’t enough to buy any. There’s more simple enjoyment to be had modifying an old Seiko with bits and pieces from eBay. My Rolex AD says it’s not much fun for him either being questioned every day by not-to-be customers… Lose, lose.

  • Konstantinos Tzoannopoulos

    Thanks for the article, Mr. Adams. However, I do think there’s another breeding ground for scalpers: limited edition watches, especially ones that were designed to revive famous (or even legendary) older designs.

  • Jonny Bravo

    I enjoyed reading this articles and other previous insights and opinions of Mr. Ariel on the topic. He is one of the very few voicing what is wrong with the industry, while most of the media and retail just ride the current bubble. And I think we’re in a watch bubble for a some time, due to the increase in liquidity since the financial crisis of 2008 (remember the quantitative easing most countries implemented) and the general rise of living standards in China and India.
    As I understand, Rolex has decided some time ago to restrict the supply of their most popular watches in order to avoid flooding the market and increase their perceived desirability. They play the long game and I understand it. If you wanna be in the luxury segment you need to supply less products than the market requires.

  • What the price of the steel and brass alone? The labor costs certainly exceed your stated $200 figure.

  • Olivier Kazandjian

    This is an unfortunate article because economically wrong about supply and demand. First, it generalize the entire industry to 2 brands and only the steel model of those 2 brands (Patek and Rolex). Those proves that it;s not a industry issue but a brand choice on those categories. The second things is that scalpers do not create issue in supply and demand but only reinforces them. If they see a potential of non match between supply and demand. This what trader call “arbitrage”. Where does this mismatch is coming from? The brands obviously which restrict the steel models to force buyers to go to the precious metal version or to artificially push their brands (and their price like the $9500 GMTII steel version which is still cheaper than the price at the scalper). Scalper are the symptoms and not the cause, please don’t mix up issues and absolve those brands of their responsibility.

    • Jonny Bravo

      I agree that it is not a general problem yet, although many luxury brands are trying to mimic Rolex strategy by buying back old stock.

      But what service to consumers are the scalpers bringing? No service, but disservice since they manipulate the market. The consumer gets the same product at a higher price, without any additional benefit. It is fine to limit the supply of watches in the luxury segment, since luxury watches are not considered a commodity like food or electricity. Luxury has always been about limited supply.

  • Mohd Shamsul

    I find it curious certain flippers are so “lucky” to get their hands on SS models. There is obviously backroom deals happening at ADs. You can see these same people on FB watch marketplaces. Just got myself a Navitimer. Dropped a few thousand walking out of the shop but who cares. I’m not selling the watch!

  • Marceau Ratard

    I agree that obsessing over value retention is bad, it just makes you buy a watch that is popular and not necessarily a watch you personally like. Not paying above retail is another good strategy, that means no steel sports Rolex or Patek models, but just about every other watch is still in play. Finally given the inherently conservative design of Rolex, you can find alternatives to the unobtainable models. The Tudor GMT is a good alternative to the new Pepsi at a fraction of the price and you can try on on at the store. The new Omega Seamaster 300 is a sexy beast, and they have them in the store (I just tried it on, it is awesome). I could go on and on.

    Rolex makes incredibly good products, they are about as close as it is going to get to industrialized perfection. Having said that, paying hugely inflated prices, waiting years on a list, or buying things you don’t want to get the privilege of paying retail for the watch you want is just stupid. Unfortunately, the power of Rolex marketing is so strong that there plenty of people with money who will continue to do this.

  • Vincent Kruse

    I agree with Ariel. Just say NO. Don’t pay more than the sticker price. Very few people are going to feel happy paying way over the sticker price. I’ve not heard anybody say “Look at my new Rolex that I just paid double the recommended value for.” Paying more for a product will almost always make you feel as though someone has taken advantage of you.

    Speaking from experience. If there is a watch you really want and nothing else catches your eye, then stick to your guns. Keep you eyes open and ears to the ground, one will become available at the the right price if you wait.

    Who knows, you could invest the money you had put aside for a watch and when it comes time to buy your watch, not only do you have the watch you’ve been hunting for, but you also have a bit of extra spending money on the side.

  • Tony NW

    Rolex could easily solve this, by simply briefly and randomly increasing production on watches that seemed to sell out without reaching consumers. Do this three times and the speculators would go bankrupt. End of problem.

    They don’t solve it because they don’t agree that it’s a problem. To Rolex, the mystique of being made of unobtainium is part of the brand value proposition.

  • PR

    None of this applies to a majority of brands and ends up putting all of them in the same bucket. You can walk into an omega boutique or AD and buy pretty much any current model that is not an LE and likely get a price under retail, same with IWC, JLC, GO, BP fill the blanks except a few independents and brands like Panerai who stock more expensive models than cheaper.

    Said person could just as well walk out of the Rolex AD go to another AD and buy a different brand, but if he MUST have a Rolex, he waits, that’s the market, those are the terms set by the brand at this point. If you don’t believe in these things, go buy something else or get it online . Nothing to fret so much over in an industry with thousands of alternatives.

  • Gokart Mozart

    Well considering they make around 1 million watches a year give or take, and probably 50% at least will be steel.

    The majority of those watches will use the same movement or 2 if you include the GMT and day date although they are probably using the same base movement

    Yet it is only certain items that are the main problem. It would be very easy for Rolex to change production to fulfill these high demand products. After all this problem is year in year out.

    The fact that Rolex does not means they are deliberately not although they easily could.

  • Gokart Mozart

    Aren’t virtually all Rolexs basic? I mean a an annual calendar with a novel setting mechanism is hardly that stuff of high complication.

  • Gokart Mozart

    Most of the commentors here looking at he replies feel it is more the watch brands themselves who create the problem in the first place for their own benefit.

    Scalpers and speculators then get in on the act along with the grey market fuel the problem.

    If Rolex gave a damn about their customers this article would never have been needed to written.

  • Phoneix_Ikki

    Based on my prediction, there’s another factor at play and that’s the everything is bubble economy we’re in right now. Not only with watches but cars and other luxury goods and real estate there’s still a strong sense of FOMO thinking out there, couple with the image of an robust economy, general consumers and even the rich feel like paying a premium is fine as price will only go up from there..Let’s see how this turns out down the line as the next crash we experience will be more severe. This will severely impact the luxury goods sector…everything I see now is highly reminiscent of the luxury or non-essential spending habit back in 2007-2007. When the world economy is in the shitter, let’s see if Rolex, scalpers and spectator get away with doing what they are doing now. The next global downturn will not be kind to the swiss watch industry especially since they are not exactly known to be proactive at best.

    I am going to save this article and re-read it 2,5,10 years from now and see how everything turns out and if my prediction comes true.

  • Ogso

    Great article! I am one of those voting with his wallet… on kickstarter. It may not be a Roller but its creative and USA born, even if the movements come from Europe or Japan. Heck I get lots of comments from non watch enthusiasts and for the price of a Roller I can get 10 unique time pieces. Will they hold value? I don’t care I bought the damn thing to wear for my satisfaction. And yes my poor ole super ocean pro has been to Breitling for repair a few times… because I wear it! Look up the watches of Jaque Coustaue. He voted for use also.

  • cjjohnso

    This problem isn’t going anywhere so long as the economy remains heated up and, in fact, will probably only get worse as interest rates rise and speculators demand ever higher returns to stay ahead of the broader market.

    In the meantime, collectors will continue to play hot potato with the most in demand products, looking to offload their assets to the next greater fool for a quick profit.

    The bad news (or good, depending on your perspective) is that the speculative inflation will likely come to a quick and spectacular end as soon as the economy runs out of steam. The moment prices hit a peak and start to drop, I think we’ll see deflationary pressure take over as speculators race en masse to get out near the top.

    Should actually be a great time for watch enthusiasts to pick up pieces that have been unobtainable for a long time at a reasonable price. Assuming they still have a job…

  • Ayham Refaat

    I agree on most of what Mr Adams said. However, I do believe the brands themselves share the larger responsibility in what is becoming a ridiculous experience. Mr Adams described exactly the conversation that one would have in any Rolex or PP boutique around the world (AP is tiny bit better in the sense that they are more apologetic and more accomodating), and I have visited more than 20 ones in 20 different countries and had the same dialogue, like copy paste.(I specifically note the Dubai dealer for the level of arrogancy they have, and I used to be a customer for them by the way!). After the 5th country, I started doing it for fun!
    However, and jokes aside, I’m personally disgusted with the arrogant attitude displayed by these brands, and although I think the new GMT master with the Jublee bracelet is cool, and the Nautilus stands out as a luxury sports watch…etc; Still I perosnally couldn’t tolerate this and erased these brands from my watch collection, sold the watches I owned from them except a Calatrava that was a personal gift (But including the popular steel ones), and moved to a collection of similar or better quality, and definitely much better looking, timepieces from other as reputable and more exclusive brands. It’s worth mentioning that since then, I get many questions and many compliments about my watches compared to when i used to wear a Rolex or PP, which by the way was None in my case!
    I definitely agree on saying No to premium prices, but I also think we should say No to the brand itself when it doesn’t respect it’s customers. When ones wants to spend in tens of thousands of dollars on a watch, one should “demand” an enjoyable and hussle free experience from the manufacture, and should accept nothing less. It’s our right as customers and they either listen and deliver, or we take our business to someone who does.

  • Pete Williams

    Poorly reasoned article. This issue was created by Rolex because they won’t increase production of their most popular models, which is their right. Rolex is driving the bus here–not gray market dealers. And I say “issue” and not “problem” because it’s not a problem. No one needs a $10,000 watch. If you can’t get one you want I have no sympathy for you.

    • Ariel Adams

      Rolex also loses if they just produce more watches. It is the same as a country trying to fight debt by printing more money. All that does is increase inflation. In this context Rolex could suffer if they don’t really carefully consider effective production volumes. They also will want to see how demand pans out over a few years. It probably isn’t wise of them to ramp up production based on a 2-3 year consumer trend.

      • I don’t disagree with you, or the content of this article generally. I do think that Rolex could increase the production volumes of its stainless sports watches (especially the 116610 and 116500) to the point at which authorized dealers can meet reasonable walk in customer demand, without jeopardizing their long term demand. However, as you point out, better retail level inventory/sales management would also be in order.

      • Thomas

        “Rolex also loses if they just produce more watches. It is the same as a
        country trying to fight debt by printing more money. All that does is
        increase inflation.”

        So, um, how would an increase in production and supply to dealers cause “inflation” in the watch market beyond what is happening today in the grey market?

        Christ, man. Get a degree that doesn’t have “arts” in it. Or google “inflation”

        • Texas watch hoarder

          If Rolex said well, let’s meet customer demand. So we need to hire 1000 new employees immediately and train them. Ok, we do not have the time to properly train them to meet immediate consumer damand and should we be ok with a drop in quality due to lack of experience? Nope, so let’s poach off other brands employees already trained. But then we will have to pay them more and offer bonuses to get them. And then, the same goes for our existing employees to be fair. We will also need new workspace and the best equipment in the industry to expand production. So all this takes time, money and additional management so we need to raise prices at retail. Then when economies cool and overproction floods the market all those new people and managers will have to be laid off. And hiring them back in the future? Good luck in a future overheated market as they will have moved on and distrust our business model and brand. So let’s just keep production increases at 1-2% and avoid all this disruption and possible harm to quality and branding. Our employees and and current customers will remain loyal.

          This cyclical hire/fire disruption has hiit the Texas oil industry hard many times. US auto industry and it’s workforce the same. Rolex, Rolex AD’s/salespeople and the grey market are not to blame. All boats have risen so real interested customers should make a long term relationship with your AD, buy Tudor or pay market price on the secondary market. Or, just be patient. All boats will eventually fall as economies cycle.

          And Rolex, if your are listening? Please consider updating the Daytona with the new datejust 41 case and escarpment. I currently have both. 100 hour power reserve and better chronograph legibility would justify a nice price increase. I would be happy to be on that waitlist.

          • Thomas

            “If Rolex said well, let’s meet customer demand. So we need to hire 1000
            new employees immediately and train them. Ok, we do not have the time
            to properly train them to meet immediate consumer damand and should we
            be ok with a drop in quality due to lack of experience? Nope, so let’s
            poach off other brands employees already trained. But then we will have
            to pay them more and offer bonuses to get them. And then, the same
            goes for our existing employees to be fair. We will also need new
            workspace and the best equipment in the industry to expand production.
            So all this takes time, money and additional management so we need to
            raise prices at retail.”

            This is a fictional situation where workers salaries are somehow tied to the fact that rolex cannot make enough money to pay four times their staff from selling tens of thousands of $200 watches for $7000.

          • Gokart Mozart

            This problem has been going on for years, many of the watches the AD’s have are the ones that do not sell.

            Most Rolexs use interchangeable parts and movements so it would not be too difficult to adjust production. Granted it is not completely straight forward but it is not the issue you make it.

            Rolex know exactly what is selling and they have to be able to reflect market changes and make adjustments so they are not put at risk.

            They just don’t want to.

  • Aditya

    Sadly this is sponsored by Rolex. They see a huge disruption coming to the Industry in the next few years and are trying to ensure they remain on the top of the watch Veblen perception by limiting supply. Once their SS models retail for 15-20K USD and the PM for 20K upwards, I doubt there is going to be any artificial limiting of supply. If I’ve said it once, I’ve said it a million times, between JLC, Breguet and VC, there is absolutely no need for a watch enthusiast to give two hoots about snooty Rolex and PP decisions. I’m in the market for a Daytona, but, I’ll probably be looking at an AP/Breguet/VC/JLC instead. I really can’t be bothered when there are so many enthusiast watches I wan’t out in the world.

    Great article Ariel!

  • BES65

    I liked the article even if there is a Rolex slant. I have been loooking at several watches and RS is the one I want. I’m waiting. The idea that Rolex is responsible seems odd.

    Rock bands saw what scalpers were doing and they raised prices on tickets and that lowered the take scalpers get. Rolex could do that… Hope not.

  • Eli Keppler

    Naturally, it seems borderline criminal to see a stainless steel Daytona selling on Chrono24 for $19,000 pre-owned and $30,000 new (yup, these are actual current asking prices, and yes – they seem ridiculous). But here’s the thing: This ‘issue’ has its roots in Patek Phillipe’s distribution and sales positioning strategy (which Rolex has been successfully cloning for some time now). And it is in no way an ‘issue’ for Rolex and Patek – they are living the dream. By limiting supply and keeping prices artificially high (i.e. by increasing prices year on year at significantly higher-than-inflation values), they have achieved a masterstroke against the rest of their competitors such as Vacheron, Cartier, Breguet, JLC, Breitling, Omega, et al – all of whom are owned by publicly traded conglomerates. For these other brands, massive oversupply, poor distribution controls and a huge grey market have collectively damaged perception of their products over the past two decades. Today, a customer buying a Navitimer EXPECTS a 40% discount on the watch at the AD, and knows they always have the option of buying a used one online for peanuts. This has created a deeply ingrained perception that luxury watches are just inherently worthless jewelry – fashion accessories that lose 50% of their value immediately upon purchase. Except for Rolex and Patek watches that is – the customer who walks in to the AD seeking to buy a steel Daytona or Nautilus finds 2 to 8 year waiting lists (depending on the city you’re in), and online prices that are up to 300% higher than retail. Simultaneously, that same customer is also constantly bombarded with news of vintage Daytona’s and PP’s that sell for well into the 6 and even 7 figures at auction. Think of the effect that has – essentially, Rolex and PP have slyly transformed their products from mere ‘jewelry’ (which suffers huge losses in value the moment you step out of the store with the watch) to collectible ‘assets’ that actually increase in value over time.

    The result of this is:
    ————————-
    1. Anyone shopping around for a watch is now forced to choose between jewelry and an asset – which is not a fair comparison. It is effectively a choice between a guaranteed loss on an alternative brand, or the chance of making money on a Rolex / PP – more than often, people will choose the latter as the trade-off is too lopsided and the economics too hard to argue with
    2. The consistent, higher-than-inflation price increases have attracted a whole other type of buyer to the market – investors (who you call ‘speculators’) looking for an alternative asset to invest in. Continuous price increases, increased rarity, and strong secondary markets mean higher investment value and greater demand.

    The other brands are not going to fare well with things the way they are. A great example of all this: over the past year, while LVMH and the other conglomerates were dropping prices and suffering low sales due to decreased Chinese demand (for example, Cartier’s new Santos has been introduced at a cheaper price than the 10+ year old Santos 100 that it replaced), Patek and Rolex were busy raising prices and enjoying strong sales (Patek even increased prices on certain models by an unbelievable 20%!). The greater invulnerability of a brand like Patek is understandable when you consider that the high net worth Patek customer considering a $50,000 watch is generally more insulated from economic conditions than the likely upper-middle class professional eyeing a $5,000 piece from one of the other brands.

    Here’s the bummer – this situation is very much here to stay. It’s not a trend or a bubble – this is very much the core active long-term strategy of these two brands – to sell less but for more. Having a few people ‘voting with their wallets’ will not change anything – Rolex and Patek don’t really give a crap about price sensitive customers anyways. They’re in the exclusivity game, not the value-for-money watch segment. Both want to be in the price segment where price elasticity of demand is simply not a factor. Therefore if anything, we can expect to see even lower production and higher primary and secondary market prices for these brands in the future.

    • johnmac

      Rolex hasn’t been increasing prices (apart from exchange rate movements). A Daytona 116500 is still the same price as when it was first released 2 and a half years ago – $12,400

      • Eli Keppler

        johnmac: Rolex & PP don’t increase prices on every model each calendar year. Instead, the choose to increase prices in ‘lumpy’ steps – meaning no increases for a few years followed by a huge price increase. And as I mentioned in my comment above, these price increases have vastly outpaced inflation.
        Since you brought up the Daytona, consider this:
        1. In 1973, a stainless steel Daytona retailed for a price of $386 (Inflation adjusted to $2,192 in today’s value)
        2. By 1988, prices had spiked considerably to $2,350 ($5,008 in today’s values)
        3. By 2013, it hit a ridiculous $12,000
        Similarly, a white gold Daytona (which was first introduced in 2006) went from $25,550 in 2006 to $37,450 for the 2013 model year! That’s an outrageous 50% increase in 7 years! A similar pattern has repeated for virtually all of their models (as can be found on site such as ABTW and others). So don’t be surprised if the Daytona sees a shocking increase in the near term – considering heightened demand and Rolex’s pricing patterns, we should be due a hefty increase very soon.

      • Ranchracer

        They actually just announced a 5% average price increase across the board in the UK market. Expect more of the same in most other markets.

  • AlbieC

    I think private/closely held companies like Rolex and PP are happy as is, since they’re under no pressure to demonstrate growth to public investors, particularly if any dividend yield they paid could be perceived as too paltry an income stream, if they would pay any at all. Stock trading investors would demand growing sales, growing market share, growing profits, growing size, etc… to hopefully raise the price of the company stock. But for Rolex and PP, profits and profit margins are probably happily high enough, and the owners will continue enjoying them just fine. A rising stock price only matters to someone who wants, or may want, to sell.

    Anyway, don’t care too much, since I much much prefer the Datejust or maybe the plain ol’ Oyster perpetual to the Submariner or Daytona. And the ears on the Nautilus always look strange to me.

  • Adam B

    There are solutions. F.P. Journe’s ultra popular Chronometre Bleu is an example. To get one from an AD, you now have to fill out an application, which allows them to vet predatory sellers from true watch enthusiast buyers. I also found a great rep at one of their boutiques, that I had very good communication with. I got my new CB watch in no time at all – at retail. It was a very positive experience for me.

    • Gokart Mozart

      Great choice !

  • Chefcook

    You absolutely nailed it, Ariel! I am living in Germany and here the situation is exactly as described. For Germans times are not economically hard by any means. Many parts of Germany experience the first longer period of full employment since decades. People are making quite a good buck here at the moment. At the same time, interest rates are terribly low, which again leads to money being incredibly cheap here because of the political and economical situation in the rest of Europe. People simply do not know what to do with all the money: Banks don’t pay interest, stock markets are in limbo and the remaining typical investments like real estate are experiencing a massive price increase while return remains about constant. 15 years ago it was easy to get 10% per annum from an apartment block. Today Germans are overly happy if they can get 2% per annum.
    This all leads to people desperately seeking investment opportunities, which in turn leads to increasing prices for houses, cars, watches, anything promising some kind of return. People also tend to take more risk and suddenly people buy a steel sport Rolex when they have a chance to, even though they do not even like wearing watches at all. As you wrote: Tons of watches are waiting in bank vaults for someone to spark a hype. I wonder what happens if the awaited hype never comes…
    For me, being interested in watches because of the technical and not the marketing achievements, this has pretty much turned the hobby I loved into one I loathe. I stopped buying watches a few years ago when prices went beyond what watches are worth to me. Rolex in particular annoyed me even though I once considered my self an avid Rolex guy. Why should I beg for a Submariner at list price with less than a two year wait from a German AD or even pay above list price to some shady scalper when I can still get them at list price without any waiting in Italy, just 150 miles south? And more so, why should I be interested in business with a German Rolex AD when they obviously prefer selling the interesting stock to grey market dealers instead of actual customers?
    The problem will be with us as long as manufacturers continue to ignore the shady business conduct of their resellers and only measure and incentivize sales volume, not sales quality.

  • Taz786

    Oh man can I relate to this. Held off on buying lesser watches for years in order to save for a Rolex Sub, and now they’re impossible to obtain at retail.

    What’s a man to do…

    • Gokart Mozart

      Buy a Tudor and then another watch with a complication that you like ( within reason) and smile when ever you strap them on.

      You will soon forget what the fuss about the Sub is.

  • JLeeMD

    I’ve come to the point where I prefer to deal with internet dealers than retail dealers. First, with watches like the Daytona, retailers leverage its scarcity to maximize their profits. For example, they’ll offer one to close a sale on a much more expensive watch but tell everyone else there’s a waiting list. Second, retailers frequently say they aren’t allowed to discount but I always find out later that someone somewhere got a nice discount. Internet dealers address both of these problems (from a consumer’s perspective). You can find nice discounts on watches that are not scarce and you can always find inventory on those that are as long as you’re willing to pay market prices. Waiting 5 years for a Daytona or Patek 5711 makes absolutely no sense to me.

  • Ian Abbott

    omega shafted their own retailers by letting dealers purchase the limited editons. I know local dealers have sold 4/5 the same watch, purchased at retail.. collected from the omega boutique. Straight on eBay. And the high street jewellers have 100k in the window of basic models…

  • shanekleinpeter

    The only people to blame are the fools paying above retail. Is it spoiling it for the rest of us that just want a nice watch? Sure, but nobody NEEDS a luxury watch. Those with the patience will find a way to eventually get what they want at MSRP.

    I’m more concerned about the bourbon market, which is undergoing a similar trajectory. When Pappy 23 is selling for $2500 a bottle, things have gotten out of control. Hell, you can’t even get Weller Special Reserve without extraordinary effort in some states. Now THAT’S a problem.

    I don’t know who said it, but they were wise: “A fool and his money are soon parted.” Don’t be a fool.

  • Texas watch hoarder

    Having fully taken advantage of “getting to know” your AD advice a few years back has greatly helped me with the “waitlist”. The sub waitlist is usually less than 3 months. The white dial Daytona/blue dial skydweller and Pepsi are exercises in patience. But they will come to good customers. Every dealer has its own way of regulating its sports models. They cannot be lumped into one basket. I know from time to time I need to throw down on a non sports model to keep a smile on the AD but I’ve found love in less desirable watches also. So I am a “hoarder” rather than a collector or flipper and the AD knows that. I believe Rolex has decided to limit growth in production not limit production. When the economy settles down so should the wait times. Darn, I’m ok with a little wait! If your not then understand in this economy you might be making more so it’s fair to pay more on the grey market if you can’t wait.

  • Borchard

    I agree. I have wanted a Rolex dive watch since I was 18, or so. NOT because it’s a “Value Prop”. NOT becasue of “Value Retention”. NOT becasue its an investment. I just wanted one becasue it has always seemed to be a sign that one has “arrived”. After being born and raised on Welfare, and having an ex-wife who uttered the phrase “You’re NOT buying a Rolex…” I felt that I would never be able to get one. I am about to be in a position to buy a pre-owned Sea-Dweller or Submariner. I will NOT flip it. It will be a “Forever Watch” for me.

    • Gokart Mozart

      There are plenty of other watches more deserving than buying a Rolex when you have made it.

      Buy a watch you like not one that you will buy so that people know you have made it.

      That is a sell out.

  • Geraldo123

    I’ve loved watches for over 30 years. The market goes up and down. Patience.

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