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On Ariel’s Watch: Don’t Spend Above Retail Price When Buying A Watch

On Ariel's Watch: Don't Spend Above Retail Price When Buying A Watch Featured Articles

As a watch consumer, I have become increasingly concerned about the state of “free market pricing” that I’ve observed all around me. Over the last few days alone, I have had at least five conversations with people who expressed to me something between awe and frustration at seeing a listed price for a popular timepiece way above the MSRP (in some instances double the retail price). None of these people seemed particularly enthused by this nor is there much expressed enthusiasm about buying these otherwise desirable watches at this price point. This isn’t the first time I have written about this issue, and this article is meant as a direct appeal to fellow consumers about what I feel is the wisest thing to do about it — just don’t buy watches for above the retail price.

On Ariel's Watch: Don't Spend Above Retail Price When Buying A Watch Featured Articles

For those of you interested in the background of this issue and why particular modern (including totally brand new) watches are being listed at above retail price, please read my article on watch speculators and scalpers. Here, I tackle the complicated issue of explaining, from a watch industry market perspective, why all of this is happening. The solution to the problem of overpriced new watches isn’t going to come from the industry, however. Even though frustrated customers who can’t buy a new Rolex isn’t a good thing for Rolex, it is hard for them not to secretly enjoy their ever-strong “it girl” status. Plus, Rolex does have a good point in its defense when posed with the question, “Why can’t you just make more steel watches?”

Rolex could, but they don’t. First of all, in order for Rolex, or any company, to do that, the decision would need to be made a few years in advance. Watch productions are expensive and don’t happen on a whim. Rolex, like other watches brands, is keen to minimize risk and often funds the production of watches based on retailers’ orders. Never mind that a company like Rolex can more or less dictate what retailers buy, they do need to predict the new years of production in advance. Rolex argues that if they make the internal decision to ramp up production of steel watches now, who is to say that the current trend of high demand for a few all-steel models will remain strong? Remember, if Rolex over-produces steel watches and the market has too many of them, then the street price will go down. Rolex can authentically say that overpriced Rolex watches (those listed at above retail) don’t make the brand any more money because their profit ended when they sold the watch at a wholesale cost to the retailer. What happens to the watch after that does not directly put money into Rolex’s coffers.

On Ariel's Watch: Don't Spend Above Retail Price When Buying A Watch Featured Articles

Thus, while watch brands like Rolex and Patek Philippe aren’t to blame for the steel watch scarcity, they also aren’t doing too much to end it. Until relatively recently, this surge in demand was isolated to a few key watch models. Lately, I’ve started to see it spread. And it isn’t spreading in my opinion because of market demand. Rather, I think the practice of pricing watch at over retail price is starting to become a result of dealer pricing speculation. In other words, people selling watches are all of a sudden pretending that they are in high demand and charging more than retail. How is this possible? It is possible because there is a perception that luxury watch consumers are now accustomed to the practice of over-pricing. No one actually controls watch prices. Other than MSRP values there is no bible to set watch prices. This makes it possible for someone selling a watch to select any price they wish. As long as they put that price online and maintain a still voice when speaking to a potential buyer, they might get away with a form of fraud.

This is not capitalism at its finest. Fellow watch enthusiasts have pointed out to me that so long as people are willing to pay particular prices, then dealers will get away with charging those prices. So, in a sense, it is the fault of the consumer for allowing the market to get away with deceptive pricing practices. Having a rule to avoid ever spending more than retail on a watch would technically fix the issue because consumers simply wouldn’t violate the rule. Is that a good rule? Let’s examine the implications of following it.

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A good number of the watches priced at above retail are desirable watches. So, if you have to spend more but you really want the watch, it is OK, right? Not necessarily. I begin with the premise that there are plenty of really good watches out there that can be purchased at or below retail price (such as the watch you see above). In other words, there is no actual market void for high-quality timepieces at retail prices. Sure, those might not be a particular Rolex or other brand configuration, but if you want a very nice timepiece that will make you look sharp and serve you well for years, then options aplenty exist, my friends. My point is that there is no actual market scarcity that might theoretically justify overspending for a consumer. If you want a nice timepiece of the sort that is not overpriced, there is currently no shortage of options.

So, if you avoid over-spending, you still get an excellent assortment of watches available to you, but are you missing out on a good “investment?” Now comes the tricky concept at which the heart of my argument lies. The people who truly feel comfortable spending more money than retail price on a wrist watch are mostly those who simply want to resell it themselves (at an even greater price). I would have a lot more sympathy with the practice of spending more than retail price on watches if it were being done by people who wish to wear and enjoy them for years. This isn’t what is mostly happening. For the most part, the practice of overpricing watches is done by people who first purchase them at retail price and, given perceived market desirability, re-sell the watch at more than retail price. Remember, in many instances, if they sell the watch at retail price, they don’t make any money. Thus, these forms of watch speculators must sell at above retail if they are going to make money. I envision these folks as stock market types feeling global economy malaise and eager to find some type of alternative investment vehicle. More than a few of them realized that guys with more than enough disposable income like watches and decided that these are the next best things to trade. Who wins? Not people who actually wear and collect watches, for the most part.

On Ariel's Watch: Don't Spend Above Retail Price When Buying A Watch Featured Articles

I hope I have explained that the winners in the practice of overpricing are not watch consumers, watch brands, or traditional watch retailers. Rather, the seediest underbelly of the watch retail world, along with non-enthusiast investors, are those leeching off an already expensive hobby. Think about it: Collectors today already have to put up with the fact that traditional timepieces are expensive. For the most part, they have to be because they are produced in such small quantities. You can’t expect a retail price value like a mechanical watch in 1970 because mechanical watches aren’t produced in nearly the volume they were in the 1970s. Luxury pricing for good timepieces is here to stay. Do you, as a consumer, want to put up with even higher costs for the same items? I didn’t think so.

If you want a good watch right now, you don’t need to spend more money than retail to get one. No major city or Internet browsing session is devoid of fine watch retail offers at or below retail prices. I simply reject the notion that “must-have” watches are important for any other reason than the fact that they have the name of a hot brand that trendy types can’t help but be associated with or that whets the chops of speculators.

As long as actual watch consumers (not just other speculators) purchase new watches at above retail price, dealers will speculate and charge for above retail price. The only way to end the practice is to dry up the market buy not buying them. Purchasing a watch from a dealer at above retail price should always be avoided. If you want to make some peer-to-peer transaction because someone is only willing to give up a watch on their wrist for more than retail, that is a rare (and private) enough situation that it won’t effect the market. For now, my advice is to apply the rule that friends don’t let friends spend more than retail price on a wrist watch.

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Comments

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  • What fresh hell is this?

    For most watches, don’t spend anywhere near retail price.

  • SPQR

    Interesting article but conflating the reasons why Rolex does not (allegedly) produce as many stainless steel watches with those of Patek is disingenuous. The two companies and their production decisions are very different. For example it is very unlikely that Rolex as a competent commercial enterprise did not recognise that one of its best selling watches of all time, the Submariner, would not remain at least moderately popular and produce stock accordingly. To suggest otherwise is stupid. Rolex are artificially limiting supply. Patek however simply do not have the production capacity to produce hundreds of thousands of watches per year. Given that the Nautilus for example is hugely popular Patek might be able to double production (though that is of course speculation) but that would probably not amount to the required number to satisfy demand. Patek certainly do not want the Nautilus to become common place so are not likely to increase production. Rolex are not in the same league as Patek and cannot be compared as Rolex watches are mass produced factory made watches with relatively pedestrian movements and a distinct lack of complications compared to Patek. The entire Rolex ethos in its design and construction of watches is to streamline production by using the same movements across the range and using common interchangeable components and basically the same case design for most of the range. In view of these factors it is unlikely that Rolex are a “hostage to fortune” in producing stainless steel watches as the article implies. The decision Rolex has made to strangle supply is deliberate and cynical.

  • Steve_Macklevore

    Thank you, Ariel for another thoughtful and useful article on the watch industry.

    Perhaps in a future article you could identify some of the good watches that are available at or below retail price that are equivalents in quality to the ‘name’ steel watches that are currently on trend?

  • Semido

    I could not agree more. I’ll add that given the number of “desirable” watches on sale on the internet and, say, at Burlington arcade, I would not be surprised if a crash (or at least a return to norm – lower prices for second hand) was imminent.

  • Ally

    Useful article and a much needed pointing out of the problem. Just to correct a typo Ariel which might mislead readers. It says: “My point is that there is no actual market scarcity that might theoretically justify overspending for a consumer. If you want a nice timepiece of the sort that is overpriced, there is currently no shortage of options” . I think you meant to say “…. If you want a nice timepiece of the sort that is NOT overpriced, there is currently no shortage of options”

    • Ariel Adams

      Thank you – updated.

      • Ally

        No worries. Leading on from your article Ariel, any advice or reference you can provide when one wants to not pay above retail price for a watch which is let’s say a Rolex Explorer from 2006? Are there any retail price listings by year (and brand) that anyone has maintained and taken the initiative to publish ? I haven’t found any. So how can one find out what it’s retail price was at the time in 2006 since if I want to buy it now in 2019 as a pre-owned watch , it’s selling at a ludicrous price (which I know is above its retail price at the time in 2006 as a brand new item). Another way this problem manifests itself is when you see watch retailers in London selling pre-owned rolex or tudor or JLC models (from 1990’s or early 2000’s) at their desired prices and you ask then what the watch originally retailed at the time when new. They never give a straight answer or pretend they don’t know. I’ve had answers like, “oh we don’t have the original pricing list from the time” or “the price could have varied at the time depending on the demand for the particular model”. Naturally they don’t want to disclose as they are looking to cash in on the demand and make profits. But such culture needs to be curbed as its part of the problem.

  • I think Patek and Rolex are two very different animals and can’t really be compared here. Some of the qualities people like in Patek are precisely the fact that they are rare and exclusive, and they are willing to pay a premium to buy one because no one else in the office will be wearing the same watch.

    Rolex is a mass-produced watch that has simply become over-hyped as a status symbol and everyone wants one, driving the prices up.

    This is a bit like buying stolen merchandise, as long as there are people willing to buy stolen stuff, there will be thieves. As long as there are people willing to pay more than MSRP for a Rolex, there will be people profiting from that. So your advice is right on: never buy a watch above MSRP, you’re just encouraging the thieves.

  • Legion681

    For me, this is a matter of principles. I refuse to buy anything above the suggested retail price. This because to me it feels like being… robbed, and I would rather be without the item than give in to someone’s gouging/speculation.

    To be frank, I was exposed to this only once: there was a car I wanted to buy and they were going for 5-10k over MSRP. I was able to get one of them at MSRP a few months later when I managed to track down one like I wanted.
    For watches, I got lucky as I was on a waiting list at my AD for “only” 8 months before I could get my hands on my Rolex Pepsi, at MSRP. I was ready to wait many years for it, but it arrived rather quickly. Oh and by the way, I don’t sell any of my watches (been collecting for 30 years now).

  • Stu Gots

    It really does take the fun or joy out of buying/collecting a brand one really connects with. I love Rolex and have owned several over the years. Now, I don’t even bother. I have moved on to other brands. Just that simple. Why even walk into an AD knowing you will be disappointed. In my world, if I am going to spend money at any sort of business, and I find they are closed for some reason during their business hours, I will never go back.

  • Isaac Chow

    Thank you for this excellent article.
    I find this “price speculating” trend disgusting. Walking into a Rolex boutique is now an unpleasant experience – I feel like someone begging for scraps. I am fortunate enough to have acquired some Rolex and AP a few years ago. It is about time to call it a day.

  • Marius

    Good post. If Rolex had shareholders, they’d be asking – why don’t you make more watches people want?

  • OhHiThere

    Great post! In your last paragraph, when you say “if mechanical watches no longer communicate as effective tools […] then mechanical watches have to communicate as something else, and that something else is status.” That’s been the case for years now. Watches these days are basically status/jewelry pieces. The trend started with cell phones actually and if anything, the idea of wearing something on your wrist may be coming back in large part due to smartwatches.

    Most people I know do not own or wear watches, except for those few wearing smartwatches. In fact, I’m the one usually having to explain myself about why I wear one and more importantly why it’s so expensive; what can it do that a lesser priced watch can’t? Point is, watches aren’t tools anymore and haven’t been for a while. They are basically jewelry. They only project status to the few people who know what you’re wearing; assuming they even care or believe it’s genuine.

  • Independent_George

    And about 20% less than retail!

  • Independent_George

    I’m skeptical. I suspect Rolex’s production crunch is as much short- and long-term incentives of the Wildorf heirs as it is macro-economic decisions. In short, the Wildorf Trust is fat and happy.

  • Ariel Adams

    As someone who does implicitly understand luxury, I think I am very qualified to remark on how certain consumers have a “too narrow” view of what luxury can entail. They hyper focus on “visibility” which is the message-conveying quality of a particular luxury item. Visibility is highly volatile without other supporting luxury qualities such as inherent value. A well-made item will remain desirable regardless of public popularity. A trendy item which is popular because it has temporal messaging value alone will not stand the test of time as public tastes shifts (as it always does). My advocacy for a focus on value is meant to help people make more responsible long-term-thinking purchases. There are plenty of well-made watches out there which can be a good tool as well as a excellent at conveying more confidence status.

    There mere notion that someone has to over-spend in order to impress upon people that they are not a “broke bitch” merely implies that the person trying to show off, is trying to show off to people who don’t really have a grasp of what luxury is themselves.

    So here is where we agree; if you are trying to impress the masses who don’t know very much about the quality of status items (and probably won’t take the time to learn), you will also have some temporary success by demonstrating to them that you have current ability to spend more money than something is worth, on that item. Such behavior typically wears off very quickly after people “get into money.” If it doesn’t it is a clear way to becoming unwealthy very quickly.

    If your goal is to burn through your money and impress a non-luxury-sophisticated audience, then your strategy is sound – at least for a while. It also doesn’t in any way remove valence from my larger argument. Thanks for your contribution.

    • LucianoLucio

      I agree, but, as history as shown, Rolexes and Pateks are exactly what you call “well-made items that will remain (as always have been) desirable regardless of public popularity”. In fact the masses aren’t even able to distinguish a Submariner from the 1950s and one from the 2000s, because they are almost the same watch aesthetically, altough in the meantime the tastes of masses have changed a lot. In 2005, Rolex started a new generation of watches and obviously couldn’t imagine that it would reach popularity in 2016 / 2019; maybe in 2023 they won’t be as popular as today, but I assure that there won’t be other major changes before 30 years.
      The fact is that Rolex catches people’s tastes doing anything else than creating great watches that carry on its heritage and marketing them in the best way possible, so it almost never needs to care about taste shiftings.

      On the opposite, the vast majority of other companies dramatically change their products aesthetics every 3 / 4 years in order to follow the fashions of the moment and the result is that they have lost their legacy and, as a consequence, almost all their enthusiasts too (look what happened to Panerai in the last 15 years…). So the only way to convince people to buy their watches is to offer them with a 25% discount from the list price; as you stated in the article, they don’t care about that, because profit ends when products are sold at a wholesale cost to retailers, so the best (easiest) way to maximize profits is to fill the market with watches nobody wants and likes.

  • Ariel Adams

    I want to support your statement that “luxury watches are not for everyone.” This is and will continue to be true. With that said, I don’t see why we need to set the bar for buying luxury watches even higher. Buying one is often like trying to do business in the wild west. I don’t think it is smart for the industry to allow such a drastic diversity in buying experiences. Meaning, it doesn’t do anyone any favors to make buying a watch in the first place so unpleasant for so many people. I don’t think that helps anyone’s cause. More and more today luxury is also about convenience as much as it is about conveying status.

  • Lurch

    Don’t pay retail – buy pre-owned at a huge discount.

  • Harley D boy

    At least the money from wealthy is being put back in into the economy, maybe Rolex can increase production and give their workers a nice pay rise…lol. You are right though, there are plenty of other nice watches out there.

  • Geraldo123

    I’ve been collecting for over 30 years. I’m lucky enough to own a lot of amazing watches-Rolex, Patek, etc. Watch cycles will continue. In the mean time, wear what you have and be proud of what you own. True enthusiasts will appreciate their collection. Patience is a virtue.

  • PowNation

    Thanks Ariel for publishing a topic that deserves more attention and collective discussion. The main takeaway, that “there are plenty of really good watches out there that can be purchased at or below retail price” should be common knowledge to most watch collectors, aficionados and enthusiasts. However, the brand specific supply-demand situation is a bit more complex, and the psychology of a luxury purchase underlies that most consumers behave irrationally. Why else would anyone buy a $10,000 watch when a $1,000 or even $250 watch can be a decent substitute. Luxury good makers are very good at emotional manipulation, and watch companies are no different, having spent billions of dollars in advertising over the last decade alone.

    I have mixed feelings about this topic. On one hand, I don’t think the practice of telling irrational consumers how to behave will have much influence. There are emotions at play!

    On the other hand, as a long time watch collector and enthusiast, I’m alarmed as you are about the negative effects that speculators produce on the watch community. Market speculation and manipulation at its worst. I believe it is the responsibility of the watch manufacturers to step up and come up with a creative solution. Price manipulation (as in raising prices significantly) is a careless and cheap tactic with risk that may backfire. Let’s look at music industry as an example: musical acts have numerous creative tactics to ensure tickets go to fans and circumvent scalpers. Do people honestly believe that watch companies cannot apply similar tactics or new retail strategies? Watch companies (ahem Rolex) are not interested at the moment… in part because many in the industry see it as a temporary phenomena, or have not quantified the negative impact to their bottom line (both in brand equity and financial).

    Lastly, a few humble creative solutions. Let’s start with registration requirements for both purchase and warranty activation for each owner. Anytime watch changes hands within the warranty period, re-registration should be a requirement or the warranty is void. This may help identify frequent flippers, and manufacturers can then think about imposing certain purchase controls utilizing data intelligence. Second, as in the music industry scenario, shouldn’t the watch makers find a better way to connect with the watch fans other than just Instagram and high profile event sponsorship? Retail: if there is going to be a retail middleman, then either find a way to enforce stricter rules, or let them apply price premiums as with the auto manufacturers and dealers. There are numerous other alternatives and solutions, but I don’t make the big bucks to come up with ’em late at night.

  • Legion681

    I would need to count them… I think that I am at about 30? I regularly wear 4-5 of them (precisely my Pepsi, SD4000, DJ w/blue dial, Bucherer Edition JLC, and a GS SBGV005) on my rotation these days, although I tend to favor the Pepsi. The rest are for the collection and each of them has memories I cherish. I keep them in top shape, but they’re not in my rotation these days.

    • egznyc

      Thanks for your response. That makes it about one watch per year, which seems very reasonable. I’ve tried to keep it to that level but sometimes I just feel too strong of an itch – and I tell myself it’s okay, I can slow down once I have more variety. And I’m generally spending under $1,000 on each so I don’t feel too guilty if I exceed one (or two).

      • Legion681

        For me it depends on what comes out in the market. If there’s something that really grabs me, I will take a good hard look at it. If I feel the same way after a month or two (= it’s not a spur of the moment thing) and can afford it, I will probably get it.
        Sometimes I might buy 3-4 watches in a year, and then sometimes I go for 2-3 years or more without buying one.

  • Independent_George

    Which is why Ariel’s prediction that the Luxury Watch Industry is going to have to produce fewer watches and sell at a higher and more stable price point, is salient.

  • Independent_George

    [Palm Beach County] Sheriff Snyder said investigators, who worked with Immigration and Customs Enforcement, estimated the trafficking ring [at the Orchids of Asia Spa] to be a $20 million international operation. Men paid between $100 and $200 for sex, the sheriff said; between $2 million and $3 million has been seized in Florida, he said, including a safe stuffed with Rolex watches.

  • philips defreville

    It’s called “The Everything Bubble”. The right apartment in Manhatten, the right vintage Porsche, the right Andy Warhol… it’s money chasing investments and Rolex is no different.

    • Tony NW

      How is a new Rolex like a vintage Porsche or an Andy Warhol? Not seeing it.

      • Rob

        Interesting post from Ariel. I think what Philips is saying is that, say, a Rolex Sub or GMT on the wrist of an exec. or salesperson is worn as a ‘badge of honour’ that say’s ‘”I’ve reached a certain point in life” , and might also possibly have a Porsche/Range Rover and/or Warhol. (personally I have a Speedy (To blend in with the ‘non-Rolex’ers’, AND a Warhol, in the loft !!!!! :). But to be fair , if someone is ‘speculating to accumulate’, and buying and selling , is that not just good entrepreneurship ?

        • Ariel Adams

          Just to add to your last point – anytime that entrepreneurship creates an unsustainable bubble then I don’t agree it is good for business since more people end up being harmed than helped.

  • Pedro Lambareiro

    I never got the Submariner thing, for once. As a conversation piece, for starters. No one cares about it. I get anywhere with a Jaeger-LeCoultre Squadra World Chronoraph Polo Fields on my wrist and people that aren’t even wearing a watch gather around and ask for it. Same thing with the Jaeger-LeCoultre Master Compressor Extreme World W-Alarm in any of its 4 guises (3 colours for the steel/titanium/wolfram edition and the gold one). These are filled with technological achievements that are almost unique to find this side of a Seiko SBGA 229 and that would blow the heads off of any Rolo with its accuracy and complexity.

    Then finishing is a mess, there isn’t much of quality control these days.Just give a glimpse to any video made with a proper macro lens (watchfinder ones in particular) and you’ll see tool marks all over the crown.

    GMT-II’s are finished so poorly that people actually announce proper finishing them all over the forums as a job, with blemishes of wrong colours all over the ceramic crown.

    I just don’t get it. Here in Monaco I never saw someone… anyone, for that sake, donning a Rolex in any form or shape that isn’t a Day Date as something to be proud of. Submariners and GMT-II? Explorers and the like? Yes, their captains will use them, even some bodyguards, but someone that is a millionaire? Never crossed my mind unless it was someone just landing from Russia and after a couple of months they already have disposed of the thing.

    Same with the PP non-sense. Since abandoning the Côtes de Geneve system there is absolutely no QC in PP, specially since they went from a production of 4 thousand to 15 times that. To have a timepiece for them comparable with a ALS one has to pay 3 times the price. Same thing with complications from them. The Aquanaut is a joje with a movement absolutely bursting with so many rough edges that one would wonder if that was a second tier replica.

    To say PP and Breguet are in the same league currently is such an insult to Breguet because they are heads and shoulders above PP with the same black bevelling for 50k that will cost you over 150k at Patek.

    My favourite watch brand when I want to make a splash and have every single person on top of me asking about it? Ochs and Junior. There is no branding on the dial, the timepiece is just unique and people look at it like a work of art. And they are really unique. I had one made in platinum to me, a kind of one-off, and it cost me less than 60k. A perpetual calender 1 of 1. Go to the big 3 and ask one from them and see how much it will cost, in millions.

    And if you really want to have something that doesn’t stand on marketing, get an Inventor from Zenith. a Watch that beats 8 times faster than any Rolex, is more precise and uses technology that is revolutionising the game. Like when the first guys got the first wristwatches in a sea of pocket watches

    • Menchman

      Ok I get it. You don’t like Rolex or Patek but to suggest that neither makes an excellent and well finished product at their respective price points is ridiculous.

    • I think you meant to say Geneva Seal when you wrote “Côtes de Geneve system there is absolutely no QC in PP”. Cote de Geneve are machined stripes.

  • Eka Pujianto

    What if the watch has been discontinued?

  • Tony NW

    @Ariel_aBlogtoWatch:disqus , you stated “… while watch brands like Rolex and Patek Philippe …”
    Let’s be clear here. There are no other “watch brands” like those two. I’ve posted about this before; those are the only two doing particularly well, at least in U.S. retail sales.
    That’s the fact. My supposition (with a fair amount of luxury-retail inside data) is that it’s due to brand recognition. Those two, and a few others (Audemars Piguet, Cartier, sadly, Molvado, etc.) have distinct looks. Omega, as an example, really doesn’t. And, as my S.O., who has two purses in primary rotation – Louis Vuitton and Gucci – despite many purses – would tell you, it’s not only about functionality at that point.
    So I suspect there aren’t a whole lot of Omega scalpers.
    That said, yeah, don’t buy a commodity as an investment. But, if you want it, have wanted it for many years, and now can afford it… do what feels good. Just don’t do it to flip it, and realize it may lose value. Pro-Tip: Every watch, every car, every spouse lose value as soon as you take them off the lot and put a few miles on them.

  • OhHiThere

    Indeed, thanks 🙂

  • 2manywatchs

    “If they start pumping out more watches to reduce the price, the demand will go down”

    Couldn’t be more wrong. First of all price is tied to Quantity Demanded, not Demand. Assuming you make that word exchange, your statement is the exact OPPOSITE of the Law of Demand which states that there is an INVERSE relationship between Quantity Demanded and Price. If Rolex “reduced the price”, Demand would go UP.

    “The reason demand is so high is because supply is low compared to demand”

    Also incorrect. The reason PRICE is so high is because supply is low compared to demand. Draw a graph showing the intersection of Quantity Supplied and Quantity Demanded and shift the Demand curve to the right while leaving the Supply curve constant and note the resulting Equilibrium price. It goes UP.

  • 2manywatchs

    Excellent points, but one thing is VASTLY overlooked. MSRP numbers are just made up, too. I worked in the acquisition side of retail. MSRP numbers were just the end of an equation based on production costs.

  • S Jones

    What I have understood by the article is not whether brand/model A is better or worse than brand/model B, or whether either are worth what someone might pay for one. The problem seems to be a dysfunctional market. If Rolex, for example, thinks a Submariner’s retail price should be $8,000 then they should ensure the dealers sell them at that price, or thereabouts. If, on the other hand the market feedback is that a Submariner is worth $20,000, then sell them at that price and exclude the scalpers from the transaction. If this were to happen, one could walk into an Authorised Dealer and buy one, or if needed, order one with a predictable wait time. This way the customer is treated with respect, gets the warranty etc, while Rolex (in this example) would not have to increase production and everyone other than the scalpers would be happy.

    Consequentially, this might also stop the scalpers or grey “bigging up”, out of date stock and trying to sell at a premium.

    • Menchman

      How does increasing the price help the watch buying community? Yes I suppose by increasing the price the demand will necessarily drop as fewer people will be able to afford them but all that means is that the same wealthy people will get them regardless. But “everyone” would not be happy. Raising a sub to 20k would make the watch far less attainable to a lot of watch enthusiasts. And Rolex does ensure that their ADs sell their watches at list price. What happens is that too many buyers are tempted to flip the watch for the extra money. But believe it or not there are actually some watch collectors who have good relationships with their ADs and are able to get these watches because the AD knows their customer is going to keep the watch and enjoy it and not flip it.

  • Ariel Adams

    I know my opinion may be of the minority, but I’ve become a much happier watch collector since no longer surfing to see what other people post on Instagram (but I do post since I need a place to do so as the main @aBlogtoWatch account is clearly now beyond my mere personal interests). It does help keep up with news and events, but I don’t trust Instagram to show me an accurate view of the world anymore than I trust most posters for publishing an accurate account of their activities. The bottom line is that watch collecting is more enjoyable when it occurs in a sort of taste vacuum were people make choices of a very personal nature.

  • Bon Vivant

    Rolex/Patek buyers are status lemmings! I’m in the luxury watch trade and I’ve yet to meet an owner of the above who could tell me a single technical spec about their status symbol watch. These are the same men who drive Beemers, wear Tom Ford glasses and whose wives all walk around with Louis Vuitton handbags with the “LV” logos.

    Rolex made 980,000 watches last year and the majority were in stainless steel so I don’t believe there is an actual shortage of SS Submariners, Daytona’s and Pepsi’s… just a classic case of controlled manipulation of inventory. But hey… if these snobs want to pay 50-100% over MSRP for watches that don’t hold a candle to watches with a Greek letter then god bless!

  • PowNation

    Thanks for publishing a topic that deserves more attention and collective discussion. Main takeaway of this piece should be common knowledge to most watch collectors, aficionados and enthusiasts: there are plenty of alternatives that can be had at or below retail prices. However, the brand specific supply-demand situation is a bit more complex, and the psychology of a luxury purchase underlies that most consumers behave irrationally. Why else would anyone buy a $10,000 watch when a $1,000 or even $250 watch can be a decent substitute. Luxury good makers are very good at emotional manipulation, and watch companies are no different, having spent billions of dollars in advertising over the last decade alone.

    I have mixed feelings about this topic. On one hand, I don’t think the practice of telling irrational consumers how to behave will have much influence. There are emotions at play! On the other hand, as a long time watch collector and enthusiast, I’m alarmed as you are about the negative effects that speculators produce on the watch community. Market speculation and manipulation at its worst. I believe it is the responsibility of the watch manufacturers to step up and come up with a creative solution. Price manipulation (as in raising prices significantly) is a careless and cheap tactic with risk that may backfire. Let’s look at music industry as an example: musical acts have numerous creative tactics to ensure tickets go to fans and circumvent scalpers. Do people honestly believe that watch companies cannot apply similar tactics or new retail strategies? Watch companies may not be interested in pursuing new strategies… in part because many in the industry see it as a temporary phenomena, or have not quantified the negative impact to their bottom line (both in brand equity and financial).

    Lastly, a few humble creative ideas as solutions to the issues addressed. Let’s start with registration requirements for both purchase and warranty activation for each owner. Anytime watch changes hands within the warranty period, re-registration should be a requirement or the warranty is void. This may help identify frequent flippers, and manufacturers can then think about imposing certain purchase controls utilizing data intelligence. Second, as in the music industry scenario, shouldn’t the watch makers find a better way to connect with the watch fans other than just Instagram and high profile event sponsorship? Retail: if there is going to be a retail middleman, then either find a way to enforce stricter rules, or let them apply price premiums as with the auto manufacturers and dealers.

  • I disagree with the contention that Rolex and Patek aren’t free to increase production (without adverse consequences). Even if they guess wrong about demand a few years from now, they could buy back the stock from dealers and re-case them in gold if that is where the demand was. And I don’t think that is much of a danger as the “shortage” of steel Daytona and Nautilus watches has been going on for a number of years now and shows no signs of letting up.

    I have to wonder if its a way for Rolex and PP to “give” their dealers a way to make extra money without the brands officially raising prices. The incentive being, “we let you make insane markup on these high demand references so you won’t be as unhappy as we require you to also stock slower moving references you’d otherwise not order.”