Does This Theory Explain ROLEX Distribution Strategy?

[77T]

So I had a slow day and I was scanning the long list of TRF threads devoted to constrained supply of hot SS models. Also looked at the classifieds and the long list of BNIB and LNIB listings at a sizable premium over MSRP for Daytona 500's, Hulks, GMT CHNR's, etc...

Then recalled seeing some articles earlier about the secondary market in Swiss watches experiencing tremendous growth:

https://www.forbes.com/sites/larryol.../#3ced0fce5966

https://robbreport.com/style/watch-c...ches-for-2018/

Despite the industry experiencing lower sales of new watches for another year:

https://www.wsj.com/articles/is-time...try-1520867714



And it dawned on me that Rolex's response to that conundrum might be to enter the Vintage and Pre-owned market.

AP has announced such a move:

https://www.reuters.com/article/us-s...-idUSKBN1F80LN


AP only had to do a Google search to see the list of successful websites reselling their brand.




I'm sure Rolex is similarly aware of the $$$Billions spent each year on pre-owned and vintage sales in the secondary market.


And now that brings me to the seemingly inexplicable reason behind the reduced supply - perhaps this is the first tactic to implement a strategy to snag more revenue from the market...making lemonade out of the lemons of lower volume of new watch sales globally. Such a move to constrain supply could build pent-up demand that would be fulfilled without any production costs. AD's would only need to begin buying used models - and RSC doing the same. All would get a spa treatment and that'd be the only cost of goods - price + service.

Just a theory, and solely my hunch, but if I am right we shall see an announcement in the future that Rolex is implementing a certified pre-owned and vintage marketing plan. The pre-owned traded/sold at ADs and the Vintage sales online.


This could also explain their consolidation of RSC work processes such that all Vintage is done at Lititz in US and Geneva for EU.

Thoughts?

[037]

My local AD sold more Rolex last year than any year prior and their cases are nearly empty of SS models. Watches go straight to buyers rather than collecting dust.

If you call RUSA they'll say demand is higher and production can't keep up. I ask whenever I call for parts or service and always get honest answers. Regional Rolex reps will say the same. My AD told me so and I believe them.

However, it's more fun to speculate any number of possibilities due to confirmation bias. We so badly want this to be on purpose despite nothing being there to support it other than speculation.

Confirmation bias is a bitch.

Regarding your hypothesis, if the primary market sees an increase then the secondary will typically follow. The economy has improved in the last couple years and those holding tight have unleashed funds into luxury goods. Rolex just happens to be what many want. The result is high demand and low availability.

But, I could be completely wrong.

[77T]

Originally Posted by 037

My local AD sold more Rolex last year than any year prior and their cases are nearly empty of SS models. Watches go straight to buyers rather than collecting dust.

I don’t disagree - some ADs can have a better year this year despite the broader Swiss watch downturn in sales globally.




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[DARK_KNIGHT]

In your estimation , how long would it take Rolex to ramp up their ability to play in the secondary market?

If they are selling their entire production , why would it matter to Rolex, what is cooking in the secondary market?


Rolex stepping into the secondary market............ could backfire for them.

[Etschell]

there is no master plan. all i have seen is reactionary efforts by management. they dont care.

[oldman2005]

That's a possibility, The WIS is a small minority of watch consumers and may have seen thing more rosy that it actually is. I remember reading that Baselworld has been shrinking and scaling back for years now. I remembered back 2 years ago, living here in Northern California, I saw that the region was doing well economically, but guess what? The majority of the country were economically struggling, frustrated, and upset. Who knows? Maybe Rolex isn't doing as well as many WIS have thought.

Just share some of my thought: When I rode my motorcycle across USA, I stayed on smaller roads traveled through many small towns and saw so many 1-dollar stores, unlike my town where most of our friends hang out shopping for $5000 Chanel hand bags, $1000 Valentino shoes. My brother did the same but took another route and saw the same things. We came to a same conclusion that we're doing much better than 90% of American and this country is actually struggling.

[Patton250]

Originally Posted by Etschell

there is no master plan. all i have seen is reactionary efforts by management. they dont care.

I absolutely hate your answer because I believe you are correct. It’s a scary world when a manufacture couldn’t care less if it sells more product.

[Muxi]

Originally Posted by oldman2005

That's a possibility, The WIS is a small minority of watch consumers and may have seen thing more rosy that it actually is. I remember reading that Baselworld has been shrinking and scaling back for years now. I remembered back 2 years ago, living here in Northern California, I saw that the region was doing well economically, but guess what? The majority of the country were economically struggling, frustrated, and upset. Who knows? Maybe Rolex isn't doing as well as many WIS have thought.

Just share some of my thought: When I rode my motorcycle across USA, I stayed on smaller roads traveled through many small towns and saw so many 1-dollar stores, unlike my town where most of our friends hang out shopping for $5000 Chanel hand bags, $1000 Valentino shoes. My brother did the same but took another route and saw the same things. We came to a same conclusion that we're doing much better than 90% of American and this country is actually struggling.

Yes, we can sometimes be swayed by an environmental shelter. TRF may sometimes encourage the mindset, together with the bouyant secondary market.

[MTBer]

Originally Posted by 037

...If you call RUSA they'll say demand is higher and production can't keep up. I ask whenever I call for parts or service and always get honest answers. Regional Rolex reps will say the same. My AD told me so and I believe them.

However, it's more fun to speculate any number of possibilities due to confirmation bias. We so badly want this to be on purpose despite nothing being there to support it other than speculation.

Confirmation bias is a bitch. ...

What else can explain why the Daytona is always in such short supply? Availability has been a problem for years, so if Rolex wanted to fix it, couldn't they have by now?

Personally, I believe Rolex is not only 100% cognizant of this obnoxious SS sports watch shortage, but is patiently playing the long game and exploiting it- sure, they could ramp up production for all the watches that currently require waitlists, but flooding the market never does a luxury brand any favors. When you have customers feeling like they're getting a bargain paying MSRP for your product, it would be stupid to change anything.

[77T]

Originally Posted by DARK_KNIGHT

In your estimation , how long would it take Rolex to ramp up their ability to play in the secondary market?

If they are selling their entire production , why would it matter to Rolex, what is cooking in the secondary market?


Rolex stepping into the secondary market............ could backfire for them.

I would guess it could take a year or more from the time they decided. And with their legendary secrecy, they could have decided to enter Vintage/Pre-Owned a year or more ago. AP announced it a while back and to my knowledge hasn't opened their online store.

As for selling their entire production - I can't argue with your comment since we would never know if they were selling 100% of production or not. I know other brands had to buy back inventory but never heard Rolex did that. (Of course, they wouldn't announce it either)

Lat's suppose they are selling 100% now - then the motive would be to leverage the revenue being missed in the lucrative secondary market.

[77T]

Originally Posted by oldman2005

That's a possibility, The WIS is a small minority of watch consumers and may have seen thing more rosy that it actually is. I remember reading that Baselworld has been shrinking and scaling back for years now. I remembered back 2 years ago, living here in Northern California, I saw that the region was doing well economically, but guess what? The majority of the country were economically struggling, frustrated, and upset. Who knows? Maybe Rolex isn't doing as well as many WIS have thought.

Just share some of my thought: When I rode my motorcycle across USA, I stayed on smaller roads traveled through many small towns and saw so many 1-dollar stores, unlike my town where most of our friends hang out shopping for $5000 Chanel hand bags, $1000 Valentino shoes. My brother did the same but took another route and saw the same things. We came to a same conclusion that we're doing much better than 90% of American and this country is actually struggling.

I agree we are very fortunate -

We who are able to afford to buy these little mechanical marvels just to know the time of day.

I'd say any of us able to buy one on the spur of the moment for cash are better off financially than 98% of our neighbors globally.

So our discussions about this or that regarding Rolex's issues don't really amount to a hill of beans compared to other matters

[jltait]

Originally Posted by 77T

So our discussions about this or that regarding Rolex's issues don't really amount to a hill of beans compared to other matters

This is good perspective.

[Patton250]

Originally Posted by 77T

I agree we are very fortunate -

We who are able to afford to buy these little mechanical marvels just to know the time of day.

I'd say any of us able to buy one on the spur of the moment for cash are better off financially than 98% of our neighbors globally.

So our discussions about this or that regarding Rolex's issues don't really amount to a hill of beans compared to other matters

Ah guilt. Nice.

[77T]

Originally Posted by Patton250

Ah guilt. Nice.

Seemed more like humility to me - but I see your point.

Guilt is reserved for those who stole their wealth.

I definitely don’t feel guilty


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[Fleetlord]

This may seem hard to believe from the Rolex fan perspective, but the watch market overall is quite soft.

But brands such as Rolex, Patek, AP (specific models) are doing very well, perhaps better than ever!

Why?

1)Limited Distribution

2)Effective Marketing



Luxury goods consumers want the product to be scarce and they want it to be desirable. The brands above have done this perfectly. Bravo

Other watch brands are not following this strategy. The shrinking watch market is making them suffer badly.

They are:

Overpriced (price function marketing failure)

Overproduced and overdistributed (place marketing failure)

Lackluster and lazy design with poor product execution(more marketing failure)

Poorly Promoted (again...lame marketing)

So, they overproducing the wrong product at the wrong price, selling it through the wrong places and promoting it poorly.

The soft luxury market does not reward these shortcomings. Since they can't be hidden in a shrinking market, the brands get punished harshly.

Breitling, Richemont Brands, Hublot are examples. Some brands aren't guilty of all of these sins, but any combination of these will cause the brand to become undesirable and thus unwanted.

Richemont just dealt with this. Buying back millions of overproduced, undesirable and unwanted stock from AD to keep from getting dumped at flea market prices on the grey market.....which is truly toxic situation...

Rolex? They don't have any of these problems anymore. They fixed the grey market pricing cesspool by pulling back distribution. The focus shifted from SS Sports at the AD level to DJ, TT and PM...which are selling now instead of getting left behind.

So in one fell swoop, Rolex handled their brand value and slow selling situation by just adjusting distribution of a few references.....they didn't need to buy any watches back or anything of the like.

[Easy E]

Originally Posted by Etschell

there is no master plan. all i have seen is reactionary efforts by management. they dont care.

+1

I’ll add slow to the reactionary part, too.

E-

[cornerstore]

Only down market is US , best year Globally for Swiss watch industry in 6 years and China up 44%. Pretty much explains why model shortages.

https://www.google.ca/amp/s/m.scmp.c...-china%3famp=1

https://www.firstclasswatches.co.uk/...pected-market/

[Soultime]

There is a very interesting article in The Guardian (UK newspaper) today.
It's primarily about Burberry burning stock to keep it off the grey market, but it also mentions the £421m Richemont watch destruction.

https://amp.theguardian.com/fashion/...oducts-q-and-a

Having read it, I am pretty sure Rolex knows exactly what game it's playing. They are too professional not to.

[Patton250]

Originally Posted by 77T

Seemed more like humility to me - but I see your point.

Guilt is reserved for those who stole their wealth.

I definitely don’t feel guilty


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Humility is the best and most saving human quality however true humility is not displayed it’s observed.

[improviz]

Originally Posted by cornerstore

Only down market is US , best year Globally for Swiss watch industry in 6 years and China up 44%. Pretty much explains why model shortages.

https://www.google.ca/amp/s/m.scmp.c...-china%3famp=1

https://www.firstclasswatches.co.uk/...pected-market/

Yup. Swiss watch sales are up 10.5% YOY this year worldwide/9.1% in USA, not particularly indicitive of a soft market.

[Pentameter]

I don't think there is any mystery to their distribution strategy. It's completely logical based on their stated intentions / goals, and wanting to keep the brand exclusive.

I do not believe they have any interest in moving into the used market. IMHO, that would tarnish their brand, and just seems like way more work involved than they would want to invest.

[jason10mm]

Never fear, there will be enough Tudors to go around....