Why do you think the market will get back to normal?

[Monte Cristo]

The optimist in me says a situation where by you can only buy a mass produced product for 30-100% more than what it retails for can’t be the new normal.

The pessimist says, well this has been the case with the SS Daytona for more than a decade, so now it’s just extended to ALL the SS models.

[Uggi]

Originally Posted by NavalFlight

As long as there is a significant part of the market of buyers who are holding onto Rolex’s simply to turn a profit, the bubble will exist.

Yeah but a bubble which never bursts isn't really a bubble. It's just an expanding space.

[bonsai-man]

OK, I was going to start a new thread but here’s why I think the market will get back to normal soon.

I think Rolex are reallocating resources internally.

We know based on the current stock of models in AD’S they have enough watch makers to assemble, can create enough movements and dials. They have over production on steel bracelets for dress models, but need more oyster for professional models.

They can continue the same production of jubilee to use on the GMT and satisfy GMT and dress customers. Adding TT to SD gets rid of the current surplus TT dress models and splits demand for SD, again satisfied customers. They now released lots of additional time consuming oyster bracelets for steel sports models without doing anything extra. They Just need to reallocate dial, steel case and increase ceramic bezels and BAM, a lot more steel sports models with the same staff and resources.

Result is shorter waiting lists and more inventory moved and grey prices corrected.

Personally I’d prefer to keep the high secondary prices, so would use the resources released to start rolling out the new movement or production of a new ceramic Explorer. But that’s why I don’t work for Rolex I am not very bright.

Just my lame opinion, what do you guys think.

[Trusted Smeller]

Currently watches are cool. There are lots of people (hype beasts) who like cool stuff who just happen to like watches because they're cool. They will move on to something else eventually.


That's my 2c at least.

[trelane]

Originally Posted by bonsai-man

OK, I was going to start a new thread but here’s why I think the market will get back to normal soon.



I think Rolex are reallocating resources internally.



We know based on the current stock of models in AD’S they have enough watch makers to assemble, can create enough movements and dials. They have over production on steel bracelets for dress models, but need more oyster for professional models.



They can continue the same production of jubilee to use on the GMT and satisfy GMT and dress customers. Adding TT to SD gets rid of the current surplus TT dress models and splits demand for SD, again satisfied customers. They now released lots of additional time consuming oyster bracelets for steel sports models without doing anything extra. They Just need to reallocate dial, steel case and increase ceramic bezels and BAM, a lot more steel sports models with the same staff and resources.



Result is shorter waiting lists and more inventory moved and grey prices corrected.



Personally I’d prefer to keep the high secondary prices, so would use the resources released to start rolling out the new movement or production of a new ceramic Explorer. But that’s why I don’t work for Rolex I am not very bright.



Just my lame opinion, what do you guys think.

This was my thinking as well, they just needed to run a six sigma or other type of lean/optimization event. GMT is now focused on two main bezels and a single bracelet for SS, with PM largely staying one. Other lines will likely have the similar optimizations with likely shared parts and resources.


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[Brian7708]

With the number of grey dealers involved in this situation I don’t see it going away no matter the economy. These new middlemen have entered the market and it is their livelihood to see it through. Some may go out of business with a recession, but certainly not all, or even enough of them to correct prices back to MSRP

[swils8610]

This is the new normal. Rolex product is highly sought after. Its a bit exclusive. It’s selling at a premium and becoming hard to get. It’s a dream come true for Rolex. Much like DeBeers controls the diamond market.


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[NavalFlight]

Originally Posted by Uggi

Yeah but a bubble which never bursts isn't really a bubble. It's just an expanding space.

All bubbles burst, whether you’re talking about housing, bitcoin, or even tulips.

As I said before, as long as a significant segment of the market is buying inventory solely for the purpose of resale, a bubble exists and will eventually burst.

[np208]

Originally Posted by NavalFlight

As long as there is a significant part of the market of buyers who are holding onto Rolex’s simply to turn a profit, the bubble will exist.

tell that to all the people that bought beanie babies as investments

[np208]

I really like how confident everyone is in their view on the market. you can tell who bought watches because they like them and those that bought them as investments.

[NavalFlight]

Originally Posted by np208

I really like how confident everyone is in their view on the market. you can tell who bought watches because they like them and those that bought them as investments.

Yup! Everyone who argues that “this is the new normal” is hoping to eventually sell to a “greater fool.”

Watches, including Rolex, are luxury goods not investment vehicles.

Speaking of vehicles, anyone remember when Toyota Prius’ had a waitlist and sold for thousands over retail?

[galveston22]

The market will flip when demand retreats


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[Uggi]

Originally Posted by NavalFlight

All bubbles burst, whether you’re talking about housing, bitcoin, or even tulips.

As I said before, as long as a significant segment of the market is buying inventory solely for the purpose of resale, a bubble exists and will eventually burst.

It won't. The majority of posters on here are right and you're wrong on this one.

[trelane]

Originally Posted by NavalFlight

Yup! Everyone who argues that “this is the new normal” is hoping to eventually sell to a “greater fool.”

Watches, including Rolex, are luxury goods not investment vehicles.

Speaking of vehicles, anyone remember when Toyota Prius’ had a waitlist and sold for thousands over retail?

I ended up waiting until 2006 and got in on the rebate

[2001jesper]

Recession ... This will never last

[NavalFlight]

Originally Posted by Uggi

It won't. The majority of posters on here are right and you're wrong on this one.

Want to buy some bitcoin at the low price of $18k?

[airchitect]

Msrp for sports models is the new normal

[Swaye]

Spoke with a friend of mine in the watch industry. He has been at it for 20 years. Started in the retail end of things and worked his way up to the management/regional operations side of things for a very large US jeweler/Rolex AD.

He thinks this is a bit of both - the new normal AND will come back down. I know that doesn't make any sense, but it does. He believes we are 5-10 years from a significant softening of the Rolex market. He believes there is so much pent up demand that it will take years, and a significant financial event to quell it (reasons cited mostly relate to new markets and social media causing a completely new reality for high end watch buying - in essence he believes this is an entirely new market and unlike any other hot periods of the past like the late 90's).

He also thinks it will soften one day, but never truly crash (for Rolex and PP). He gave me a great example about new price floors. Take a 16710. 3 years ago they were 5-6K (just using his numbers) and now they are 10-12K. Double, In three years. He thinks it is entirely possible that in the next 5-10 years they could go up another 50% (18K) to double again (20-24K). He said if we are on the high side of that and a nice B&P 16710 is trading for say 22K in 6 years or whatever, that when the market does correct it may pull back to 20K (10%), but it will have set a new normal way above where it started the decade hot streak.

In short, he thinks this hot market is here to stay for 5-10 years, and a major global economic reset will only pull them back 10% or so (just Rolex and PP which he believes are in markets of their own now and do not follow predictive models that other brands are much more sensitive to), which will eventually happen. Then they will dither along for a decade or so without much valuation change, before the next hot market pushes them ever higher.

He has been around this since the late 90's, and he knows a good bit more than me. Sounds logical to me. Another 5+ years of extremely difficult to find watches and climbing prices, followed by a small pull back after the next crash, but the net result is after 10+ years all the popular references are worth 4 times what they started at and it sticks, at least until the next time it goes hot.

The big point he told me, and he isn't trying to sell me watches so I tend to believe it, was buy now, because in 20 years even these prices will seem cheap. FWIW.

That was too long. Heh.

[Monte Cristo]

Originally Posted by Uggi

100% true. Anyone talking about "Rolex bubbles" is just clueless.

Originally Posted by Uggi

It won't. The majority of posters on here are right and you're wrong on this one.

You obviously feel quite strongly about this topic and instead of calling people clueless and telling them their opinions are wrong, why don’t you share with us your viewpoint? Happy to read it.

[Harry-57]

Originally Posted by NavalFlight

Yup! Everyone who argues that “this is the new normal” is hoping to eventually sell to a “greater fool.”

Incorrect. I have never bought a watch for this reason. You seem to have a very narrow view of how people think.

I am also not at all confident of my prediction for market behaviour. But I'm as confident about my prediction as I am about anyone else's.

[DoctorA]

Two years ago a 16710 could be had for $6K
Now they go for 9-10K !! With the ups and downs of the market, Rolex knew only one direction..... UP

[ppalasthira]

This is the new norm.


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[173rdabn]

Just can't get fired up over it. It is what it is.

[T3F]

I'm someone who was chirping that the bubble was about to pop and prices would go right back down again up until the last few months. I'm still not sure that the current market is the "new normal," but I do think the mean has been bumped up.

The new normal, in my opinion, will be the following:
-Certain models (e.g., Daytona, BLRO, 5711) will remain very scarce
-Hot-but-not-scalding models (BLNR, Hulk) will be attainable, if not readily available. I'll quantify this by saying you could get on a waitlist and get one within 6 months, and might happen to come across one in a case occasionally.
-"Normal" models (black Submariner, Explorer range, etc.) will be readily available

There will still be fluctuations in this depending on market conditions. Right now, I still think we're at the top and are seeing prices about 25-30% higher than what will be "normal," but I guess we'll have to wait and see.

[Zackwheat]

During the last big recession, it became out of fashion to appear to be flaunting wealth. So even many of the ultra wealthy cut down on their purchases of luxury items. Art prices took or dip or held steady during 2008-09.

It might be easy for a guy to justify a $10-12k purchase of a watch on a 100k salary when his 401k is going up 10% per year. But if the stock market goes down 5-10%, or if it looks like layoffs at work are possible, that $10k watch purchase most likely will be deferred.

In a economic slowdown the well-to-do will not be deterred. But the thousands of guys who have to really stretch to be able to afford a Rolex most likely would be. And those are the guys who have been driving demand.

[RolexDad]

Anyone who thinks this will go on forever is silly.

[Uppersouth]

I think we’ll continue to see strong demand for the foreseeable future but one must account for the many sales of hot models made due to groupthink. I think this is the consumer that wasn’t previously a buyer of premium brand watches and perhaps, some will eventually move on to the next big thing. This movement won’t open up the floodgates, but will begin to soften, not eliminate, grey premiums on the semi-hot models back to near MSRP and hot models a few K over MSRP. Daytona, Blue Sky Dweller and LVc will be the marathon runners and persevere the longest.

Regardless we’re in a new place with Rolex demand, but don’t think we’re in a bubble, but do think the Rolex market expanded rapidly due to social media and the reintroduction of watch-wearing to younger gen X and millennials (thank you Apple). This is the part that is here to stay.

All of this prognosticating and never mentioned a likely post election recession.

[Burbank90]

Originally Posted by Zackwheat

During the last big recession, it became out of fashion to appear to be flaunting wealth. So even many of the ultra wealthy cut down on their purchases of luxury items. Art prices took or dip or held steady during 2008-09.

It might be easy for a guy to justify a $10-12k purchase of a watch on a 100k salary when his 401k is going up 10% per year. But if the stock market goes down 5-10%, or if it looks like layoffs at work are possible, that $10k watch purchase most likely will be deferred.

In a economic slowdown the well-to-do will not be deterred. But the thousands of guys who have to really stretch to be able to afford a Rolex most likely would be. And those are the guys who have been driving demand.

This.

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[kingSubTT]

It will come back to normal (MSRP prices). Real question is when? It can take 2, 3, 5 years. I need to put my money where my mouth is and should sell BLNR and SS Daytona right?

No, I am 50 years old. I don't know how many good years I got? I would rather enjoy my watches rather than waiting for downturn. This is guaranteed that I am not getting any younger :)

[jcoltrane]

A decade-old bull market has a lot to do with what's happening in the luxury world, but the reality is most folks never spent much time in jewelry stores unless they were buying gifts for their SO, or passing by one in an airport. Social media has exponentially exposed brands like Rolex to younger generations. More eyeballs = more demand, it's really as simple as that.