My Theory on SS Shortages

[HERITAGE82]

Originally Posted by Fleetlord

To be blunt,

So as a Rolex fan, would you rather Rolex be STRONG and well positioned as the leader in luxury wristwatches, or would you rather them be Breitling? Soft and weak, sold through TJ MAXX alongside Fossils and Diesels as they are unloaded by desperate dealers looking for some kind of cashflow...

Ouch!

[jbk45]

I haven't seen this mentioned in the many threads that I've read on this topic, but I imagine at least part of the issue is that grey dealers have cultivated relationships with ADs and are paying money under the table to jump waitlists/access to the hardest to get/highest demand watches. What's it for a grey dealer to grease their local AD/salesperson $2K for a Daytona when they can turn around and flip it for $19K? Why would an AD sell to your average Joe when they can make some extra money on the side for themselves selling to a grey dealer? When I look at the multiple daytona/hulks/blnr etc watches many trusted sellers here and other grey's have in stock at any one time...it makes you wonder, how are they getting their hands on so many BNIB SS Rolexes when your avg Joe can't find a single watch at your local AD. This has to be impacting supply/availability.

FWIW - I was traveling on business last week and checked ADs in LA, Chicago, SF and NYC - the only SS professional model I saw was a single Milgauss and 1 yachmaster rhodium dial, 2 rolesor YMs. Every AD said the same thing - there are none available and they don't know when more will be coming...yet the grey dealers have no shortage of Hulks/Daytonas/BLNRs/SS Sky Dwellers etc...

[mattza]

Originally Posted by Fleetlord

To be blunt, Rolex had to tidy up their affairs.

It was becoming a bit of a mess.

1) Over Production

2) Over Focus on SS Sports from an AD standpoint.

3) Heavily discounted watches all over the grey market.

Quite frankly, for a brand as strong as Rolex, it was getting out of hand.

Since Rolex did not wish to become Breitling, they implemented distribution and marketing policies to ensure that would NOT happen.

The policies are:

1) Limit Distribution

2) Market more effectively than ever.

Every Rolex is a special watch, but there were too many watches not being sold over the AD counter. What was happening was the brand was being defined by SS Subs, Daytonas and the such. AD salespeople would use these as crutch and promote them as they are lay down, easy sale. This would leave other great quality Rolex lanquishing away....also there were just too many watches selling at heavy discounts on the grey market. That's awful. So awful, for example, that Richemont just bought a bunch of junky watches back to keep them out of the flea market. They would rather throw them away...

Limiting distribution stops all this nonsense. It allows other great references to become the focus to the general public buyer, takes away the crutches...so to speak.

It also cleans up the grey market pricing and makes the brand LOOK better as people see them selling for MORE than retail and now have a FOMO reaction.

So as a Rolex fan, would you rather Rolex be STRONG and well positioned as the leader in luxury wristwatches, or would you rather them be Breitling? Soft and weak, sold through TJ MAXX alongside Fossils and Diesels as they are unloaded by desperate dealers looking for some kind of cashflow...

Excellent analysis

[JR16]

Originally Posted by Fleetlord

To be blunt, Rolex had to tidy up their affairs.

It was becoming a bit of a mess.

1) Over Production

2) Over Focus on SS Sports from an AD standpoint.

3) Heavily discounted watches all over the grey market.

Quite frankly, for a brand as strong as Rolex, it was getting out of hand.

Since Rolex did not wish to become Breitling, they implemented distribution and marketing policies to ensure that would NOT happen.

The policies are:

1) Limit Distribution

2) Market more effectively than ever.

Every Rolex is a special watch, but there were too many watches not being sold over the AD counter. What was happening was the brand was being defined by SS Subs, Daytonas and the such. AD salespeople would use these as crutch and promote them as they are lay down, easy sale. This would leave other great quality Rolex lanquishing away....also there were just too many watches selling at heavy discounts on the grey market. That's awful. So awful, for example, that Richemont just bought a bunch of junky watches back to keep them out of the flea market. They would rather throw them away...

Limiting distribution stops all this nonsense. It allows other great references to become the focus to the general public buyer, takes away the crutches...so to speak.

It also cleans up the grey market pricing and makes the brand LOOK better as people see them selling for MORE than retail and now have a FOMO reaction.

So as a Rolex fan, would you rather Rolex be STRONG and well positioned as the leader in luxury wristwatches, or would you rather them be Breitling? Soft and weak, sold through TJ MAXX alongside Fossils and Diesels as they are unloaded by desperate dealers looking for some kind of cashflow...

I vote for “STRONG”!!!!! Lol.
Seriously though I agree w you. The grays need to go and distribution needs to be tight. Here’s a watch, it sells for X, you can only get it from Rolex/AD, and customer pays exactly X.


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[nikesupremedunk]

I am definitely starting to believe that the whole "shortage" thing is BS. Rewind to Christmas season 2017, there were rumors that the shortage was due to Rolex underestimating production and closing down for the holidays. Well it's the middle of the year so are they still closed for the holidays or what?

Also, the whole "Rolex is trying to kill greys so they're limiting supply" is BS too because who is profiting off of all this? The greys. It actually works out better for the greys because they can buy in bulk while most of us just want that hot item.

Every AD I've been to has told me that they haven't gotten a popular sport model like BLNR and Hulk (forget Daytona) since last year and they don't see them coming for a long time, but everyday I see incomings on TRF so they are coming in. It seems like dealers are holding on to hot items to throw them in as "bonus" when a buyer buys in combination with a slower moving model.

Believe what you want but I think this "shortage" will be the new norm now and won't be changing for a while. (Although I hope I'm wrong since there are many models I would like to pick up in the future)

[HogwldFLTR]

Originally Posted by AK797

I generally agree that Rolex, longer term, are probably thinking about how to survive the inevitable shrinking down of the market, and exclusivity will help altho I think the brand name is so strong, maybe the strongest for men there is, that they don't need to do anything very different. So rather than "create demand for a luxury product" as you've said I would say "capitalise on demand" as they are just taking advantage of this wave of demand caused by various global factors. They are short term reacting to get rid of flippers, their main priority, but yes this may lay the platform for the future.

I believe that Rolex is considering the long term impact of all the giddy hoarders anxious for Professional watches. I'm not so certain they're focused on the future down turn as much as keeping their watches from going the path of Cabbage Patch Dolls.

Originally Posted by Maiden

...This exclusivity will allow Patek to survive making a smaller number of watches and Rolex is looking for the same. I think its all about how to survive in the future by getting full prices and margin for a smaller number of units.

Anyhow those are my thoughts, just an opinion, I could be and I am probably all wet on this one. Maybe it just is a supply demand issue. Who knows?

I agree that if Rolex were to just open the flood gates it would potentially kill the brand at a down turn. Or even kill it without a down turn.

Originally Posted by Fleetlord

To be blunt, Rolex had to tidy up their affairs.
...
So as a Rolex fan, would you rather Rolex be STRONG and well positioned as the leader in luxury wristwatches, or would you rather them be Breitling? Soft and weak, sold through TJ MAXX alongside Fossils and Diesels as they are unloaded by desperate dealers looking for some kind of cashflow...

I think fully that Rolex wants to retain their market position. Allowing collectors to hoard and resell their watches is not a good appearance for the company. Allowing the ADs to pick and choose those who will help maintain the corporate image really helps to insure the long term viability of the company.

Finally many will remember the late '90s when there were waiting lists for Harleys and old bike were selling for as much as new ones. Harley added a bunch of capacity to meet the demand. This resulted in less mystique and less demand. Harley is at the point now that its long term viability is coming into question as the Millenials have little interest in their product. So HD made some profits by striking while the iron was hot but the also likely have shot themselves in the foot.

[Fleetlord]

Originally Posted by HogwldFLTR

I believe that Rolex is considering the long term impact of all the giddy hoarders anxious for Professional watches. I'm not so certain they're focused on the future down turn as much as keeping their watches from going the path of Cabbage Patch Dolls.



I agree that if Rolex were to just open the flood gates it would potentially kill the brand at a down turn. Or even kill it without a down turn.



I think fully that Rolex wants to retain their market position. Allowing collectors to hoard and resell their watches is not a good appearance for the company. Allowing the ADs to pick and choose those who will help maintain the corporate image really helps to insure the long term viability of the company.

Finally many will remember the late '90s when there were waiting lists for Harleys and old bike were selling for as much as new ones. Harley added a bunch of capacity to meet the demand. This resulted in less mystique and less demand. Harley is at the point now that its long term viability is coming into question as the Millenials have little interest in their product. So HD made some profits by striking while the iron was hot but the also likely have shot themselves in the foot.

Panerai and Harley are similar in that they overproduced and got away from what made them super cool. Now they are running in the pack trying to get back.

Overproduction never works in luxury goods.

[Lol-x]

Has anyone considered this as a possibility:

Rolex is stockpiling SS models to release them all onto the market at some point, so that when that happens the many people who paid well above RRP will be so mad they will never buy from grey dealers again thus killing off the grey market??

[HogwldFLTR]

Originally Posted by Lol-x

Has anyone considered this as a possibility:

Rolex is stockpiling SS models to release them all onto the market at some point, so that when that happens the many people who paid well above RRP will be so mad they will never buy from grey dealers again thus killing off the grey market??

That's an interesting theory I'd not heard before. They've yet to do that with Daytona. Maybe they will. Time will tell!!! (So to speak)

[Fleetlord]

Originally Posted by HogwldFLTR

That's an interesting theory I'd not heard before. They've yet to do that with Daytona. Maybe they will. Time will tell!!! (So to speak)

In the past, they just continued to raise the price of the SS Daytona to the point where the market flipped and the grey market premium was gone. The flipping stopped and the SS Daytona were being sold under RRP. This went on for quite some time up until 2016, then the Daytona C came out and we are back in the clouds again in the grey market...

If Rolex raised the price of the SS Daytona to $18,050.00 what do you think would happen to the grey market on that reference?

Would it go up further or drop down?

[Bladeshot]

Originally Posted by Fleetlord

To be blunt, Rolex had to tidy up their affairs.

It was becoming a bit of a mess.

1) Over Production

2) Over Focus on SS Sports from an AD standpoint.

3) Heavily discounted watches all over the grey market.

Quite frankly, for a brand as strong as Rolex, it was getting out of hand.

Since Rolex did not wish to become Breitling, they implemented distribution and marketing policies to ensure that would NOT happen.

The policies are:

1) Limit Distribution

2) Market more effectively than ever.

Every Rolex is a special watch, but there were too many watches not being sold over the AD counter. What was happening was the brand was being defined by SS Subs, Daytonas and the such. AD salespeople would use these as crutch and promote them as they are lay down, easy sale. This would leave other great quality Rolex lanquishing away....also there were just too many watches selling at heavy discounts on the grey market. That's awful. So awful, for example, that Richemont just bought a bunch of junky watches back to keep them out of the flea market. They would rather throw them away...

Limiting distribution stops all this nonsense. It allows other great references to become the focus to the general public buyer, takes away the crutches...so to speak.

It also cleans up the grey market pricing and makes the brand LOOK better as people see them selling for MORE than retail and now have a FOMO reaction.

So as a Rolex fan, would you rather Rolex be STRONG and well positioned as the leader in luxury wristwatches, or would you rather them be Breitling? Soft and weak, sold through TJ MAXX alongside Fossils and Diesels as they are unloaded by desperate dealers looking for some kind of cashflow...

I like this logic.

And I never even considered this next one, but man... my brain is melting...

Originally Posted by Lol-x

Has anyone considered this as a possibility:

Rolex is stockpiling SS models to release them all onto the market at some point, so that when that happens the many people who paid well above RRP will be so mad they will never buy from grey dealers again thus killing off the grey market??

This would be quite a sight!

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[Jacksh]

When Rolex stopped sending watches to the AD’s, people went to the gray market & bought watches at higher prices. Current situations, golden age for the grey market and AD’s stand helpless pulling some weird bundle business, making them look like gray market. Weird strategy. I rather buy a Rolex from an AD at MSRP.


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[Tomas Eriksson]

Originally Posted by Fleetlord

In the past, they just continued to raise the price of the SS Daytona to the point where the market flipped and the grey market premium was gone. The flipping stopped and the SS Daytona were being sold under RRP. This went on for quite some time up until 2016, then the Daytona C came out and we are back in the clouds again in the grey market...

If Rolex raised the price of the SS Daytona to $18,050.00 what do you think would happen to the grey market on that reference?

Would it go up further or drop down?

Good comment. It wasn't that long ago when one could pickup a daytona from greydealers below MSRP.

[Fard]

If us, the customers, were clever enough, we would stop purchasing their watches - plain and simple. That's the only way to stop this nonsense.

[jfoord27]

From an economic standpoint what Rolex should do is:
1) maintain production where it is
2) hike the msrp to where the grey market price is now

Would eliminate the grey market while keeping sales volumes close to where they are now and all profit moves to Rolex and away from the greys.

[Quamby]

Originally Posted by jfoord27

From an economic standpoint what Rolex should do is:
1) maintain production where it is
2) hike the msrp to where the grey market price is now

Would eliminate the grey market while keeping sales volumes close to where they are now and all profit moves to Rolex and away from the greys.

Yes, but first Rolex needs to rationalize its product mix and reduce production of models that AD's can't sell or can only sell via bundling (either to legit buyers or greys) or at deep discount. Raising prices late in the economic cycle is a risky play.

[Bostonbert]

Originally Posted by nikesupremedunk

I am definitely starting to believe that the whole "shortage" thing is BS. Rewind to Christmas season 2017, there were rumors that the shortage was due to Rolex underestimating production and closing down for the holidays. Well it's the middle of the year so are they still closed for the holidays or what?

Also, the whole "Rolex is trying to kill greys so they're limiting supply" is BS too because who is profiting off of all this? The greys. It actually works out better for the greys because they can buy in bulk while most of us just want that hot item.

Every AD I've been to has told me that they haven't gotten a popular sport model like BLNR and Hulk (forget Daytona) since last year and they don't see them coming for a long time, but everyday I see incomings on TRF so they are coming in. It seems like dealers are holding on to hot items to throw them in as "bonus" when a buyer buys in combination with a slower moving model.

Believe what you want but I think this "shortage" will be the new norm now and won't be changing for a while. (Although I hope I'm wrong since there are many models I would like to pick up in the future)

Sad but true! Rolex’s distribution system is seriously flawed. The ADs are out of control (can’t believe Rolex approves of the grey market surge), and the greys are profiting from this Charlie Foxtrot.

[AK797]

Originally Posted by nikesupremedunk

I am definitely starting to believe that the whole "shortage" thing is BS. Rewind to Christmas season 2017, there were rumors that the shortage was due to Rolex underestimating production and closing down for the holidays. Well it's the middle of the year so are they still closed for the holidays or what?

Also, the whole "Rolex is trying to kill greys so they're limiting supply" is BS too because who is profiting off of all this? The greys. It actually works out better for the greys because they can buy in bulk while most of us just want that hot item.

They are not trying to kill off greys, they are trying to kill off flippers of sports models so they are carefully allocating to ADs who are carefully allocating to only genuine customers, at least in most markets now. Unless DJs and PMs start flying off the shelves in similar fashion, the grey market still serves a vital role in the Rolex machine, both directly from ADs and as a secondary market option for AD customers as without these options DJ sales will plummet. And I don't think Rolex is ready or willing to completely re-allocate their product line to a majority SS sports and minority DJs and PMs, to wipe out greys altogether.

[Chester01]

Perhaps nothing to it, but seems to me that the SS shortage came about the same time as Tudor really started ramping up. As others have pointed out Tudor is providing what Rolex used to very reliable tool watches and at “affordable” price points. They are more accessable and available compared to the Rolex SS sports models, which makes me wonder if that’s the point.

[VicLeChic]

My take is Rolex is in it for the money, like everybody else. However, they want the brand to be perceived as rare, luxurious and more valuable than the typical luxury brand. They want to project and protect this image in the long term.

If they''d they flood the market with the popular SS models and these could easily be found at the AD without waiting, then most buyers would ask for a discount and would shop around. These pieces no longer being rare would become less valuable. More sports steel being available would simply dilute the brand.

Also, Rolex would like to sell more TTs and PM models because they make considerably more cash per piece. That's where the real money is. Such pieces help Rolex keep their image too.

So basically Rolex are moving up the luxury ladder, leaving Tudor to fill the mid-tier void.

[crazymcmichael]

Originally Posted by mattza

Excellent analysis

Indeed perfect !
Rolex is a special brand and must keep up this status somehow…
Who would pay MSRP price for a Breitling or Omega ?

[Fard]

Originally Posted by AK797

They are not trying to kill off greys, they are trying to kill off flippers of sports models so they are carefully allocating to ADs who are carefully allocating to only genuine customers, at least in most markets now. Unless DJs and PMs start flying off the shelves in similar fashion, the grey market still serves a vital role in the Rolex machine, both directly from ADs and as a secondary market option for AD customers as without these options DJ sales will plummet. And I don't think Rolex is ready or willing to completely re-allocate their product line to a majority SS sports and minority DJs and PMs, to wipe out greys altogether.

Yes, allocating to genuine customers such as some famous grey dealers on here, who of course are selling at MSRP, not outrageous "market" price.

[markseattle]

Originally Posted by VicLeChic

My take is Rolex is in it for the money, like everybody else. However, they want the brand to be perceived as rare, luxurious and more valuable than the typical luxury brand. They want to project and protect this image in the long term.

If they''d they flood the market with the popular SS models and these could easily be found at the AD without waiting, then most buyers would ask for a discount and would shop around. These pieces no longer being rare would become less valuable. More sports steel being available would simply dilute the brand.

Also, Rolex would like to sell more TTs and PM models because they make considerably more cash per piece. That's where the real money is. Such pieces help Rolex keep their image too.

So basically Rolex are moving up the luxury ladder, leaving Tudor to fill the mid-tier void.

This sums it up best in my opinion but who knows.


Mark

[Fleetlord]

Originally Posted by Fard

If us, the customers, were clever enough, we would stop purchasing their watches - plain and simple. That's the only way to stop this nonsense.

Why?

The market is crystal clear on this.

Overproduction of watches ruins brands. Every brand that overproduces is considered less desirable and is devalued accordingly.

The luxury market demands limited production. The brands that follow this are rewarded with increased sales and brand equity.

The ones that don't are subsequently punished with soft sales and brand degradation. It's nasty and mean, but that's what the luxury market is. People WANT what they can't have and if you give them too much they will reject it.

What should Rolex do? They are in essence giving people what they really WANT. The market is reflecting the desires of the many. Why should they go against that and suffer the negative consequences like Breitling and most of Richemont are?

[lefty1999]

What about all of the people abandoning mechanical watches for smart watches?

As smart watch tech improves I see many people moving to those. I see Apple Watches EVERYWHERE now. Rarely see mechanical watches anymore.

Imagine when smart watches have Star Trek level tech in 10-15 years.....and all kinds of new abilities like the ability to sense your blood pressure and all kinds of other health benefits.

I often wonder if someday mechanical watches will be like pocket watches are now

the Quartz watches did that already in the past and in the 1980s "smart" watches did almost everything already..

they don't have Cosmograph on the dial though and can never be as aspirational as a Nautiles ...

you see for a long time watches are "for wearing" if that makes sense

[Innocenti]

the profit made on a gold watch is much much higher than on a ss watch,, cost to produce isn't that much higher.

[Ballzzz]

Originally Posted by Jacksh

When Rolex stopped sending watches to the AD’s, people went to the gray market & bought watches at higher prices. Current situations, golden age for the grey market and AD’s stand helpless pulling some weird bundle business, making them look like gray market. Weird strategy. I rather buy a Rolex from an AD at MSRP.


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But they didn't stop sending watches to AD's. They still send ALL production to AD's. AD's as another poster mentioned probably get greased for all Daytonas they sell and throw in GMT's and minimum 5 DJ/DD per order to the greys.

I place the blame on ROLEX not the AD's, the AD's need to survive and keep the lights on. Why wouldn't they sell 10 watches at a clip rather then 1 to me who wants a discount? Some smart business owners understand getting you in the store for a watch is the gateway to the real profit the jewelry BUT you still come to the store for the watch, you just cant buy any. So they sell to the greys they keep there AD status and they still sell you high margin jewelry when you come to inquire about a watch.

Rolex needs to seriously review there agreements with AD's and how to compensate and regulate them accordingly.

UNLESS Rolex send watches to back channels (which i doubt) ALL production flows to an AD, plain and simple.

If Rolex wants to be fully integrated in sales as they are in production they should open 10 boutiques in major markets. Problem here is now you are smacking all your long standing AD's in the region in the face. Lawsuits galore when they have 10 Daytonas sold a month and the local AD's didn't get that in an entire 30 month period.

IMHO Review and revamp AD compensation, see who is really on your team. Clean house and start completely controlling distribution by rewarding the AD's who play by the rules and allowing them a healthy enough profit margin to not think about the grey world. When they grey's cant call there "guys" aka dirty AD's that game is over. What makes the AD not answer the phone anymore, only two things. Fear or money, Rolex has the power and means to induce both.

From a market perspective they are spot on with supply/demand BUT the grey problem is real from where I stand. I will admit I am contradicting myself because I liked when the greys were less as a reference point. I only buy my watches from AD's or brick and mortar shops used I trust, that's just me though.

[Bobby T]

Originally Posted by Fleetlord

In the past, they just continued to raise the price of the SS Daytona to the point where the market flipped and the grey market premium was gone. The flipping stopped and the SS Daytona were being sold under RRP. This went on for quite some time up until 2016, then the Daytona C came out and we are back in the clouds again in the grey market...

If Rolex raised the price of the SS Daytona to $18,050.00 what do you think would happen to the grey market on that reference?

Would it go up further or drop down?

That would depend on their availability to the consumer. If the limited availability was still the status quo, grey market pricing would rise. If the watch somehow suddenly became more available, it would ultimately put a ceiling on those grey market prices......

[79280_116520]

I think Rolex is aware of the million dollar grey resellers along with the social media hype from newbie "fanboy sheeps".

Seeing how "fanboy sheeps" usually crash and burn any products of their interest, it's wise for Rolex to cut back on production to filter out these buyers.

All the Patek ADs in my area don't have any Aquanaut or Nautilus models in any metal, the sales associates tell me that even their VIP clientele has been having a hard time buying steel Pateks even with $ in hand.

[oldman2005]

DJ/TT/PM are definitely being overproduced, I visited many Rolex ADs over Asia and here in the USA have seen so many not if oceans of DJ/TT/PM sitting on the display cases while there's none or little SS Sport.