Rolex needs grey market prices to increase

[MountEverest]

Hello everyone,

I wanted to share my thoughts from an economics viewpoint on why Rolex wants the Grey Market to increase Rolex prices.

A Rolex watch is a Veblen Good, a good whose demand increases as the price increases. Rolex can't compete with the movements from the big 3 (PP, AP, and VC) so they need exclusivity to generate the increased prices and brand name.

From an economics perspective, the Grey market is doing a service for Rolex. However, it is the new consumer to Rolex that ultimately gets hurt. The twist is that the higher the price goes, the less consumers can afford it, so it becomes even more exclusive, which drives the price up even higher. The only way to stop this cycle is eventually there will be a recession or some external shock that will decrease economic growth and the market prices will return closer to MSRP.

It is an interesting situation to follow but terrible for me because I don't want to buy grey market watches and I just want to buy a basic submariner and I have bought 6 Rolex watches before from the same AD. Unfortunately, I have an easier chance getting the new PP Calatrava than I do of getting a Submariner with a date, Sigh!!!

I hope this explanation helps people better understand what is happening.

[RolexSimon]

Grey markup for Sub Date is not huge - just get one.......

[Santiago32]

Originally Posted by RolexSimon

Grey markup for Sub Date is not huge

Subjective... a 70% markup might put it out of reach for some.

[Hemdog]

Tell us about the 6 watches you already bought?

[cblock406]

Isn't that everyone's understanding already?

[Feb_29]

Well, Rolex survived resections, inflations, deflations and market crashes, came out stronger than other brands. I don't think your theory will work. Better buy the watch you like now before it's too late.

[MountEverest]

I have been very fortunate. Over a 6 year period I become very close to the manager of my local AD. Unfortunately, the store no longer sells Rolex watches as many Rolex ADs have shut down in the Washington, DC area.

I own a DJ41, a pepsi, a white milgauss, a black explorer II, an Explorer 1 39mm version and I had a BLNR that I gave to my brother when he got divorced. I would like a Submariner to complete my collection.

[JohnGingerwood]

I think about the economics too, it is interesting to track the beginning. I presume at some point roughly 5 years ago, someone discovered they could buy all the sports models from an AD, and then in essence, set their own price in the secondary market. People would go to the AD, which was empty, then they discovered the grey dealer, who said, Hey I have what you want but theres a slight premium because you don't have to wait and the AD has none and does not know when they will get more. From there it snow balled to what it is now. More people started doing it and the hype continued to grow.

I am not so sure a recession will curtail this. The people paying 50k for Daytona's (knowing they are 16k) must have sizable wealth, I would think, and recessions do not always impact high net worth people the same. They have more money to lose, but usually have more investments and assets outside of traditional "stocks" that do well during market turmoil. I could be way off on that assumption, just my initial thought.

[Tim Plains]

Some people believe they are recession proof, so that throws a wrench into your theory if it's true. I don't think prices will ever drop, maybe fluctuate slightly, but worldwide demand is far too high for them to drop.

Originally Posted by RolexSimon

Grey markup for Sub Date is not huge - just get one.......

Not huge? A $12,000 watch selling for $22,000 isn't a huge mark up to you? Canadian $$.

[RolexSimon]

Originally Posted by Tim Plains

Some people believe they are recession proof, so that throws a wrench into your theory if it's true. I don't think prices will ever drop, maybe fluctuate slightly, but worldwide demand is far too high for them to drop.


Not huge? A $12,000 watch selling for $22,000 isn't a huge mark up to you? Canadian $$.

Nope - pretty reasonable compared to PP, AP, FPJ, Silver snoopy Omega and numerous other difficult to obtain watches. If you're buying it because you want to make money then I think the AD has made the right call. There are many threads out here about the fact that most Rolex buyers just want to have an investment they can wear then sell for a profit at some stage.

[Benzsiam]

Not only Rolex, AP and PP are the same too.

[gerry100]

Rolex positions their process to compete with Omega, Brietling etc in the store.

The 2% here are not in the equation

[GradyPhilpott]

Good ol' Thorstein Veblen. The man who identified the phenomenon of conspicuous consumption and one of my favorite social theorists.

Nonetheless, I'm tired of reading the term "Veblen goods."

[RolexSimon]

Originally Posted by Benzsiam

Not only Rolex, AP and PP are the same too.

Agree 100%

[Tensai]

Originally Posted by GradyPhilpott

Good ol' Thorstein Veblen. The man who identified the phenomenon of conspicuous consumption and one of my favorite social theorists.

Nonetheless, I'm tired of reading the term "Veblen goods."

Ditto. Plus please no more mentions of tulips, cabbage patch dolls, Bitcoin and the mind of the Chinese consumer. So many wannabe economists.

[TswaneNguni]

Originally Posted by Tensai

So many wannabe economists.....

Maybe its the lack of oxygen on top of the mountain .

[MountEverest]

That's funny, I am an economist

[inadeje]

Your post is accurate, the Rolex brand is a veblen brand now

[TswaneNguni]

Originally Posted by inadeje

Your post is accurate, the Rolex brand is a veblen brand now

Not bad for the collection value ,

I love veblen youngsters .

[gerry100]

Originally Posted by gerry100

Rolex positions their process to compete with Omega, Brietling etc in the store.

The 2% here are not in the equation

I meant "their PRICES"