Quote:
Originally Posted by Kevin of Larchmont
If Rolex always does it how is it artificial? It’s quite tangible, reliable, clearly predictable. How can a business strategy so intentional be artificial?
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It is deliberate, strategic and considered. Artificial (to me) is just a way to attach a negative connotation that in reality has limited useful meaning in this context.
Virtually any manufactured item has its supply set in some “deliberate” manner. How that is set is based on different criteria / drivers, depending on the nature of the item (commodity, near-commodity / highly competitive, branded, luxury etc). In some cases there are true constraints but they are usually either time-limited or in fact a constraint based on another principle (eg costs no longer are competitive).
Patek could increase their supply 10x. Will the market accept this at current msrps? No. Can Patek do this without significant cost (expansion investment, finding and paying for skilled labor)? No. Is it a smart business move? No. Can they do it in one month? No…
So calling Rolex supply “artificial” is pretty meaningless to me. They deliberately plan production increases to lag demand over time. They also likely manage near term production - in favor of protecting brand expectations. Smart long-term business approach…
I also keep reading people thinking Rolex could still sell everything if they bump supply up massively. This reflects a poor understanding of economics. Rolex does maintain excess demand vs supply at msrp. But that excess demand is at msrp AT today’s supply. If supply increases then you will see pressure on pricing (downwards) and eventually Rolex would need to CUT prices to keep selling… even though the end market for their watches is many, many multiples of their total output.