Rolex Availability: Why this is the new normal

[inadeje]

While perusing this article and considering other geopolitical scenarios surrounding world GDP analysis, I have come to the conclusion that this new normal is here to stay. Quite a lofty prediction, but I will try to outline my beliefs.

Let us first base our assumptions on a Rolex S.A. (Excluding subsidiary Montres Tudor SA) producing 1 million watches annually, basically returning from the 810,000 produced in 2020 to the medían annual 1m production number averaged over the previous 5 or so years. Secondly, let us continue to assume that Rolex controlled its customary approx. 25% of the swiss watch market until Jan 1st 2021. The swiss watch market is considered to be approximately 4m watches annually. General market sentiment, whose barometer can be derived from forums like this one, indicates that Rolex desirability has increased significantly in at least the previous 12 months. But by how much in percentage terms?

A simple calculation based upon this data results in every 1% of the swiss watch market representing approx. 40k watches. So, if Rolex has taken just 3% extra market share, rising from 25% to 28% it would need to produce 120k more watches to satisfy the demand. One solution would be to increase prices across the board by 10% (wait…they just did that) while maintaining the current production volumes, thus squeezing other manufacturers margins unless they follow suit. Many have… So the conundrum continues without a solution to the supply issues. Could Rolex manufacture 120k more watches to capture the hypothetical additional 3% from other manufacturers? So a 12% increase above historical annual production?

But, what if the swiss watch market as a whole isn’t 4 million watches anymore? What if new demand due to geopolitical factors (China, India, etc) requires hypothetically 5m watches? Logically other manufacturers could pick up the slack and would be seemingly more than happy to fill the void? The problem with this analysis is that the swiss watch buyer is fickle. It is largely a niche market and buyers tend to have their sights set on a brand (or two) and won’t budge from their decision. They’ll either wait, or pay over the odds (enter the greys?). So the secondary grey market is possibly satisfying two phenomenon that have occurred concurrently. 1. Higher swiss watch demand overall 2. Selective buyers who will only settle for a given brand.

This is where the Rolex meteoric rise to fame must be factored in. As I’ve stated in other threads, Rolex has crossed over into the ultra-desirability realm, a status that the company hasn’t ever held with such conviction since it was founded. The subtle blend of increased swiss watch demand, huge brand recognition and sustained 1m annual production means that only one parameter remains as a variable - PRICE. But Rolex just increased prices by 10%, and we all know that this increase isn’t anywhere near enough to dissuade buyers, especially in a market where Rolex watches are regularly selling at 2, 3 and 4 times retail.

So what gives? Well, I would say nothing gives. I would say that this is the new normal and save for a huge worldwide economic meltdown similar to that experienced in 2008 the situation is unlikely to improve, alas, it will probably get worse before it gets better (if in fact it ever does). What does worse mean though? Well, it means that swiss watches on a whole will remain extremely desirable, with Rolex continuing to lead the charge. If all things remain the same, the lack of supply will be rectified via continued increases in secondary market value of all Rolex models, including long discontinued pieces that were previously off the desirability radar. Supply won’t and cannot meet demand, even if Rolex has gained just another 3% of the whole swiss watch market, that’s 120k extra watches they are unlikely to produce. 3% of the swiss market is 12% of the Rolex production, they’ve already raised prices by 10% this year, so…factoring in everything, I’d say we’re looking at an increase in grey prices of at least 25% this year, and possibly up to 40% on ultra desirable pieces.

2022 and beyond is likely to render getting a Rolex at retail an aberration or an almost mythical accomplishment.