Why limit supply at the entry level?

[thomaspp]

Why do brands choose to limit supply on basic/entry level steel sports watches?

1. Does it ultimately make the brands more money as more customers come in the door asking for a nautilus, eventually get bored and buy something else like an annual calendar for more money?

2. Does it make the ADs more money as ADs can "bundle" and cross-sell other watches/stuff together with the desirable watches?

3. Is there something more other than money at play? Conserving the legacy of a certain design? This one to me is pretty hard to believe! lol

I can't get over the irony of the current situation where the entry level watches that one would normally play around in are hard to obtain yet most of the actual haute horology is easily obtainable at discounted prices! The market has really turned into a nutty situation and I wonder if anyone will care to rectify it in time (make a ton of steel nautilus and stop making masses of annual calendars) or if rather the current status quo is the more profitable way to have it for both the brands and the retailers. What do you say?

[Helmi]

All your points are valid, but if they don't limit the supply, no one would buy these entry level watches. Think of tag, omega...etc if you want to buy one of these you just keep telling yourself "they are here I can buy them anytime, let me focus on hard to get pieces first". Another reason to limit the supply is to create a hype and inflated prices so people keep saying if entry level are that expensive in secondary market then this is very strong brand. Finally the resale value, limited supply watches naturally are more expensive used and considered "investment pieces" which positively impacting the brand perception and value.

Why not do this for high end watches? Because they are naturally expensive and their target market is very small anyways.

[lapince]

Originally Posted by Helmi

All your points are valid, but if they don't limit the supply, no one would buy these entry level watches. Think of tag, omega...etc if you want to buy one of these you just keep telling yourself "they are here I can buy them anytime, let me focus on hard to get pieces first". Another reason to limit the supply is to create a hype and inflated prices so people keep saying if entry level are that expensive in secondary market then this is very strong brand. Finally the resale value, limited supply watches naturally are more expensive used and considered "investment pieces" which positively impacting the brand perception and value.

Why not do this for high end watches? Because they are naturally expensive and their target market is very small anyways.

Well I was very happy to buy some entry level PP and it was before any of the hype, you could get 5711 or 5712 a little under retail, I didn't get them because of any hype or investment, I was sure to loose a minimum of money should I decide to sell them but would have lost between 1-4k, what I don't understand is people getting the 5711 for 45-50k, that is nuts, for me even the retail for the 5711 or 5712 is already not really justified but the crazy grey prices are nuts, I got them for retail when retail was 20% less than it is now, expensive but justified not sure I would have gotten into PP with a 5712 at 40 retail, probably not to be honest.

About the high second hand prices positively impacting the brand not very sure, if you can't get it at retail and can only at grey prices which are almost 100% more, I would think it will disgust many first buyers who will go to other brands who don't make a limited production of their hot models, had the situation been like this 5 years ago I can guarantee you I would have had zero Patek, so maybe in the short and middle term it is positive, but on the long term not so sure as many buyers don't want to buy a 20-30k Calatrava to be able to get a 5711 at retail.

Anyways I think that Patek will slowly come to terms with the new market, which is the clients want sport models, at some point or another you need to give the market what it wants, and you can't continue your brand image on dress pieces or grand complications if they are not in favor, but it seems that T Stern understood this by releasing the 5968 and 5740, the market wants more Nautilus and Aquanauts, if the ones you make are not obtainable it will drive off many potential clients

[jon_jon]

A watch company determines its future direction. Thierry Stern certainly listens to his clients. However his main clients are the ADs and big whales who know TS on a first name basis. He is certainly aware of the trend in SS Nautilus and SS Aquanaut. However he is not planning to follow in the footsteps of AP and turn Patek into a sports watch company. That is why he is quoted as placing a hard percentage limit on the number of SS watches they will produce (and many of them are ladies watches).

Patek has always been known for their complicated watches (PC, PCC, chronos and split second chronos). In the past, AP has made some very nice complicates pieces. But today I doubt anyone even looks at AP when looking to purchase a complicated watch.

Will TS fold to the market forces and become like a AP? Do true Patek collectors (and not just one Patek watch enthusiasts) want Patek to produce 10,000 57111/1A's a year and crash the secondary market prices? IMHO, the answer is a big no. But I am certainly open to hearing other collector's opinions.

[Wiredx]

I don’t think they’re limiting anything since they’re easily available through trusted sellers. Something else is happening.


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[GB-man]

It’s really only Patek doing this. AP is happy to sell anyone a 15400 at retail. The Daytona isn’t entry level for Rolex so you really can get a plethora of entry level SS Rolex easily for retail (atleast in North America).

It’s a marketing strategy imho. It’s the Daytona model but Patek doesn’t have half a dozen cheaper entry level watches to satisfy new customers. That’s why it is stupid.

[RussW]

Originally Posted by jon_jon

A watch company determines its future direction. Thierry Stern certainly listens to his clients. However his main clients are the ADs and big whales who know TS on a first name basis. He is certainly aware of the trend in SS Nautilus and SS Aquanaut. However he is not planning to follow in the footsteps of AP and turn Patek into a sports watch company. That is why he is quoted as placing a hard percentage limit on the number of SS watches they will produce (and many of them are ladies watches).

Patek has always been known for their complicated watches (PC, PCC, chronos and split second chronos). In the past, AP has made some very nice complicates pieces. But today I doubt anyone even looks at AP when looking to purchase a complicated watch.

Will TS fold to the market forces and become like a AP? Do true Patek collectors (and not just one Patek watch enthusiasts) want Patek to produce 10,000 57111/1A's a year and crash the secondary market prices? IMHO, the answer is a big no. But I am certainly open to hearing other collector's opinions.

I think that if Patek want to remain relevant as a watch company then they ultimately need to give the market what it wants, just as it needed to adapt when no one was buying pocket watches anymore.

It’s no use making high end horological masterpieces or dress watches if no ones buying them. However I think we are a long way off Patek needing to change its current strategy, but that day may come.

[jon_jon]

Most TRF forum members are men, so the next point may be hard to understand, but Patek is also going with a strategy to produce 40% ladies and 60% men's watch (or at least 1/3 ladies and 2/3 men's).

Is that heading in the right direction? Why are they producing so many ladies' watches when the market demands that they produce 10,000 5711/1A's a year instead? I don't know the answer, but another factor in the whole production equation that seems a bit puzzling for the rest of us.

[GB-man]

Originally Posted by jon_jon

Most TRF forum members are men, so the next point may be hard to understand, but Patek is also going with a strategy to produce 40% ladies and 60% men's watch (or at least 1/3 ladies and 2/3 men's).

Is that heading in the right direction? Why are they producing so many ladies' watches when the market demands that they produce 10,000 5711/1A's a year instead? I don't know the answer, but another factor in the whole production equation that seems a bit puzzling for the rest of us.

Yeah knocking out thousands of tank knockoffs that float around on eBay for 10 grand doesn’t seem like a worthwhile strategy.

[RolexWearinSonOfAGun]

As a younger (relatively speaking) prospective Patek owner, the current strategy/market with respect to their entry-level sport watches is disheartening. I’d love to own a diverse and comprehensive collection of complicated Pateks in the future, but I’d rather my entry point be a 5167A or 5711 now. When you make those watches virtually unattainable (at MSRP, and within a reasonable timeframe), it discourages similarly-situated prospective new customers from becoming lifelong patrons. While I’m ultimately OK waiting a few years for my number to be called, I will admit that it’s been an unexpectedly frustrating ordeal. I’m sure some others would agree.

[kultschar]

Social Media hype for the Nautilus and Aqua is at an all time high

Might not be good for people who are trying to attain the watch but surely the hype is making the brand stronger? Seems celebs have gone PP mad judging by insta etc

[Ichiran]

To be fair, all Patek's models are limited in terms of supply given PP only manufactures 50,000 watches per year (compared with the 800,000 to 1m watches from Rolex). There is almost an equal amount of Aquanauts, Nautilus, Calatrava, complications and perhaps less grand comps.

Today's phenomenon is just a reflection of the market demand for sports watch. The other entry-level line, the Calatrava, is also produced in limited numbers but they are just not so hot at the moment.

[Ton91]

From where I live AD and Patek will get more money with this situation. If you want to buy aquanaut or nautilus you have to buy other complicated model at least $70000 then you can have one.

Same situation with Daytona and Pepsi. To get one you have to spend $50000 with datejust or precious metal sport model.

AD told me that If they want to get 1 Daytona in their shop they have to order 10 Datejust from rolex.

[RHIII]

It is the watch industry’s attempt to ‘right the ship’ - and regain ‘control’ by finding (or what seems like grasping towards) a baseline plateau for performance. To get the ‘other’ unauthorized avenues under control and determine how many units are being sold actually to consumers vs. retailers...then...produce and release the ‘quantified demand’.

Why the ‘entry level’ references — because they make up a significant portion of the sales...and nearly ALL of the demand.

It will change...I suspect not too distant in the future.

My .02


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[jon_jon]

Originally Posted by GB-man

Yeah knocking out thousands of tank knockoffs that float around on eBay for 10 grand doesn’t seem like a worthwhile strategy.

Hey, don't knock these "tank knockoffs" as they (SS Twenty~4's) are the best selling Patek watches for almost 20 years now -

But in all seriousness, according to TS during his interviews, he sees more women with buying power wanting complicated timepieces (ACs, PCs, chronos and even MRs) and they are not purchased by their husbands, but they are purchasing them for themselves.

Anecdotal story I heard from a major US AD - their top Patek collector is a wealthy businesswoman, who owns close to 100 Patek watches. If a special watch comes to the AD, she gets first dibs on the watch!

[thomaspp]

Originally Posted by Ton91

From where I live AD and Patek will get more money with this situation. If you want to buy aquanaut or nautilus you have to buy other complicated model at least $70000 then you can have one.

Same situation with Daytona and Pepsi. To get one you have to spend $50000 with datejust or precious metal sport model.

AD told me that If they want to get 1 Daytona in their shop they have to order 10 Datejust from rolex.

This is what I am most curious about. Ultimately the question is does this strategy make Patek and their retailers more money?


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[thomaspp]

Originally Posted by RolexWearinSonOfAGun

As a younger (relatively speaking) prospective Patek owner, the current strategy/market with respect to their entry-level sport watches is disheartening. I’d love to own a diverse and comprehensive collection of complicated Pateks in the future, but I’d rather my entry point be a 5167A or 5711 now. When you make those watches virtually unattainable (at MSRP, and within a reasonable timeframe), it discourages similarly-situated prospective new customers from becoming lifelong patrons. While I’m ultimately OK waiting a few years for my number to be called, I will admit that it’s been an unexpectedly frustrating ordeal. I’m sure some others would agree.

As a 10 year “veteran” it pisses the hell out of me. Not very fun as a collector and watch hobbyist honestly


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[thomaspp]

Originally Posted by jon_jon

A watch company determines its future direction. Thierry Stern certainly listens to his clients. However his main clients are the ADs and big whales who know TS on a first name basis. He is certainly aware of the trend in SS Nautilus and SS Aquanaut. However he is not planning to follow in the footsteps of AP and turn Patek into a sports watch company. That is why he is quoted as placing a hard percentage limit on the number of SS watches they will produce (and many of them are ladies watches).



Patek has always been known for their complicated watches (PC, PCC, chronos and split second chronos). In the past, AP has made some very nice complicates pieces. But today I doubt anyone even looks at AP when looking to purchase a complicated watch.



Will TS fold to the market forces and become like a AP? Do true Patek collectors (and not just one Patek watch enthusiasts) want Patek to produce 10,000 57111/1A's a year and crash the secondary market prices? IMHO, the answer is a big no. But I am certainly open to hearing other collector's opinions.

Thanks my friend. I don’t want to see Patek become “an AP” but the current situation does not appear to be very sustainable frankly....


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[thomaspp]

Originally Posted by GB-man

It’s really only Patek doing this. AP is happy to sell anyone a 15400 at retail. The Daytona isn’t entry level for Rolex so you really can get a plethora of entry level SS Rolex easily for retail (atleast in North America).

It’s a marketing strategy imho. It’s the Daytona model but Patek doesn’t have half a dozen cheaper entry level watches to satisfy new customers. That’s why it is stupid.

I believe AP wants to replicate this bizarre market with the 15202 and Journe with the CB....


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[thomaspp]

Originally Posted by RHIII

It is the watch industry’s attempt to ‘right the ship’ - and regain ‘control’ by finding (or what seems like grasping towards) a baseline plateau for performance. To get the ‘other’ unauthorized avenues under control and determine how many units are being sold actually to consumers vs. retailers...then...produce and release the ‘quantified demand’.

Why the ‘entry level’ references — because they make up a significant portion of the sales...and nearly ALL of the demand.

It will change...I suspect not too distant in the future.

My .02


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You know who is making more money than ever?? Grey dealers!! So if that was the goal, seems like a complete fail...


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[soundserious]

The answer is to raise the bar for entry.

Said it once and will say it yet again: get rid of the 5711 in SS.

[RHIII]

Originally Posted by thomaspp

You know who is making more money than ever?? Grey dealers!! So if that was the goal, seems like a complete fail...


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Time will tell....these hyped up prices aren’t sustainable...and until inventory is better regulated (which we know it’s not)it cant give...


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[codecow]

Originally Posted by thomaspp

This is what I am most curious about. Ultimately the question is does this strategy make Patek and their retailers more money?


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They’re protecting the brand in the long term. Some retailers do not carry AP as an example because their non-Royal Oaks do not sell. I think the family wants to protect their entire range. One way to do this is to limit production on popular models, the other is raising prices. They’ve done both.

[AK797]

PP is different to Rolex, Rolex deliberately limited supply of the D500 and hot new Basels, but kept the other models in slight over-supply as per the grey discounted prices, whereas TS clearly saw PP as a complications company and wanted to limit the influence of the basic Nautilus and famously claimed he did not want PP to become a one watch company, irony of ironies.

But then came the massive surge in demand last year, and the year before in Brexit UK, and suddenly limiting supply was not the issue as huge over-demand took over everything else, and continues to do so as the 5711 is at a 100% premium here, much like the D500, even the LVc is at 50% now. And now AP want in on the action and are restricting supply and their prices are rising. But none of this has been planned, all are just reacting to a complete change in the market. No geniuses here imho.

[AK797]

The problem with high resale prices is that their exclusivity draws to the owner more kudos and status now than a grand comp, and so it becomes more desirable, and the available watches less so even if they are horologically vastly superior. Human nature is always the main driving force.

[tom2517]

Originally Posted by AK797

PP is different to Rolex, Rolex deliberately limited supply of the D500 and hot new Basels, but kept the other models in slight over-supply as per the grey discounted prices, whereas TS clearly saw PP as a complications company and wanted to limit the influence of the basic Nautilus and famously claimed he did not want PP to become a one watch company, irony of ironies.

But then came the massive surge in demand last year, and the year before in Brexit UK, and suddenly limiting supply was not the issue as huge over-demand took over everything else, and continues to do so as the 5711 is at a 100% premium here, much like the D500, even the LVc is at 50% now. And now AP want in on the action and are restricting supply and their prices are rising. But none of this has been planned, all are just reacting to a complete change in the market. No geniuses here imho.

Not saying this forum is a good representation of the entire market, but just look around here, Patek has become a sports watch company.

Porsche is producing more SUVs than sports cars, it used be a sports car company also making SUVs, but now it's the opposite.

[RHIII]

Originally Posted by AK797

The problem with high resale prices is that their exclusivity draws to the owner more kudos and status now than a grand comp, and so it becomes more desirable, and the available watches less so even if they are horologically vastly superior. Human nature is always the main driving force.

True - but you know as well as I do these surreal resale / secondary prices are completely unsustainable — and as long as there are (minimal) buyers at those astronomical prices — that approach (to rectify the secondary markets) just continues to backfire.

The only true way (from an economics standpoint) would be to either lower prices - to ‘flush out’ the remaining references within secondary channels - or flood the market to a degree - and fill the orders. (Likeliness...Slim to none)

The watch market is so upside down right now - it needs a ‘hard reset’.

I also think we may see in the upcoming years an upturn in boutiques - that can be better governed by the manufacturers. The days of the small ‘mom and pop’ ADs May be coming to an end.

We’ll see...but the continued current state - will eventually do far more harm than good to the watch market - and the enthusiast.

Just my .02




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[thomaspp]

Originally Posted by RHIII

We’ll see...but the continued current state - will eventually do far more harm than good to the watch market - and the enthusiast.

Just my .02




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I agree with this statement. The only way I find to rationalize the current situation is that the brand(s) must be making or thinking they will make more money this way.

It is nevertheless amazing to see minute repeaters, split seconds, perpetual calendar chronos etc sell at HUGE discounts while the entry level stuff is 2x retail.... just a huge turn off and sad sad day for the long-time/long-term/passionate collectors.

[RHIII]

Originally Posted by thomaspp

I agree with this statement. The only way I find to rationalize the current situation is that the brand(s) must be making or thinking they will make more money this way.



It is nevertheless amazing to see minute repeaters, split seconds, perpetual calendar chronos etc sell at HUGE discounts while the entry level stuff is 2x retail.... just a huge turn off and sad sad day for the long-time/long-term/passionate collectors.

I’m completely with you.

I am of the mindset just release the dang watches people want - and sell them! It is a huge turn off to me as well — to a hobby and passion I have had for 25 plus years!!

Same with the incalculable amount of banter on - how much over retail should I pay or is this rare, etc...




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[kaiserphoenix]

I think it depends on the brand. I can see why Rolex may want to do this as their more expensive watches are essentially the exact same watches but in a more noble metal. Patek on the other hand i feel could do with abit more supply as clients will most likely start “upgrading” to the complications and perhaps grand complications. I feel people who buy a Sub may be their only watch, someone who may not necessarily be interested in watches.


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