For those who wants to understand the current Rolex grey market watch prices...

[mleong]

Hi All,

I found the video below from WSJ provides some explanation on the current Rolex watch grey market price phenomenon. First time I learnt the word "Veblen Goods"..

https://www.wsj.com/video/behind-the...2158BFBB5.html

Enjoy! :-)

[JodyHighroller]

Excellent video imo. They goofed up when they said 007 has been wearing a Speedmaster since Goldeneye. It’s actually been a Seamaster a majority of the time.

Laughed at when they described the “Snob Effect”.

[Benzsiam]

Thanks for the link!

[csaltphoto]

That was interesting. I had an idea about some of the concepts intuitively and through life experience but had no idea there was a name for it. Veblen goods. I'd be interested in what formula works to develop the ideal price point for an item though. The video mentioned that there is point that an item becomes so expensive it is no longer perceived as a good value, despite the actual value of the item being so inflated in the first place. So right now the market will bear 30K Daytona's because plenty of buyers still consider that acceptable value. But 1M probably not. Despite there being some watches that cost 1M. So there is an intersecting line of value vs exclusivity. Or exclusivity is the value. But it's more than that.

I'm sure the marketing and economics folks at Rolex can model these multi-variates like the math department at the world bank.

[hng]

Interesting...it has some truths but it didn't say anything about current social/economic situation which may have affected luxury watch purchasing behaviour...

[Bryan81]

Video makes a lot of sense. It seems that the gray/resale market will tend towards the "sweet spot" for veblon goods like Rolex.

The ADs are selling at an artificially set MSRP from Rolex (i.e. Rolex has a monopoly in the sense at ADs can only buy new Rolex watches from them and they must then sell the watches at the MSRP). The grays and resellers represent a capital market that has competing actors setting prices according to what the market will bear. If they go above the "sweet spot", then demand falls to the point where prices need to come down.

It goes back to the old adage that the value of an item is the amount that someone else is willing to pay. For most Rolex models, ADs are selling them for a lot less than what they're worth. However, the fact this is happening helps drive up demand to a certain extent, which further increases the value on these "veblon goods" since the exclusivity is perceived as increased.

[mleong]

Originally Posted by Benzsiam

Thanks for the link!

Most Welcome! :-)

[mleong]

Originally Posted by Bryan81

Video makes a lot of sense. It seems that the gray/resale market will tend towards the "sweet spot" for veblon goods like Rolex.

The ADs are selling at an artificially set MSRP from Rolex (i.e. Rolex has a monopoly in the sense at ADs can only buy new Rolex watches from them and they must then sell the watches at the MSRP). The grays and resellers represent a capital market that has competing actors setting prices according to what the market will bear. If they go above the "sweet spot", then demand falls to the point where prices need to come down.

It goes back to the old adage that the value of an item is the amount that someone else is willing to pay. For most Rolex models, ADs are selling them for a lot less than what they're worth. However, the fact this is happening helps drive up demand to a certain extent, which further increases the value on these "veblon goods" since the exclusivity is perceived as increased.

Agree... hence after watching the video, I think the upper bound grey market price for Rolex SS model should be around PM models (as people will start to realize that paying above PM for a SS doesn't make sense while the lower bound price will be the MSRP.

In the meantime, the grey market price should move between these two levels depending on the prevailing supply/demand condition.

[mleong]

Originally Posted by csaltphoto

That was interesting. I had an idea about some of the concepts intuitively and through life experience but had no idea there was a name for it. Veblen goods. I'd be interested in what formula works to develop the ideal price point for an item though. The video mentioned that there is point that an item becomes so expensive it is no longer perceived as a good value, despite the actual value of the item being so inflated in the first place. So right now the market will bear 30K Daytona's because plenty of buyers still consider that acceptable value. But 1M probably not. Despite there being some watches that cost 1M. So there is an intersecting line of value vs exclusivity. Or exclusivity is the value. But it's more than that.

I'm sure the marketing and economics folks at Rolex can model these multi-variates like the math department at the world bank.

If I am Rolex, I will definitely want to find that sweet spot price point and maintain at that level for optimization. :-D

[fooey]

great vid

[WalterE]

Great video indeed. Very well made and informative.
It clearly explains why Louis Vuitton, Moncler, Rimowa, and similar boutiques NEVER have sales.

[Aquinas]

See also here:
https://robbreport.com/lifestyle/new...o-get-2913405/

[jamesbondOO7]

Excellent

[Explorer2Fan1991]

they fixed the note about the speedmaster LOL

[jlv982]

This is very informative!

[Cookman]

Very few brands achieve true Veblen status like Rolex when it comes to resale value in recent times. Long may it last IMO.