Rolex – Will the Bubble burst?

The idea of supply and demand is relatively easy to understand. For Rolex that balance is long gone, as the brand is experiencing a massive shortage in supply and a disproportionately high demand from consumers for their luxury watches.

With many brands including watch brands struggling during the corona virus pandemic to stay in business, a few brands seem to be struggling with other issues, for example keeping up with inventory and the high demand. One of those brands that is doing quite well in the times of a crisis is Rolex, which in 2019 had $5.4 billion in turnover (Sabanoglu, 2019).

The serious shortage of watches has led to many having to go to the secondary market (grey market) in order to purchase a watch. This means that one of Rolex’s most desirable models, the Rolex Daytona, will demand around $24.000 – $29.000. The price reflects the frustrations of many, including serious collectors who are turning away from the brand because of Rolex’s production and supply policies The original MSRP from Rolex for the watch was set at $12.500 but the limited amount of available watches compared to the increased demand has Grey Market places such as Bob’s Watches list the watch for almost $29k and often even selling them above that.

In the times of a pandemic, many have turned to watches as in investment pieces which has lead to prices staying high, more demand and less availability. With the corona virus also affecting production cycles at Rolex’s headquarters in Switzerland, Rolex has had to further reduce the amount of watches they could produce in 2020, leaving retailers with even even less inventory (Rolex Shortage: Market Guide on Supply & Price Hikes: Bobs Watches, 2020).

With many publicly voicing their frustrations and abandoning the brand, nobody really knows where Rolex is heading. As of now availability at Rolex AD’s (authorized dealerships) is little to none. Although there are waitlists, depending on the city one lives in, it could take over eight years to finally get the call for a Rolex Daytona…. Will customers remain loyal? Or will they move on as a result of not being able to purchase their favorite model within three to four years of waiting? Once the hype leaves Rolex, how fast will prices drop with everybody trying to protect their investments and selling as fast as they can, or will they?

References:

Rolex Shortage: Market Guide on Supply & Price Hikes: Bobs Watches. (2020, July 15). Retrieved December 08, 2020, from https://www.bobswatches.com/rolex-blog/resources/rolex-shortage-secondary-market-guide-supply-demand.html

Sabanoglu, T. (2020, November 27). Luxury watches: Leading brand turnover worldwide 2019. Retrieved December 08, 2020, from https://www.statista.com/statistics/789382/leading-luxury-watch-brands-sales/