Over the last week, a massive sale from Watchfinder, one of the largest watch retailers in the UK and Europe sparked talk of the Rolex bubble bursting as several sought-after models went on sale on their website. Two popular YouTubers (Adrian from Bark & Jack, and Paul Thorpe) had very different takes on this sale. One states the sale is a sign that Rolex steel sports models will start to come back down in aftermarket pricing to reasonable amounts, while the other states saying so is dangerous for the watch business. So, who is right?
Adrian posted a video a few days ago outlining how tensions in Hong Kong, as well as changes in his own economy (Brexit), are leading causes of the decrease in buyers for these very expensive models. His theory is that with the uncertainty of the economies in these large watch buying markets, people are not willing to pay 100-300% more than retail for sought after models like the Daytona. The sale from Watchfinder, in his view, is sort of the canary in the coal mine.
Paul, on the other hand, is a former watch dealer and disagrees vehemently. In fact, he believes someone with Adrian’s reach should be more responsible for the news they report. Paul does not believe the sale is indicative of a bubble bursting and thinks the sale on these models was simply someone lowering the astronomical asking price to unreasonable. He brings up a good point that lowering the price on something that is priced above retail, to a price that is still above retail, is not actually a sale. His concerns lie mainly in the disseminating of faulty information by influencers harming the market.
In 2004, the now-defunct American automaker Pontiac wanted to hype the replacement for their decades-old Grand-Am line by introducing the G6 on Oprah’s Favorite Things. This series of television shows has been nothing but advertising gold for products, as the items that make this list consistently are the highest sold items of the holiday season. Pontiac gave away 276 of the G6 and the perceived value of them plummeted. Not only did the car have horrible sales figures, but there was also backlash about the gift taxes levied on the recipients. People were completely turned off from the model and the brand. The company had made several other missteps over the previous 10 years and eventually folded in 2009.
Rolex is no Pontiac.
Since his initial post (that has now been removed from YouTube), Adrian clarified his video to be exclusive to the six-digit references. He then backed his thoughts with data from Chrono24, as well as former employees of Watchfinder. This data included estimates for how many actual pieces Watchfinder has on hand and what the selling prices have averaged over the last few years and months. The data shows a softening of pricing on certain models, which bodes well for those in the market for steel sports Rolex models. What it doesn’t show is an all-out market crash (which is what a bubble burst is).
In the history of things being made and sold, nothing compares to the combination of marketing and quality control of Rolex. This brand has somehow managed to be appealing to every demographic, maintained a high standard of quality, and still hold a ridiculous amount of brand equity. What’s more, is they have done so for decades. Everyone who knows anything about watches thinks Rolex is the epitome of a luxury watch; also believing the brand to be incredibly reliable. The combination is unheard of anywhere else. All of this is to say that with the combination of these attributes, there is no fucking way the perceived value (which is the ultimate bottom line in after-market sales) of Rolex will drop to a point where anyone will need to ‘get rid of them’. This ‘sale’ was more of a price adjustment to make purchasing the models more appealing to those already in the market for them. On its own, it is a poor attempt to get people who weren’t looking before to consider buying one.
The most important thing to take away from all this talk of the pricing of current generation Rolex models is that there really is no reason to panic. The steel models are still commanding on average +65% of their retail price. These models may not be the investments that people have touted them to be going forward, but they are far from being ‘affordable’. Rolex will continue to be a highly sought brand, and they will also continue to command a higher-than-retail price on their more popular models. The only thing that would effectively change this is Rolex incentivizing a grey market dealer to become a certified pre-owned dealer. This would set the ceiling on the market price for used models by offering extended warranties at lower prices. The other way would be to increase production by an astronomical amount. There would need to clearly be more models available than buyers for them. Rolex, being a luxury goods manufacturer, would not upset it’s perceived or realized exclusivity by flooding the market with its product. So, for now, let’s just take a deep breath and see where this takes us. If you weren’t looking for a Rolex, this doesn’t affect you at all. If you are, then the price correction should help.
You can find Sanford at @quest327