Why is it nearly impossible to buy a steel sports watch from Rolex, Patek and Audemars Piguet? Quill & Pad (writing that ampersand makes me die inside) offered some excellent insight into steel sports watch scarcity. I’m not going to excerpt it. It’s worth reading in its entirety – at least after you get past GaryG’s wealth braggadocio. Towards the end . . .
the writer offers a few suggestions on how manufacturers and dealers could improve the “problem” of steel sports watch scarcity. While they’re all reasonable ideas – be transparent, discourage flipping, don’t tie access to expenditure on other models – I get the feeling that GaryG was pulling his punches.
I don’t blame him. GaryG’s a collector. He’s obviously established relationships with manufacturers and dealers. He doesn’t want to upset influential people. That’s the game people, and we won’t hate the player for it. However . . .
I have no such compunctions. I give absolutely zero fucks about any of this. The entire concept of collecting anything for any reason except one’s own personal enjoyment is so absolutely foreign to me it might as well be from another planet.
And I couldn’t care less about offending anyone. So allow me to bottom-line the steel sports watch scarcity issue: manufacturers think consumers are imbeciles.
For the past several years, luxury watch buyers have been giving them every reason to think so. Buying watches you don’t want to get a grail? Paying double MSRP on the gray market? These aren’t the actions of the sophisticated gentleman-collector that everyone likes to pretend to be; they’re the actions of a hayseed halfwit who recently hit the big one.
The manufacturers act like they care. They moan about grey markets, and flipping, and all the rest. But instead of doing something about it, they throw up their (no doubt finely-manicured) hands and stoke the shortages.
Contrast this to the high-end car manufacturers. GaryG’s piece starts with a quote from Enzo Ferrari:“Ferrari will always deliver one car less than the market demands.”
Right. One fewer than the market. One fewer than demand is discipline. It’s a signal to consumers that the manufacturer isn’t going to oversaturate the market. The customers can buy with confidence. That residual values are going to be at least somewhat supported. (Of course, go try to flip any Ferrari that isn’t either a special edition or a race-replica and tell me they don’t depreciate).
What the watch manufacturers are doing – manufacturing thousands or tens of thousands of pieces fewer than the market demands – is discipline of the kind you get at the Citadel. And they’re holding the whip while you’re begging Mistress for more.
How do you know this? Because car manufacturers have spent the last thirty years trying to quash the grey market and flipping and ensure that their preferred customers – the ones who are going to drive the things, not try to look at them as an investment – get allocated. Ferrari exclusively leased the F50. Ford sued resellers of the GT. And Porsche takes a kind of glee in screwing with people who try to flip their GT cars.
Meanwhile, watchmakers can be counted to rend their garments on cue about flipping and then do . . . nothing. Maybe a strongly-worded letter. They don’t act because the situation gives them power. Power over their dealers, to allocate favors. Power over collectors to make a billionaire beg for an allocation. Power over the supine media.
If the manufacturers were serious about ending the shortages or at least making the system more customer-friendly, there are several things they could do:
Produce more high-demand pieces
This is the easiest path, the most lucrative, and most likely already happening.
There might be a few companies with actual constraints on watchmaking, but not Rolex. Not Patek. This is an allocation decision rather than a binding constraint. Producing a few more Daytonas will not affect anything besides the grey market.
GaryG makes a false equivalence between producing more and flooding the market. There is a massive difference between today’s situation – where there are literally no steel sports watches available at retail – and a flooded market. There is plenty of room to produce more.
Move to a national-based waitlist and allocation system
This is what Ferrari and Porsche do. It gives the manufacturer more control over who gets what and allows them to punish flippers and encourage the “right” consumption. It also removes the dealer incentive to collaborate with flippers for the kickbacks.
GaryG says “pumping up the price point would risk disrupting the brand’s full-line pricing policy in ways that would be very difficult to retract later.” That’s insightful, if a bit familiar-sounding.
There are ways of raising prices that can slake demand without permanently changing list prices. Special editions. Color variants. Look at Tesla’s “Founder Editions” or basically everything McLaren does for inspiration. Give people a reason for paying more (maybe much more) than typical retail.
Bring dealers into line
Part of the reasons for the steel sports watch scarcity: dealers are putting grail watches on the gray market as soon as they come in.
Each watch has a serial number; it’s simplicity itself to see which dealer’s inventory is immediately ending up on Chrono24 – and take action. There have been dark hints that Rolex is actually doing this.
However, until a bunch of ADs end up as examples with their heads on metaphorical pikes, the situation won’t change. As I said above, steel sports watch scarcity gives manufacturers power. The bigger the shortage, the more power the manufacturers have.
In well-functioning markets, shortages create opportunities for competition. When it comes to steel sports watch scarcity, that’s not happening, despite all the help we can give. So a bunch of people chase the same “grails” and ignore all the other great watches that are out there. No wonder the manufacturers think consumers are stupid.
If you want to rectify this sad state of affairs, be the change you wish to see. Buy something that gives you pleasure instead of something that some dipshit on Instagram is showing off. You’ll be happier in the long run, and maybe, just maybe, the manufacturers will listen. But you won’t care any more. Win-win.