Rolex is too scarce or millionaires are too many
Recently, a recurring topic has been appearing in comments: the persistence and apparent shortage (I use this term) of certain stainless steel sports watches. This issue is not limited to Rolex and Audemars Piguet, although these two brands have become typical representatives of retail watch supply shortages or non-existence (I specifically refer to retail because, like anything else, as long as you are willing to pay, you can have whatever you want).
While Rolex is not the only company difficult to find in retail stores, it presents an interesting case study as Rolex is a significant highlight of watch industry scarcity. It is difficult (not impossible, but difficult) to obtain Rolex watches. There have been endless discussions about the reasons for this, including speculation that Rolex intentionally restricts retailers from purchasing watches (with various assumptions about why the company would do this); retailers stocking up on inventory deliberately to increase retail prices; production shortages due to factory closures related to epidemics, and so on. Rolex officials say the scarcity is purely due to unprecedented demand. When this issue does arise in the comments, readers sometimes express the natural skepticism that arises: Are there really more people today who want Rolex watches compared to when I started working at HODINKEE in 2015?
In my view, the most pragmatic approach is to start with the simplest possibility, which is that Rolex simply cannot produce the number of watches the market demands. Let’s start with the number of watches Rolex manufactures. A small organization called The New York Times claims to print all the news fit to print. In March of this year, it published an article titled «Why Rolex Watches Are More Expensive Now?» Rolex is a privately held company and does not disclose sales data as a policy, but Alex Williams wrote for The Times, citing a report by Morgan Stanley in collaboration with Geneva-based Luxeconsult, that the company produced approximately 1.05 million watches in 2021, estimated to account for 29% of the luxury watch market in Switzerland.
If I assume that Rolex indeed manufactured around 1 million watches in 2021, and there are 56 million millionaires, and I assume that each of them (this is a big assumption, but perhaps you’ll allow it for the sake of argument) wants one Rolex – any Rolex – then Rolex’s production would only account for 1/56 of the actual annual demand worldwide. If we consider that demand for certain Rolex watches would be much higher than others (professional steel watches, Daytonas), and that you don’t have to be a millionaire to want or afford a Rolex (at least on paper), it seems fairly clear why retail Rolex watches are so rare, unless I am missing something. However, this is not the only part of the story and it brings up the next, more challenging question.
This is largely thanks to the Internet, especially Instagram. I don’t know. However, I find it interesting to note that Rolex posted its first Instagram in 2015 (I’d like to say it was to celebrate the start of my time at HODINKEE, but no).
The only question I have is whether this situation will continue indefinitely, which I can’t speculate on as my college degree is in art and philosophy. The issue with predictions is that we are talking about a significant increase in wealth being pursued for an apparent fixed quantity of assets (although as Bloomberg points out, crypto bros are doing their part). But buying watches is driven by desire, not necessity, which is the hidden variable in the whole equation. However, at least in terms of scarcity, in my view, why we have it is very clear. While there have been recent unfavorable factors, it is more relevant than ever.