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How the Rolex Daytona destroyed the watch market

Intro

Whether you saved up for years or earned 50k on the weekend, there is one thing your cash can’t buy you right now: a Rolex Daytona from an Authorised Dealer (AD for short).

In an instagram-liked up society mirroring “American Psycho” more by the day it happens to be the iconic chronograph from Rolex that is the ultimate business card. Look at that subtle dial colouring. The tasteful thinness. Oh my God. It even has a tachymeter.

Rolex sports watches, and the stainless steel Rolex Daytona ref. 116500LN at the forefront, have been wiped from the windows of shops for the last couple of years.

What happened that made the purchasing process for a status symbol from the last century so complex that you need to learn a whole new language to understand it?

In order to answer that today we will explore the modern Rolex buying experience.

Let’s get into it:

The acute symptoms of the Rolex mania are a new phenomenon.

The event that kicked things off was Baselworld 2016. It was here that for the first time ever, the world laid eyes on memorable watches like the Hublot MP-05 LaFerrari Sapphire, the totally original Meccaniche Veloci ‘MoneyMaker’, oh and I almost forgot: the new Daytona.

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It was that simple watch that marked the beginning of the end of the normal Rolex market. The recipe for the perfect storm was simple; A ceramic bezel. Other than that it was inside and out identical to its predecessor model ref. 116520. 

This move was about as revolutionary as a 1mm case size increase, but the impact was beyond our sight. We had seen ceramic used as bezel material on precious metal versions prior and the trickle down effect towards the steel version was anticipated for multiple years.

Advice from Benjamin Clymer:

The founder of Hodinkee, Benjamin Clymer (back when he was actually still writing articles) said the following on the day of the release:

“I have been asked by more (…people…) for help in getting this new Daytona than any other watch…Consider this new Daytona an invitation to the cool kids’ table. This is the watch that makes you forgive Rolex for what it has done to you in the past because it is exactly what you wanted.”

His advice on how to get one was simple:

“Call your local AD and put your name on a list. It’s just that simple – there is no game here to win for people who deem themselves serious buyers, or preferential treatment for people with lots of Instagram followers – Rolex doesn’t do that. If you want one, you wait.”

But it wasn’t that simple. While Clymer may have been right in saying that Rolex doesn’t play games with their allocation, he fails to mention that strictly speaking Rolex is a B2B company.

You can’t simply call Rolex, and Rolex simply won’t sell to you. Instead they exclusively sell their watches to an assortment of jewellers and watch shops from all around the globe. These are the AD’s, and they certainly are willing to play games.

Why does everybody want a Rolex?

But why does the hype seem to be so intensely focused on one brand? 

Rolex has been moving their product faster than you can say “waiting list”. While their products are of high quality they aren’t the leagues beyond their competitors as their markup on the secondary market would make you believe.

Prospective buyers tend to be more intrigued by the allure that the name carries rather than the actual product itself.

This is because having a Rolex nowadays means you have made “it”, however, people individually define that for themselves.

Back when you could walk in and buy a watch:

For a long time 99% of the Rolex catalog was readily available. You want it? You buy it! Having been involved with watches for over a decade the ready availability of today’s hot pieces was a common sight.

I vividly remember a Patek Nautilus being available for walk-in customers at an AD in Singapore. This was a time where the Aquanaut was still snubbed by enthusiasts and the Royal Oak available at a healthy discount. 

Market liquidity:

Another advantage that makes Rolex watches fit for mass market madness is their high liquidity. Even with other popular brands the perceived value is only true so long as you actually find a buyer.

If you have a Rolex there will always be somebody in the world willing to buy it off you, even if we are talking about the ref. 115598 SACO Leopard.

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115598 SACO Leopard

Rolex was perfectly primed to take off in a bull market pumped up with cheap cash. If the Daytona was the seed, then it was Corona that made it blossom to reach over 400% of its original retail price.

The market goes crazy

The year is 2020 and we all have to stay at home. No Parties in Ibiza, no steaks with Salt Bae, and no Louis Bags in Paris or whatever people pretending to be rich tend to do. What are you gonna do with all that disposable cash though?

Investments are lame but a fancy Rolex might be nice. Cheap dopamine when you consider the resale price. On to Chrono24 we go!

While Rolex factories had to close for 10 days in an unprecedented move due to Corona, demand continued to shoot through the roof and people were willing to buy whatever became available. The ADs would be swept completely out of stock, grey dealers would be growing grey hair, and online prices would shoot up like it’s the roaring twenties.

The extremity would explode once things started to open up again. People partied, worries vanquished and bank accounts were flush with cash from stimulus checks. High on YouTube unboxing’s a new wave of watch nuts craved the real deal. Everyone wanted to buy a Rolex, especially since it was free money with the well publicised resale values. Free money sells itself.

There was only one problem. You could no longer buy a Rolex at the store. A Daytona was always hard to get but even what enthusiasts referred to as the dogs of the collection suddenly seemed to be made out of unobtanium. 

The typical consumer experience tended to go a little like this. You want a Submariner? Forget it! Air-King- Sure buddy. But surely the two-tone sports model was available? Nope! Think again, all gone. Alright, I guess I’ll settle for a big Datejust. No way sir, maybe with a year wait time. After complete despair you would end up with a 34mm lady two-tone diamond dial Datejust.

How to get your dream Rolex in three easy steps

What do you actually have to do to buy the Rolex you want? Look no further than this simple three step process. It doesn’t guarantee you the watch you want but it will make you question whether you have a kink for masochism.

Step 1: Building a “Relationship”

Calling the weird connection between the Rolex AD and their simping customers a relationship is about as accurate as saying a hooker loves you. The dynamic is completely one sided and focused on getting your cash out of your wallet. 

The internet will have you believe that in order to build a relationship it is important you visit the store multiple times, introduce yourself and your watch collection, and strike up a chat with the sales reps.

You want to give them gifts, chocolate or champagne, and prove your worth to the jeweller. If this sounds weird to you then congratulations you still have a functioning brain.

The only thing that matters for building a relationship is your purchase history with the store and how well you know the owner. An AD knows that you will triple your money on a Daytona so they expect a piece of the cake.

You can bribe them but ADs have become increasingly scared of losing their license after many have been caught doing that. The cleaner solution, being about as clean as politicians rubbing shoulders with tobacco lobbyists, is to buy other stuff at the jewellery store. Ideally this is a product they can’t move, necklaces, rings, or Hublot’s.

Step 2: Getting on the “List”

Having established your relationship with the AD, the proverbial hookers kiss is when they put you on the list. This used to be a lot easier before, but with the current demand even this has become a challenge making the first step a prerequisite. You may be able to skip the first step, however, that may negatively impact your luck with the list.

Being on the list basically just means that the AD has taken down your details and interest for a model. What many fail to understand is that the list does not work numerically, which is also why Rolex has moved away from calling it that.

You may wait a week or a decade on any given watch. A good example is the famous ten year waiting list for a Daytona, which translates in real time into never.

There is a good chance that they will try to sell you something else while being on the list, for example a two-tone variant being offered when the steel was what piqued your interest.

It shocks me that I have to spell this out but DO NOT buy something you don’t actually want. You are only increasing the demand issue, you won’t be satisfied with the purchase, and flipping it can be harder than it might seem.

Step 3: Getting the “Call”

The final step, and the one you have been working towards your whole time. Getting the call. This has become a meme in its own right within the watch community. The call basically means that all the waiting has finally come to an end and the AD has blessed you with the opportunity to buy the watch you wanted to begin with.

With all the fanfare involved you would believe that you had actually earned or achieved something, rather than just being allowed to spend several thousand to buy a luxury watch. Don’t forget that the reason they called you is for lack of immediate better options. Remember that they aren’t gifting you anything even if they would like you to believe so.

Rolex responds to the madness

The situation has clearly gotten out of hand. No other product, except for maybe Porsche GT cars and Hermes Birkin bags, have become so hard to purchase. While there may be an element of stockholm syndrome at play here, where rich people get aroused by the idea that here is something they finally can’t just buy with money, this is not a normal market anymore.

Rolex, in a very un-Rolex like manner, felt the need to respond to the situation. In between loads of marketing fluff was the following statement:

“The scarcity of our products is not a strategy. Our current production cannot meet the existing demand. We continue to increase (… our production capabilities…) as much as possible. Finally, it should be noted that Rolex watches are available exclusively from official retailers, who independently manage the allocation of watches to customers.“

What this translates to is the following: Rolex cannot, or at least not before 2029 when a new factory is supposedly being finished, produce more watches than they already are. Beyond that Rolex is removing themselves from any responsibilities on who gets which watch and when. After all, it is the AD’s that independently manage the allocation. 

Attentive readers may have noticed that something is not quite right with the statement. Rolex watches aren’t available exclusively from official retailers. Having looked at how getting a Rolex from an AD works, let’s take a look at how getting watches from the grey dealers works.

How to get a Rolex the “non-official” way

I wouldn’t be surprised if the term “Grey Dealer” was created by the brands themselves in an attempt to make buying watches the “non official way” sound as shady as possible. In a corporate wet dream people would only ever buy the products from the company that makes them.

When you leave this fantasy world you are free to sell any product that you own. Because selling expensive timepieces can come with a variety of risks associated there are market participants specialised in trading these watches.

These watch shops do not get any official allocation from the brands themselves, but they also aren’t forced to take on stock that they know is hard to move. They are free to take in any product that they think they can sell for a profit and are free to decide their pricing. Offering anything and everything ranging from rare vintage pieces to brand new watches with their stickers still on them.

In the watch community there is a lot of demonising going on with grey dealers. The myth is perpetuated that it is their fault that Rolex prices shot through the roof. People like to conveniently forget that individuals have to sell to the dealer at a juicy markup for them to have stock. 

For every hyped watch that goes for multiples of its retail price there is a plethora of non-desirable brands that ADs are more than happy to unload at considerable discounts to these middlemen which they pass on to customers. You wouldn’t believe the calls and discounts we get on package deals and clearance stock. Grey Dealers are a necessity in a market where manufacturers have strict control on what their AD’s can and cannot do.

If you want to avoid the bells and whistles that go into building a “Relationship” with your local jeweller then going grey is your best bet. You will have to face reality in that you actually have to pay the market price, but in exchange for that you get exactly the watch you want, exactly when you want.

Some may not want to admit it but in most cases the premium you pay for that instant buzz is the same you would have had to spend in your “Rolex Journey” at an AD. The biggest difference is that here you are guaranteed to get the watch you actually want and you don’t have to lose your dignity.

There certainly are some shady figures lurking in the market. That is a possibility in any marketplace so proper care and research are essential when doing business. If it’s too good to be true then it probably isn’t. Having been many years in the business I can tell you with confidence that whichever route you go to buy your Rolex, there is no free meal.

At the end of the day Rolex always wins

At the end of the day Clymer was right. When Rolex gives you “the call” you will forgive them. You want to sit at the cool kids table. You crave that business card. You have to eat at Dorsia. You need that Daytona.

There are two ways to go about purchasing a Rolex. You can go through the hoops of “building a relationship”, being placed on the “waiting list”, and hoping you get “The call”. Or you go grey and buy the watch you want at the price you don’t want.

What the future holds is unknown but to think that Rolex is not learning from this whole experience and trying to capitalize on it is naive. The market is changing and brands are actively trying to control their supply more. 

The future of the Rolex market

In an announcement that is simply said seismic in nature Rolex has detailed its plans to join other brands in creating an official pre-owned program.

This means that Rolex ADs, starting with Bucherer for now, will be allowed to buy back stock, refinish it, and sell it to take part in the market madness.

When the news first hit there was a naive glimmer of hope in the watch community that the days of shady gray market dealers are finally over. Rolex would finally cut out the middleman!

Unfortunately, the fairy tale does not seem to be true. The first watches for sale have all been priced comfortably above the current market prices. These prices will be interesting to follow as they essentially allow us to understand how Rolex themselves values their own watches.

This may have impacts on price movements for the secondary market. For that increase in price you do get a guarantee as well as some piece of mind that your watch is authentic, but that could be had at any reputable watch shop. 

Die-hard collectors may find that piece of mind to only be surface level deep as there seems to be no indication on what has been replaced on these watches. As originality is a key aspect to value from a collectors perspective this could be a downside.

Realistically though most Rolex buyers care more about glitter than provenance. Also it is questionable whether they will compete for the same customer. This programme seems to be more aimed at those too scared to buy gray and too frustrated to keep waiting for a new model.

On the one side this will always ensure that there is stock available. The days of empty Rolex shops are numbered. It does make you wonder about whether this could be hurting the image of Rolex. How do you explain this to a walk-in customer? You can’t buy the watch new but we can sell a pre-owned version for double the list price. It feels paradoxical to even spell out.

The AD model is antiquated and Rolex knows this. They have made clear efforts to shake things up, the new pre-owned model being their most impactful change. We have also seen ADs owned directly by Rolex, one in Geneva for example, but those have not proven to operate on a noticeably different level in terms of their allocation.

While I cant see Rolex becoming a B2C company they have consistently surprised us in the last years and anything is on the table.

We have heard some strong rumors through the watch vine that Rolex is reworking allocation to their ADs. They used to be largely region based which before the internet made it much easier to get desirable watches abroad or currency based discounts. These are to be changed to instead work based on five criteria at each store.

  1. Shop size that is dedicated to Rolex
  2. Number of employees
  3. Employee watch knowledge
  4. Security
  5. Marketing Spend

So if you have been wondering why a lot of stores right now seem to be renovating this may answer your questions. Whether that means that the average watch guy will get his hands faster on a Rolex only time can tell.

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There might even be a possibility that they switch to selling watches no longer for walk-in customers but only on an appointment basis as Audemars Piguet has recently experimented with. Maybe soon you have to bring your CV, a copy of your passport, and your dental records to the boutique.

Maybe you wont need a physical Rolex though because you will be spending all your time in the clouds of Zuckerberg’s wet dream: the Metaverse.

There has been a recent patent registered that sounds like a crypto bro at a family gathering: NFTs, Crypto keys and virtual goods auctions.

Let’s hope that Rolex won’t have to struggle creating enough supply for their digital Daytona without having to sacrifice their continuous pursuit of excellence in quality.