Business: Price, Patience and the Rolex Effect

I am not an economist, but I do have a budding interest in how markets work, specifically how they reflect or supervene our ethics. In this post, I’d like to apply some Philosophy of Economics to better understand the luxury watch market, particularly the Rolex market, to take a nuanced look at how it’s all gone wrong.

Rolex History

First, some background on the Rolex brand. Rolex is a know quantity even outside the watch-lover crowd, which is actually quite rare in the watch world. Ask a regular punter about Patek Philippe and they might not recognise the name, but ask them about big watch brands they do know, or just luxury brands in general, and they’ll likely cite the king. The word ‘Rolex’ is almost synonymous with ‘a decent quality watch’ (I’ve heard people say ‘hey, nice Rolex’ about a watch from a different brand; even a man in London walking into an IWC boutique saying to his wife ‘let’s check out some Rolexes’). But although Rolex has always been synonymous with quality, it hasn’t always necessarily been associated with luxury. 

The shift in marketing language and brand image from dependability to luxury (in the watch industry at large) was necessitated by the quartz crisis. The introduction of highly accurate, tough and, most importantly, cheap quartz watches made selling an everyday-style watch with a hand-made mechanical movement very difficult. The great independent watchmaker, and perhaps the greatest modern horologist, Dr George Daniels, went as far as to call the producers of quartz watches, derogatorily, “damned electricians”. In sum, Rolexes were originally to be worn and loved by the masses, rather than the wealthy few; by commuters, tradespeople, explorers, scuba-divers and even soldiers. 

Rolex Economics

The everyday watch market - and by this I mean as opposed to the brands always associated with luxury and exclusivity like Patek and AP, changed from everyday goods to what’s called ‘Veblen goods’; goods the demand for which, contrary to the usual law of demand, increases when the price increases. I believe this is where the tool watch more-or-less died, cynical as that may be. In sum, the first tool watch brand was Rolex, and the quartz crisis shifted the way in which a Rolex watch was seen; from a decent dependable everyman’s watch, whose high price was simply a result of a commitment to quality, to a piece of jewelry whose price is dictated by Veblen economics. 

And Rolex’s synonymy with exclusivity has only grown in recent years. This is manifest in the ‘grey’ or ‘after’ market prices; namely, the astronomical price increase of Rolex watches selling after retail, since getting them at retail is so hard (there’s the exclusivity bit) . I admit there has been a slight ‘correction’ or ‘adjustment’ (or whatever you want to call it) to the grey market since the pandemic, but the overall trend, at least for the steel sports pieces, has seen crazy resale prices.

Now, I might be okay with this system, since you can actually get the watch you want at retail so long as you’re willing to sit on the waiting list. This is how I bought my Rolex Explorer: make it clear to the AD (that’s Authorised Dealer) that you’re not in the business of reselling and that you are willing to wait your turn (I waited around 6 months). But this was back in 2021. Nowadays, getting on the waiting list is only possible if you’re a big client with the AD, if you’ve got a big purchase history or agree to buy your watch as part of a larger purchase - a couple of gold watches or even jewelry alongside your steel tool watch. To me, buying extra crap in order to secure your Rolex is the same as just paying the aftermarket price. Therefore, today, the only way to get a Rolex, a good originally valued for its everyday dependability, is to pay extra to skip the queue, and this is a result of exclusivity-marketing. 

As a footnote, I’d like to list a few similar case-studies: Canada Goose and Supreme. Canada Goose, who used to be the brand of choice for actual arctic explorers and mountaineers, now mainly cater to fashion-flexors and roadmen. Supreme used to be an indie/cult brand built around an NYC skate shop in the 90s, but now use hype and exclusivity to drive-up aftermarket prices which effectively acts as scarcity-marketing.

Rolex Philosophy

Why does the un-obtainability and subsequent high aftermarket prices of certain Rolex models outrage us watch-lovers? I think it’s because Rolex originally made everyday tool watches which you didn’t necessarily have to be uber-rich to get your hands on. But now, the idea of being an everyday Joe or Jane mowing your lawn wearing a Submariner, rather than flaunting and stunting, is dying more and more. I think this has been amplified by the abolition of the ‘wait your turn’ ethic previously employed by AD’s in favor of the ‘pay more’ ethic used now. The Harvard academic Michael Sandel wrestles with the bridge of economics and ethics in his 2012 book, What Money Can’t Buy: The Moral Limits of Markets. His first chapter concerns the separation in economics and ethics when ‘paying to skip a queue’. His main thesis is that we sometimes value the fairness of waiting one’s turn in a way which goes beyond money. This idea, coupled with the fact that Rolex tool watches are to be worn and beat-up by rather than locked in a safe, means that the idea of rich people paying the AD to skip the waitlist only to sell the watch for the resale value leaves a bad taste in the mouths of those who understand what Rolex were really be about as a brand.