False Scarcity And Steel Sports Watches: A Collector’s View – Reprise

by GaryG

“Ferrari will always deliver one car less than the market demand” – Enzo Ferrari

One of the pleasures – if one can call it that – of collecting is that you can’t have everything you want! For almost everyone, there’s the little problem of resources and affordability; I’ve written previously about that constraint and how throughout my collecting journey I have needed to “sell to buy.”

In other instances, though, the frustration comes from the limited number of pieces available of a given reference or from a particular brand. In the vintage world, some coveted pieces were made in very small quantities and aren’t being made anymore, making them nearly impossible to acquire – especially if you’re looking for an example in especially good condition.

Unobtanium, at least at retail price (and now discontinued): the author’s Rolex GMT-Master II

But the “unobtanium” phenomenon isn’t limited to watches from the past: in the broad and deep landscape of contemporary watch production, there are a variety of references for which supply seems to lag demand by much more than Enzo Ferrari’s legendary “one less.” Nowhere is this more apparent than in the current market for select steel sport watches, and that imbalance has resulted in some interesting dynamics – not to mention loud choruses of complaints from prospective buyers.

A brief, incomplete, and somewhat personal history of managed scarcity in luxury goods

For a broad overview of the phenomenon of scarcity in luxury goods, I’d recommend Lucy Alexander’s article on the Robb Report site: From A Rolex To A Birkin, Why Some Luxury Items Are So Hard To Get.

I won’t repeat her arguments (or outline a few quibbles I have with her reasoning) here, but I will dwell for a moment on the case of that classic exemplar of the art, Enzo Ferrari.

Ferrari was first and foremost a racer, and famously disliked producing road cars; as a result, he had little desire to expand road car production beyond the point needed to fund his racing operation. At the same time, he was a shrewd businessperson with a keen sense of revenue and profit maximization and knew that the shortest path to raising the needed cash was to sell fewer cars at higher prices.

By remaining true to this principle through periods of higher and lower demand, Ferrari was also able to sustain the residual value of cars already made and support his brand’s new-car pricing over the longer term – a topic I’ll return to shortly when I talk about the current watch world.

Of course, no policy is so perfect that it operates optimally under all conditions or can’t be perverted in some way. I came out on the good side of the imperfections in 1993 when, after several years of booming Ferrari market prices following Enzo’s death, customers figured out that perhaps Ferrari would be making good cars for a while yet and demand softened. When I bought my beloved 512TR, I received not only a discount but a fully paid trip to Italy for the Pilota Ferrari driving school as incentives.

Hard to get: the author drifting his Ferrari 599 GTB at Laguna Seca

The flip (literally) side caught me out in the 2000s, though, when booming demand for Ferraris led to the emergence of a class of Ferrari buyers who bought cars at the right moment, flipped them at above retail, and returned to the dealer to do it again – and again.

Somehow these folks became classified by Ferrari dealers as preferred customers, and I found that I couldn’t even get on a waiting list for a new car – until I succumbed to the unsavory practice of tying, in which I agreed to buy a less-desirable used four-seat model at its asking price in exchange for a spot in the new-car queue.

In a classic display of GaryG market timing (remember, folks, I’m an enthusiast collector, not an investment advisor), in March of 2008, just before the bottom fell out of the economy, my name magically rocketed to the top of the waiting list. I passed on my slot and bought a year-old, lightly driven car at a substantial discount, selling the four-seat car at a considerable loss as well.

While it’s somewhat cathartic to tell my story, the main reason I’ve set it out here is to illustrate a migration of the role of managed scarcity in luxury goods: from a method to sustain overall pricing for a brand to a tactic to force the purchase of less desirable items in exchange for access to more coveted ones. Whether it’s a Birkin bag or a Rolex GMT, the ability to buy “hot” items seems more and more to depend on other purchases made from the brand or retailer.

Turning to the world of watches

While all , or at least many, of the facts are to some extent shrouded in the mists of history, it was most likely Patek Philippe that first mastered the use of what I’ll call the “Ferrari” model in the world of high-end horology. Access to the brand’s highest complications was reserved for the loyal customers of the brand and by application only, and top customers (with Eric Clapton and Michael Ovitz as prominent examples) were sometimes granted the privilege of requesting unique pieces.

Patek Philippe Ref. 3970 commissioned by Sir Eric Clapton (image courtesy Phillips)

I recall well the experience of sitting several years ago with a collector friend at the Patek Philippe Geneva Salon, where he had not previously done business, as he asked about the availability of a certain perpetual calendar chronograph.

The sales advisor asked my pal to write down on a note pad a list of the Patek Philippe references he owned; when my friend flipped the sheet over to continue on the other side, he was informed that it might well be possible to find a piece for him. Notably, there was no hint of, “If you want x now, it would be very helpful if you took y off our hands.” Rather just a validation of past buying behavior.

While it was easy for me to resent that I wouldn’t have had the same access, by the same token I understood that when a manufacturer has a finite capacity to create its finest pieces, it might well want to ensure that the majority of them go to the most loyal buyers.

Finally got one, though: the author’s Patek Philippe Ref. 5370P

More recently, though, it’s not so much the ultra-complicated platinum and gold pieces that are objects of desire and in short supply: it’s the more prosaic sport models, especially those in steel.

Once upon a time (actually, not that long ago), it was possible to go into an authorized Rolex dealer and buy a GMT-Master II “Batman” off the shelf at its suggested retail price. I did just that in late 2015, just before Rolex steel sports watches became the subjects of a buying mania.

Somewhat more recently, a good friend purchased, at suggested retail, a white-dialed “piano key” Patek Philippe Reference 5711A Nautilus that was in stock at the brand’s Geneva Salon. And although it’s been a while, you could also once buy an Audemars Piguet Royal Oak Reference 15202 in steel with blue dial without standing on your head or coughing up exorbitant amounts of cash.

In theory, at least, manufacturers should have few problems shifting production to these simpler items; so, what’s behind the current scarcity and what should manufacturers, buyers, and retailers do?

Triumph of groupthink

With all of the great watches and diverse brands out there, is there any reason why all of us “must have” examples of only a few of them? In reality, no – even with a general shift in lifestyles leading to increased demand for more casual and sporty watches, there are many fine pieces out there that aren’t labeled Nautilus, Royal Oak, or Daytona.

And yet, with the constant reinforcement of a seemingly endless stream of daily Instagram posts, blog articles, and dealer messages, owning one of a small number of possible watches has become a badge of honor for many.

He has one, I don’t: a friend’s Patek Philippe Ref. 5711A

Brands have contributed to the mentality of scarcity over the years by introducing steady streams of limited edition pieces; and while brands such as Omega, Panerai, and Hublot receive their fair share of criticism for breathlessly hyping the latest substantially-sized “limited” runs of modestly tweaked pre-existing models, those watches do sell, at least well enough for their makers to continue repeating the practice.

It’s become a FOMO world out there; online retailer Hodinkee took things to another level with limited online batch offerings of customized watches that sold out within minutes, and even small brands like Hajime Asaoka’s Kurono have benefited from this practice, most recently with an offering of 136 examples of its Chronograph 1 selling out within ten minutes of opening the order book.

Kurono Chronograph 1 designed by Hajime Asaoka (image courtesy Kurono Tokyo)

More of us, it seems, want the same things, and those nasty manufacturers aren’t giving them to us – right?

Looking at it from the producers’ point of view

Imagine you’re the head of product policy at one of the big makers I’ve mentioned above, and you are more than well aware that demand for your steel sports line is substantially in excess of what you’re making. Why not simply make more or balance supply and demand by raising prices on the popular pieces?

Just make more? Royal Oak Ref. 15202 from Audemars Piguet

For better or worse, it’s not that simple. As a brand chief, you have to balance several considerations:

  • Brand equity: ensuring that your offerings are seen as providing value for money and managing a steady value trajectory not just in response to today’s demands, but for the long term.
  • Customer equity: maximizing the value of your customer relationships and balancing what you do to ensure that you have a healthy mix of new-customer acquisition and existing customer retention.
  • Pricing structure: maintaining an appropriate relationship between the prices of different types of products in your overall line and signaling the inherent value of workmanship, technological complexity, and material costs in each part of your offering.
  • Product policy: maintaining a diverse and healthy product portfolio that doesn’t become overly dependent on a single sub-line (witness Royal Oak at Audemars Piguet) or type of watch.
  • Infrastructure costs: avoiding substantial investments in manufacturing equipment and capabilities that may fall idle when tastes shift again.

Flooding the market with today’s hot sports watches poses real risks from a longer-term perspective on most of these dimensions, and 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.

Perhaps the toughest challenge is with customer equity: if your brand’s most-desired watches are among your most affordable and yet are reserved for existing customers, what will replace them as “entry-level” pieces to draw new buyers to your brand?

Tough ticket: Odysseus in steel from A. Lange & Söhne

And in some cases there are actual physical constraints: I’m sure that A. Lange & Söhne, for instance, would love to be making more steel Odysseus pieces right now than it is, but with a production capacity on the order of 5,000 or pieces per year in total and a pandemic going on, the ability to deliver even the *hundreds of steel Odysseus examples targeted for year one must be in jeopardy.

What to do?

There are no perfect solutions to the current situation, and I’m certainly not going to go on the record encouraging watch brands to invest in a bunch of tooling and parts production for products that may or may not remain at recent levels of demand.

In fact, I’m a qualified “yes” on managed scarcity – the establishment of certain luxury items and items within a brand’s line as aspirational purchases that represent the apex of a relationship with the brand over time (and that help to generate the profits needed to sustain the brand, as well as provide a halo effect to brand equity).

I’m much less a fan, however, of the way that false scarcity is used, particularly in retail channels, to coerce the purchase of less desirable items in order to obtain access to more desirable ones. To me, there’s a big difference between rewarding loyal customers and forcing a quid pro quo on buyers, whether established or new.

A few thoughts for the various participants in this dance:

For manufacturers:

  • Strive for transparency. I think that Patek Philippe president Thierry Stern has done a pretty good job here, explaining that he does not plan to increase Nautilus production.
  • Discourage flipping. That’s tougher, but if flippers understand that they will likely lose access to desirable items, more pieces will be left for those who will keep and treasure them.
  • Discourage retail tying. I was troubled to hear that in at least one region, A. Lange & Söhne dealers are requiring the purchase of other Lange watches to get on the list for the Odysseus, and I sincerely hope that this practice, and similar practices by others, will be eliminated.
  • Focus on customer acquisition. Again, not easy when your “entry” items become hot; these days, even the “entry Nautilus” Aquanauts seem impossible to find. But keep trying – without appealing and affordable entry pieces, brand longevity is at risk.

For retailers:

  • Stop the obvious games. We know that in some cases you have those pieces in the back room, and in others you are holding onto your preciously small allocations to sell each as parts of multi-watch deals. Yes, you have to make a buck, but the cynicism you create is poison for the long term.

Going beyond the obvious suspects: the author’s Vacheron Constantin Overseas

For consumers, one of three things:

  • Buy something else! The world is full of wonderful watches, and when I wear my Vacheron Constantin Overseas or A. Lange & Söhne Odysseus, or for that matter my Ming 17.06 or Hajime Asaoka Tsunami, I bet I feel just as good as the folks who love their Royal Oaks and Aquanauts.
  • What goes up usually comes down, and we are already seeing a softening of the price bubble on some of the “must-have” steel sports pieces.
  • If you absolutely, positively can’t live without one of the popular sports models, pay the going price! Markets are made of willing buyers and sellers, and if you’re one of those on the buyer side you absolutely have my blessing. Only thing: once you buy, I don’t want to hear any bitching about what you had to pay.

I’m eager to hear your views in the comments section below – in the meantime, happy hunting and enjoyable wearing!

*This article was first published on May 23, 2020 at False Scarcity And Steel Sports Watches: A Collector’s View.

You may also enjoy:

Stainless Steel Patek Philippe Nautilus Market Madness: Thoughts On The Current Market Situation

Why I Bought It: A. Lange & Söhne Odysseus (A Photofest!)

All 7 Of The Latest Rolex Models Of 2019, Plus Some Cool Variations (Rolex Photofest!)

Great Rolex Experiment With The GMT-Master II Or How I Learned To Stop Worrying And Love The Crown

28 replies
  1. Ron Howard
    Ron Howard says:

    Rolex and their ADs are notorious for the exact thing your article is written about. And they are flagrant in their arrogance about it. Their AD in Los Angeles, Geary’s, makes no attempt at subtlety. They will direct you to the watch THEY want you to buy instead of the watch you want to buy, and if you object they literally walk away from you. That’s the time to walk out the door and never come back.

    • GaryG
      GaryG says:

      That’s a shame, Ron. There are some sales folks I really empathize with — for instance the lovely fellow our gang visits with at the Patek Salon in Geneva who suffers visibly when he has to tell you that a given watch is out of stock or simply not available to you — but it’s not too surprising that some folks in sales roles who get paid for selling you things you don’t want and who don’t have the ability to sell the items that are most in demand quickly get jaded. Certainly not defending the behavior, but it’s good that we have many other options!

      Best, Gary

  2. Tam O' Banter
    Tam O' Banter says:

    Rolex have poisoned the well for thousands of buyers n the last few years. The idea that they can’t make more steel watches without spending a fortune is nonsense when 80% of boutique stock is diamond-encrusted, gold versions of the very steel pieces everyone wants.
    They’re just not nice people.
    As for the retailers, they should all be put out of business.

  3. Gavin Whitaker
    Gavin Whitaker says:

    It’s possible that PP and AP don’t need to provide access to the public anymore as global demand will forever be greater than supply. On a different note we tend to think of the watch world through the lens of watch nerds – what is amazing is the demand for Rolex – people paying double / triple etc, not watch nerds but regular people flexing. Spending 50,000 and only looking at Rolex sport models.

    • GaryG
      GaryG says:

      Forever is a long time! I’m more inclined to see things as cyclical, but time will tell.

      Agree that the shift from a market driven by watch nerds like us to monied flex artists is proving to be disconcerting for many of us!

      Best, Gary

  4. Matt R
    Matt R says:

    I’m not at the top end of the watch hobby, but I’ve seen these vary forces at play at my price point. (< about $4k).

    I've started buying "something else". $650 for a Tsao cause I think purple. $2400 for an a anOrdain because the blue fumé dial called to me. A Ball "Time and Tides" because I love moon phases complications, a blue dial and tritium lume.

    I'm never going to own some of the watches that I really like because they cost more than all my cars, and that's OK.

    Life is short, I find happiness where I can, and don't shed a tear at all for those things I like but are beyond my means.

    And to those stores and companies that lock out the new buyer? Eff 'em! There are plenty of places that are happy to take my money when offered. And I'm just as happy as if I'd gotten the latest piece of unobtainium.

    • GaryG
      GaryG says:

      Good on you, Matt! Congrats on owning several very interesting pieces, and also for your great attitude on our hobby and buying pieces that speak to you.

      Best, Gary

      • Matt R
        Matt R says:

        I’ve also found a lot of pleasure in some older references. A friend’s Dad wore a Seiko 7A48-7000 for decades. She got it when her dad passed. It’s a quartz chronometer from the 89s for those not familiar with it. Does 1/19th of a second AND has a moon phases. I bought one in great shape for a couple hundred dollars. I was wearing it on a hike and it fogged, so it’s going off to the US Seiko service center. Just $154 for a full service.

        All in the whole deal costs just a but more than servicing one of my Omegas, and it’s thin too. When did watches get so darned thick?

        It was only after I bought it that I learned if the historical significance of the 7A*8 calibres.

        I don’t buy to invest or flip, but I’m pretty sure this one won’t go down in value….

  5. Tam O' Banter
    Tam O' Banter says:

    “Flexing” (or “showing off”) by paying twice the list price of an already deliberately overpriced item only tends to work with those of limited knowledge or intellect.
    I believe Rolex have decided to go for ‘The Kardashian Dollar’ from now on, having made a conscious decision to follow precisely the opposite goal of their founder.
    I find it curious and admirable that JLC has not gone down this route.

    • GaryG
      GaryG says:

      The flex artists are definitely in force in our hobby right now! For better (for watch lovers) or worse (for values of some watches already in our collections) I suspect that many of those folks will move on to trading cards, cars, wine, or whatever turns out to be hot next.

      Interesting point on JLC — I think that their whole identity as a “watchmakers’ watchmaker” perhaps makes them a less likely candidate for the showoff crowd. I will note that JLC do seem to be playing the LE game at considerably higher prices than in the past for pieces like the Kingsman ultra-thin and Novantieme Reverso, but I haven’t seen either of those pieces on a ten-watch arm-shot photo in front of a Lambo yet…

      Best, Gary

  6. Mehtab Bhogal
    Mehtab Bhogal says:

    I moved into primarily purchasing from independents who don’t insult customers by trying to play the false scarcity game. I love supporting artisans/small businesses and being able to get exactly what I want. Of course, it’s not always possible to get an independent watch delivered quickly, but at least you know the delay/wait time isn’t false. IE Marco Lang’s new brand is just him.

    • GaryG
      GaryG says:

      Another reason we love the indies! I agree that the delay times with many indies can be maddening, but the reasons (including difficulties they have in sourcing small volumes of components and more recently pandemic-imposed limitations on the ability to work) tend to be clearer and, as you say, not false.

      Best, Gary

  7. Tam O' Banter
    Tam O' Banter says:

    I assume the value for money is also much greater.
    Humans really are easy to manipulate.
    I remember the last time I was in an Hermes boutique. While Mrs Banter and I were commenting on how dreadfully overpriced everything was, there was a desperately unhappy young man in a very tight suit shelling out multiples of his monthly salary on a woman’s handbag. We both felt very sorry for him.

  8. Paul
    Paul says:

    No disrespect Gary but you’re at the top end of the watch world and would obviously be for the “managed scarcity.” I would be also. And it’s OK cause I don’t begrudge anyone who has made it and is able to acquire such watches in demand. And you’re right, there are many other watches out there. I owned quite a number from Independents who produce excellent watches and who appreciate their customer base.
    What ticks me off is that AD’s like Rolex won’t even give you the time of day to even have a conversation. I recently went to such an AD and asked the young lady at the counter about an upcoming watch. It ended quickly as she wasn’t aware of any upcoming watches or timeline for getting them. I decided to walk around and look at the various counters hoping at least 1 salesperson would ask me if I needed assistance. Silence for the entire 10 minutes. I thought… let me see if they ask me when I’m walking out…continued silence as I walked out the door…it’s not like it was busy. I was the only customer in store.
    It’s just this blatant disrespect that turns me off. I own a few Rolex watches and I know it wasn’t always this way. In 2003 I purchased a submariner from a knowledgeable and friendly salesperson.
    Like you noted, if one really wants a particular high demand item, then pay the market price but as you also noted, there are many alternatives. Many of us have gone in those directions.

    • GaryG
      GaryG says:

      Hi Paul —

      I’m actually not a fan of managed scarcity, but I feel that the underlying causes go beyond arrogance on the part of makers. And as far as getting watches on demand, I’m still not in that top tier, especially when it comes to Rolex 🙂

      The behavior of some retail staff is really unacceptable, though — especially when a brand like Rolex has pages and pages of retail standards, you’d think that “greet the guest” would be pretty high on the list…

  9. Bazz
    Bazz says:

    I would never ever buy a Rolex. Despite the bad price/quality ratio, this is in my eyes an unsympathetic brand due this very behaviour. I don’t buy from unsympathetic brands. When I was 7 years old, I wrote a letter in my best English to Rolls Royce, asking them for a brochure. They send me a beautiful and expensive publicity pack, normally reserved for interested clients. They also invited me to visit their main dealer to have a test-drive (as a passenger, obviously). Now they couldn’t predict whether or not I would ever be able to afford one, chances being I wouldn’t (which is true). But still they invested in me. If I ever would win the lottery, I would buy a Rolls. Because they’re a sympathetic brand. Rolex isn’t. I would never buy one, ever and moreover, I advise friends to look elsewhere.

    • Ray
      Ray says:

      Good for you ! So aware of the energy around you ! There is business and then there is a scam market ! Well you and I know which some brands are in ,at the moment! Lots watches in the world , pick one you can enjoy ,without thinking dbag ,every time you look at your own wrist !

  10. Russell Teo
    Russell Teo says:

    I sense loads of ppl are butt-hurt cos they can’t buy their steel sports watch they wanted.

    Get a life

  11. Tam O' Banter
    Tam O' Banter says:

    I have visited many watch boutiques. With the exception of one Chopard shop, I have only ever experienced disdain from the representatives of one brand: Rolex.
    Patek Philippe has a stunning boutique in a mansion just off The Bund in Shanghai. I actually thought it was a museum as I approached it. I never pretend to be wealthy. I was very honest and asked if they would mind me looking, even though their watches are out of my budget. They could not have been nicer. They offered me coffee, asked if I wanted to try on any watches. They were proud to work there and proud to show others their exceptional products. It was a wonderful experience.

    On several occasions I have been treated like a streetwalker by Rolex “salespeople”.
    There comes a point when you realise that the company has been taken over by psychopaths. And that is the point you move on.

    • GaryG
      GaryG says:

      I’ve had similar (excellent) experiences at Patek Boutiques, well before I bought any watches from them. Customer service at my local Rolex shop is actually very responsive, but they are a smaller family owned operation and have been in the business for quite a while so remember the days when watches actually had to be sold and customers served.

  12. Majed Al Essa
    Majed Al Essa says:

    This bubble is very dangerous to watch making and collectors alike, even businesses. Imagine that the demand for hot watches / brands cool off what will happen? Its 2008 for watch manufacturers, there will be a lot of inventory dumping, the brand will lose its status and people will lose their trust…
    What is happening now is very bad and it won’t last coz trends, tastes, interest change with time, and people started to have negative feelings / opinions towards certain brands

    • GaryG
      GaryG says:

      Thanks for commenting, Majed — there are certainly signs of a bubble in certain brands, and if nothing else it bears close watching, IMO.

      Best, Gary

  13. carlos
    carlos says:

    its simple. middlefinger this greedy industry for good.
    get a smartwatch, as health is more important.
    and invest in more honest enjoymenr and experience.
    you can see formidable art in galleries and museums. art cannot be owned, atbest hold for a moment.
    toolwatches, get a seiko sports…


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