Why Rolex Watches are NOT Smart Investments
One thing I always hear when dealing with customers is, "Rolex holds its value though doesn't it?"
Well, the answer is not so obvious. You need some experience in the industry to understand what this means.
RESTRICTION OF SUPPLY - THE ROLEX WAY
In recent years, it is no secret that Rolex have been restricting supply of their watches. Why? Decreased supply increases the market price (the rationing function of the price mechanism). It is no miracle that prices have risen; the price has been coordinated from Rolex HQ in Switzerland. In the UK, Rolex has even reduced the amount of stores they have from around 300 to about 100 in 2019.
Eventually, Rolex will not be able to restrict supply much further and prices will reach their equilibrium level. My opinion is that Rolex are aiming to get the price of their steel models in-line with the higher-end competition like Audemars Piguet and Patek Phillipe.
You could even say this pricing strategy is the oldest trick in the book.
THE WAITING LIST GAME
As an example, a new steel Rolex Submariner Date will cost you about £6,550 (brand new). The trouble is, Rolex have cut supply to the point that no normal person can buy one! The waiting lists are in excess of 2 years (up to around 10). The aftermarket value of the watch is about £9-10,000 at time of writing. People are paying £3,000 over retail just to beat the queues. If you can buy a steel sports Rolex brand new from an Authorised Dealer (AD), go ahead and buy one! But you won't be able to find one...the only people who manage to find these watches are grey market dealers (the reason why is a story for another time).
On the other hand, if you buy a Rolex from the grey market (like on Chrono24, for example) at £9-10,000, how can it be considered an investment if you're paying over retail? If you were to trade the watch in, you'd probably trade it in for 70-80% of what you paid (about £7-8k). So, in this case, you WOULD LOSE money.
It makes logical sense doesn't it? If you could never lose money on a Rolex, then used market dealers would be out of business. How would a dealer be able to buy and sell a watch for a profit, if nobody traded them in? It works the same in the car industry and in any other industry that involves a dealer. The dealer needs to get their cut! This takes at least 20% of the profit potential for you.
Why not sell privately? Sure, you could always sell privately, but you wouldn't be able to charge dealer prices because, guess what, you're not a dealer! Most people won't trust you (they'll be on guard as they might think you're selling a fake), you don't offer a dealer's warranty, and you'll therefore have to sell it at a discount on Chrono24. Also, bear in mind that sites like Chrono24 will charge you around £300 in commission, and to insure your £10,000 Rolex in the post will probably cost you north of £100. This is why people just trade their watch in to a dealer in the first place. No kidding, it usually takes MONTHS to sell a Rolex yourself. They don't just fly off the shelves.
IS ROLEX A SMARTER INVESTMENT CHOICE THAN OTHER BRANDS?
The truth is Rolex does hold its value better compared with other brands, and in some rare cases you can make money if you hold onto one long enough (at least a few years, ideally around 10 years for any serious return). If you want an investment watch, you have to: 1) be able to buy it new (which 99% of people can't), and/or 2) you have to know which pieces are considered true investments (the model numbers, date of production, materials used etc).
In recent months, Rolex has actually been seeing a DECREASE in the market (they were previously overvalued). Don't take my word for it, please watch the video below.
THE DIFFERENCE BETWEEN A TRUE INVESTMENT AND A SMART WATCH PURCHASE
On the other hand, I wouldn't call most Rolex watches a smart investment choice (they can't all be good investment watches). If you had £10k a few years ago and wanted to buy shares in Amazon, you would have basically tripled your money right now (Amazon has gone from around $700 per share up to over $2000 dollars per share). Furthermore, the share price of Amazon is not dictated by one entity, it is dictated by the stock market, made up of billions of people.
Put simply, when Amazon goes up in price, it means the company is becoming more and more profitable and hence, this creates more demand for their shares. When a new Rolex watch goes up in price, it usually means Rolex is holding back more supply. This is
Also, please take into account that Amazon shares require no maintenance. A Rolex watch needs to be looked after, insured, locked in a safe and serviced regularly. This costs money!
However, I would say that most Rolex watches are smart watch purchases (but not real investments).
A SMARTER WAY TO ENJOY WATCHES
This is my personal advice. However, this is in no way the perfect solution for all types of people - this is merely my trained opinion.
1) Buy 1 or 2 nice watches (and make a smart choice with brand and model). Buy something that won't lose you a tonne of money, but make sure you can wear it day-to-day (like a steel model).
2) Make sure it is versatile enough to suit many different occasions. A good choice would be to buy one nice sports watch, and one nice dress watch.
3) Make sure you actually like the watch! If you don't, you'll probably just trade it in at reduced value.
4) Don't buy a watch that will just sit in a safe gathering dust, only to be worn once or twice a year because you're scared it will get stolen or scratched. Invest that money elsewhere; be it stocks and shares, paying off your mortgage, paying more money into your pension, there are so many wiser investment choices. There are much better ways you can allocate your money.
5) Just hire one if you're desperate! If you really do like watches and you just have an itch that needs to be scratched, or maybe you want to wear something different for a special occasion - just hire one for a few days!
To see our entire collection for hire:
Cufflinks & Accessories: https://www.watchvip.co.uk/luxury-cufflinks-for-hire
The points made in this article are merely opinions of WatchVIP and in no way intended to be strict rules for your spending choices. Please seek professional advice should you need assistance with your finances.