Serious watch buyers have probably noticed that a lot of the brand new luxury watches on the market are being sold for higher than the retail price, and are difficult to get. The most notable examples are Audemars Piguet, Patek Philippe and Rolex, which can be a real headache for some. Below are some reasons why this is the case, and what can be done about it.

What Determines Luxury Watches Demand?

Demand for luxury timepieces are heavily influenced by perception as well as emotion. Dealers of such merchandise have known for decades that availability and perception is far more important than the inherent value. This essentially means that even short term trends of high demand can result in more demand than the market can supply.

Unfortunately, Luxury consumers wind up prioritizing the fact that a watch is difficult to get a hold of as opposed to what the watch is actually worth. Exclusivity occurs naturally whenever a watch (or anything else) has limited production due to its complexity or the rarity of the materials needed for its manufacture. However, exclusivity can also be created artificially by simply manufacturing less. Although this reduces profits in the short term, it can increase profits over the long term since reducing supply keeps consumers engaged and having emotional demand for goods that are limited, which now carry additional value due to exclusivity.

How Major Watch Manufacturers Behave

Rolex will not send you luxury watches every time you order them. Instead, watches are randomly shipped to retailers and as a consequence they have no method for determining which will satisfy their clients and when. This forces retailers to be selective with regard to which clients they are most loyal to.

Basically, this creates an environment where the consumer is expected to spend a minimum amount with a retailer before they are allowed to buy a luxury timepiece at a retail price. The practice is encouraged because customers accept it, and the brands promote it. It works for many retailers because it gives them the opportunity to sell their less popular watches.

Most luxury shoppers don’t mind this behavior because they have the disposable income to support it. The current tactics being used by watch manufacturers is a result of the oversupply problem that occurred in the past. Twenty years ago, watch brands expanded aggressively to capture as much market share as possible. This required them to manufacture more luxury watches, but because their growth plans were unrealistic; more watches were produced than customers wanted. Watch makers then decided to go in the opposite direction, creating artificial scarcity which focuses on producing less, but making more.

Current and future profits in the watch industry will be made from taking greater value from each watch rather than selling more watches. Raising interest in their entry level timepiece is the best way to maintain demand.