The Certified Pre-Owned Rolex Business [Part 2 of 4] The aim is to optimize and stabilize the quality and prices of Rolex watches in the secondary market

The biggest topic in the watch industry right now is Rolex's entry into the pre-owned watch market through a new program called "Certified Pre-Owned Rolex" (hereinafter referred to as CPO Rolex), which it has launched with Bucherer, a prestigious, long-established European watch retailer.

In the first article last week, we explored and explained why Bucherer launched this service and who will benefit from this new service.
This time, I would like to share my personal views on why Rolex is launching its certified pre-owned service and its impact.

The long-term goal is to "maintain and improve brand value"

　So why did Rolex start the certified pre-owned business? There are likely a number of reasons and objectives for doing so. What is the main reason?

　The main reason, in my opinion, is that by joining the used Rolex market as the "original source," they can optimize and stabilize the quality and prices of Rolex watches in the used watch market over the long term, thereby protecting and enhancing the "brand value" of Rolex. To put it bluntly, they have judged that "if the overheated used watch market is left as it is, the value of the Rolex brand will be damaged (impaired)."

　However, Rolex elegantly explains why it launched its certified pre-owned business: Let me quote from the official press release issued on December 1, 2022:

(The following is an excerpt from the press release)
Rolex places great importance on the durability of its products and adheres to uncompromising quality standards to create timepieces that can be enjoyed for a long time. This is why we maintain and guarantee the performance of watches already on the market, and are committed to accompanying them into their second life. This approach is in line with our perpetual philosophy, which is an unrelenting pursuit of excellence and a long-term commitment for future generations.

　Watchmakers and readers of this magazine are surely aware of the technical excellence of Rolex watches and the integrity of its brand. Since its founding in 1905, Rolex has pursued practical functionality, such as precision and water resistance, and its reliability more diligently than anyone else. It is no surprise that Rolex holds the world's number one popularity and market share as a watch brand.

　And when it comes to new Rolex watches sold at list price in authorized dealerships, no one doubts the quality or brand value of the product. However, there are so many people around the world who recognize the value of the brand, i.e., people who want to buy a Rolex, that as a result, demand far exceeds supply, and this has become the norm. For popular models, there continues to be a waiting list of three to five years.

The abnormality in the pre-owned watch market is undermining Rolex's "brand value"

　So what about the "quality" and "brand value" of secondary Rolex products, that is, used Rolex watches circulating in the used watch market?

　Unfortunately, this is a dire situation that cannot be described as good, even as a compliment. Pre-owned Rolex prices have always been consistently higher than those of other watch brands. However, since the COVID-19 crisis began in 2020, the number of people interested in Rolex for speculative purposes has increased, and things have clearly become abnormal. Pre-owned Rolex prices have stabilized slightly in the fall of 2022, but the price hikes remain so high that all watch experts declare them to be "abnormal" and "a bubble."

　Symbolizing this abnormal situation is the extraordinary price hike of "new Rolex" watches in the secondary market, particularly the "Cosmograph Daytona." The list price of an Oystersteel Daytona is 1,724,000 yen (as of December 24th). However, second-hand watch dealers are willing to pay roughly double that amount. And the selling price at second-hand watch dealers is in the 4-5 million yen range. In other words, if a new watch is resold immediately after purchase, the reseller can make a profit equal to the purchase price. And the second-hand watch dealer can make an additional profit of several hundred thousand to several million yen.

"There are people who have the money to spare and want a Rolex even if it's several times the retail price. We're simply using our connections and ingenuity to meet that need and turning it into a business opportunity, so there's nothing wrong with it. It's not a crime, there are no victims, and we're just making a good profit, so anyone who criticizes us is just making an unfair accusation and is just jealousy," is the argument made by "scalpers" and others who engage in these shady transactions.

　But are there really no victims of these speculative purchases? Is there no problem with business ethics? Of course it is a problem, and there are in fact many invisible victims. These include people who understand the true value of Rolex, who want to buy it at list price and use it for the rest of their lives, and the staff of authorized retailers who have to repeatedly tell these people every day, "Even if you want to sell it, we don't have any products" or "We're not sure when it will arrive." Some of these people are even suffering from mental illness. As we've mentioned before, the head of a long-established watch retailer said, "It's painful that we can't sell it to someone who really wants it."

　And the biggest victim of this unfair level of speculation in the used Rolex business is Rolex itself, the watch brand itself.