[jamesralph8555]

This model is not unique to Hermes. Watch and car brands work the same way. Early on in these markets, you can get one of the desirable items without spending too much on undesirable items.

Some examples:

Rolex - stainless steel models are desirable and appreciate, gold models go for below msrp

Porche - Bucking the trend a bit, Porche gives you the option of paying an additional dealer markup rather than making you buy a Macan to get a GT3 RS.

Over time, this arbitrage goes to equilibrium and resellers can’t make money. It is relatively easy to get into this market so naturally it gets flooded. Profit goes to 0. Resellers also carry a risk that the item loses market value while they hold it. The only real winner here is the brand.

[blantonl]

On the watch side, there is some nuance here.

Rolex stainless steel models are highly desirable, but they really don't appreciate in value. They simply sell on the secondary market for a >50% markup because they are still less expensive than a lot of the precious metal versions. So a rolex authorized dealer will typically have a huge ratio of buyers to watches available for steel watches. Precious metal rolexes - it's a big "depends." Any of the platinum watches are highly desirable as well as the meteorite dial watches - they sell well above msrp on the secondary market. Note that rolex authorized dealers are not allowed to mark up new watches at all. The price is the price set by the brand. Most authorized distributors are also jewelers so they allocate steel sport watches to people who buy a lot of jewelry.

Pateks are a different beast. The sport watches are highly desirable, and generally not available to the average buyer under any circumstances unless they have > $100K Patek spend, which means you're going to have to buy what is typically more of an art piece type watch (complication, calatrava, etc) before you'll get a shot at a $20K Patek sport watch. This means you can very easily get a beautiful brand new Patek dress watch for 20% off on the secondary market, since buyers will simply purchase that watch to get the spend history, immediately dump it on the secondary market at a big discount, just so they can get the opportunity to purchase a $20K watch and sell it for a >100% markup. There's no shame for some of these people.

[rayiner]

> There's no shame for some of these people.

It sounds like the market just fixing a stupid sales model.

[OnACoffeeBreak]

When I think of "sport" I think of "fitness" watches from Garmin and Apple Watch. Patek sport watch is definitely not that. What is meant by "sport" in case of the Patek sport watch?

[NoLinkToMe]

Really interesting, answered some of the questions I had on watch market economics and seller and buyer incentives. Is there a place where I can learn more (e.g. a youtube channel that explains how all of this works, the roles and incentives for the various parties in the watch market)?

Thanks

[roncesvalles]

Ah, the games people play when they have too much money.

[mamonster]

In the watch market, a lot of the resellers who got in during COVID are still underwater.

Know a guy from the alternatives space who bought an 8 figure portfolio of Richard Milles, Pateks and some smaller brands and is still sitting on it. Bidders are coming at 15-20% below his ask at least.

[pc86]

At some point you have to think you'd be better off selling at a loss and reallocating the funds, especially if there are tax implications of being able to show a loss in business inventory (which you may not be able to if it's just some guy buying a box of watches and not an actual business venture).

[htrp]

Not a loss til you sell??

[tempsy]

I think you're missing a key point here and that is you have no chance of buying a Hermes bag unless you have a relationship with a specific sales associate and buy a lot of other stuff there. Very few other categories of goods can get away with something like this.

In some ways Rolex is like this but Rolex is relatively high production volume and there are many situations where you can get lucky and buy one relatively easily, especially now that the hype has died down a bit from 2021-2022.