Pop Quiz : Economic Depression vs Rolex's Price

[Lexushowroom]

Hi All Gurus,

I wonder how will the Rolex's Price response to Economic Depression if the coming Economic Depression storm hit again ? Like what i hv experience during mid 2008 to mid 2009.

My advance apologies & really very sorry if i making some1 feeling pessimism rgds this nerve-wrecking discussion. Cuz i ridden thru' the Economic Depression sh*t storm to nail my beloved happily ever after precious DSSD & GMT-TTc with satisfy deals.

As world economist mentioning the 2nd tidal might be hitting................

Pls kindly advise & share your experience/knowledge.


Thks & Chills.

[skydweller_sg]

the economic cycle is getting shorter with greater spikes
not surprising if the next one hits the world - fast and furiously

as usual, rolex will survive these shocks
for every $ that someone loses, it goes into another's pocket
so there will always be $ chasing after rolex

[taxico]

I wonder how will the Rolex's Price response to Economic Depression if the coming Economic Depression storm hit again ? Like what i hv experience during mid 2008 to mid 2009.

As world economist mentioning the 2nd tidal might be hitting................

i'm surprised not more people chimed in.

i'm not an economist although i'm a little keen on world economics as i consider it my job to stay current with used rolex valuations (some what linked to pricing of new pieces).

rolex has never and imo will never reduce their official retail price... BUT they have been known to make marginal price adjustment DOWNWARDS (ie, price corrections) to reflect real pricing due to currency values... they may also hold off on price increases while currencies drop in value during bad times, which i think are about as good as it gets.

whether demand for rolex watches go up or down during such times is debatable as we don't have statistics, but i would think as a luxury product, they would be affected negatively. their ability to survive is due to their "healthy reserves" and rolex's operational structure.

[kohym]

i think luxury goods are relatively recession-proof. some will still benefit from the downturn, others may not.

[taxico]

i think luxury goods are relatively recession-proof. some will still benefit from the downturn, others may not.

i believe rolex will be hit. it is not a brand popular among the HNWs. the idea that luxury goods are recession-proof seems to be traditional thinking though... with plenty of data and op-eds to support it, like this conflicting (imo) post from Shukla:

Luxury consumption: will it really be affected by recession?

The talk of medium-term recession is in the air. The mainstream media everyday reports so many gloomy results on various fronts that reading a newspaper in the morning makes the breakfast an undesirable event at times. One of my friends has just told me she has actually stopped eating breakfast, for the reason being the prices of food products have gone drastically up and it’s getting harder to make ends meet.

Consumers consume products to satisfy two major needs, namely, (a) utilitarian needs: basic needs such as food, thirst, shelter etc. and (b) hedonistic needs: which includes largely wants such as entertainment and status which mainly focus on pleasure.

Luxury consumption adheres to the later part of the needs and if asked any consumer would state that in tough times the first they will cut is the luxury consumption. However, in my opinion, it doesn’t seem to be the case. Over the past few years of unprecedented economic growth, luxury consumption has caught the eyes of the masses. Historically, such pleasure seeking behaviour was observed in more ‘well to do’ class of society. However, in recent years, our appetite to consume luxury products has increased voraciously.

From my own experience, finding a Louis Vuitton, Gucci or Prada accessory while sitting on a train in London Underground is as common as a finding the Metro newspaper (available freely to every reader on London underground).

On the academic front, we have good many forecasting models which provide some assistance in predicting how utilitarian products will fair in such recessionary scenario. However, we only have anecdotal evidence with regards to luxury products.

Financial analysts using historical sales data predict that luxury goods companies such as Moet Hennessy Louis Vuitton (LVMH) or GUCCI are traditionally hit hard by economic downturns. There is evidence of the same too as LVMH saw it profits drop by at least 20% in the aftermath of 9/11. According to Financial Times, in 2008, Bulgari felt slower sales growth in March, Richemont at the end of last year, while Gucci sold less in the first quarter than last year.

Furthermore, analyst at Lehman Brothers, points out that 50-60 per cent of the luxury goods industry's consumers remain in classic, developed markets, which are hit hard by the recession.

While there seems evidence that luxury goods consumption will be hit hard, I tend to disagree with the analysts due to following:

1. Mass consumption behaviour: As I stated earlier luxury products have come much closer to becoming necessity in case of many affluent customers who still represent middle class in the socio-economic classification terms. This was hardly the case in earlier market scenarios.

2. Geographical scope: Half of the luxury consumers live in the Eastern emerging markets. The glitter of Dubai and Shanghai shows the dominant presence of Eastern consumers in consuming luxury products. While market such as India and most other parts of Asia underexposed to global luxury brands, the scope of growth is too hard to predict.

3. Tourism trends: There is an unprecedented growth in terms of tourist travelling from Asian markets to the Western markets. For examples, Indian tourists took the number one spot in terms of visitors to the UK displacing Japanese consumers who has reigned on that spot for a long period of time. Tourists have a huge tendency to purchase luxury goods as souvenirs and such behaviours have to be accommodated in the overall prediction however that will be too difficult to address without substantial research.

The above three points, when included in any economic analysis of luxury products can skew the overall results. They surely seem to have the propensity to create a mini ‘black swan’.

Source: Evan Carmichael

NYT from a year back (covering US spending patterns and recent years events of the US)

http://www.nytimes.com/2011/08/04/bu...ngly.html?_r=0

Additional reporting with extra readings at the end from the Atlantic Wire about Burberry from a year ago.

http://www.theatlanticwire.com/busin...hriving/43601/

Guardian just this month (covering the world in general) about Burberry this year

http://www.guardian.co.uk/business/2...luxury-fashion

And Professor Kapferer in The European business review talking about the past, present and future of luxury spending and commenting on other people's research.

http://www.europeanbusinessreview.com/?p=2408

[Dfive]

The rich get richer and the regular folks stay the same... the rich vs. poor gap widens every year... and end of day who cares if a multi-millionaire looses money..... they may loose more than regular people will actually own in a entire lifetime but to them is perhaps insignificant.

The rich will always afford Rolex and those watches way beyond ( Rolex to them are a cheap brand perhaps? ), for me I work hard to buy a new watch and have great satisfaction when I get a new piece.

[skydweller_sg]

economic depression or not, bottomline is: buy the watch because you love it and want to wear it
that alone should make it a well-worth investment

[kohym]

economic depression or not, bottomline is: buy the watch because you love it and want to wear it
that alone should make it a well-worth investment

plus one and well spoken for

[Lexushowroom]

Thks a lot for all the inputs & advices, esp bro taxico with very good reading material.
Cheers.