2004 COSC Cert. Numbers: Interesting Trends.

[JBHII]

I'll probobly cross post this to the Seamaster Forum as I have some interesting observations for both brands.

COSC just released their 2004 totals for the numbers of certificates issued.

In looking at the numbers, it would appear that COSC issued 10% less certs in 2004 than 2003. This is the 2nd year of such a trend, as 2003 was down over 2002 as well. So one might get the impression that the Swiss Watch Industry is in a sales slump. However, my position is that the evidence suggests instead that Rolex is trying to manipulate supply and demand of their watches.

Lets look at the numbers again, and we'll take a look at 2003 numbers too.

2003 2004
Rolex 756,408 628,556
Omega 207.668 226,796
Breitling 107,689 135,423

Total COSC Issued in 2003: 1,212,166
Total COSC Issued in 2004: 1,090,581

Rolex, Omega, and Breitling combined make up 90% of COSC output, so from a trending standpoint, it's easiest to look at their numbers.

Notice that while total COSC certs issued droped 10% in 2004 over 2003 (the drop from 2003 over 2002 was about 5%), Omega and Breitling actually increased their certs issued pretty substantially. That means both companies produced more watches in 2004 than 2003. But Rolex has been slashing their production by well over 10% a year for the 3rd year in a row! (Rolex had over 800,000 certs issued in 2002).

Based on these numbers, and the facts, I have to conclude that Rolex is reducing production to influence supply and demand and create artificial scarcity for their watches in the marketplace.

Agree, Disagree?

Kudos to Omega for increased production and sales - same for Breitling.

[BrianHud]

John,

In economics speak, there is a term for this. It is called "contrived scarcity" and it is a tool used in all markets while trying to create greater margins. The US Govt uses it in conjunction with farm subsidies to help bolster agricultural markets in the US.

Rolex also realizes that being at the higher end of the market gives them the best market position and ablility to generate higher margins. This should make the charities that they fund even happier...and me even sadder. The SD that I want just keeps getting farther and farther out of reach.

Brian

[Ben]

Greetings,

I think that the question to answer is whether this is due to "contrived scarcity" or is Rolex simply losing market share to Omega and Breitling - and perhaps other "luxury" watch brands?

I'd love to own a Rolex and spent some time looking at them today while waiting to have a battery replaced in a Seiko Diver that I bought 20 years ago and thought I'd lost years ago. (I found it in a box yesterday while looking for something else. I'm wearing it now!)

But jeez, Rolex are waayyy overpriced as far as I'm concerned. Nice watches, but is a Rolex SD or EXPII really any higher quality than Omega Seamasters or Breitling watches that are half the price? A 100% mark-up is a lot to pay for the caché of the Rolex name. Could this be a reason for their declline in COSC certs?

-Ben

[BrianHud]

Ben,

You might be on to something....I can't believe that I didn't think about this, but I read an article in the Bloomberg magazine about the Swatch group doing huge business...growing by leaps and bounds in fact...in China. Supposedly, they've seen their growth in that market multiply exponentially. Other swiss brands as well, but the article referred to the popularity of the Seamaster line in particular.

The Chinese are also being given credit for the price of gasoline skyrocketing in all markets. This is "true" scarcity...nothing contrived about it. I guess as long as their economy and wealth continue to grow, demand will be felt throughout the world.

Brian

[JBHII]

Ben - the numbers don't support the notion that Rolex is loosing market share (the increases we see in Breitling/Omega Certs is a fraction of Rolex's drop).

I suspect I know what's happening, but without true sales numbers, and enough historical data (like 10 yrs. worth) one can only speculate. At this point the data more strongly points to Rolex trying to create scarcity, but it's not a well supported threory.

[BrianHud]

John,

This is a very interesting discussion. I always enjoy number crunching an analyzing data, and when you pair it with watches, it's more interesting. As you say, "one can only speculate", which is how most analysis is done anyway. You pull together the most concrete information that you can, and when you're sure you've researched and modeled every possiblity, you make an educated guess.

Anyway, this has been and interesting discussion for me, as I work for a large investment management firm in support of the invesment practice. Always crunching #s and looking at trends.

Brian

[Ben]

admin said:

Ben - the numbers don't support the notion that Rolex is loosing market share (the increases we see in Breitling/Omega Certs is a fraction of Rolex's drop).

I suspect I know what's happening, but without true sales numbers, and enough historical data (like 10 yrs. worth) one can only speculate. At this point the data more strongly points to Rolex trying to create scarcity, but it's not a well supported threory.

OK. I'll admit that I'm far from being an economist, but if creating scarcity is their aim would they not also wish/need to, at least, maintain their current profit levels? Can I assume that a 127,852 drop in COSC certs also means that level reduction in sales (or have they perhaps decided to COSC certify less inventory)? I'd think that they'd have to raise their prices significantly to offset the production decrease and maintain profits while creating this illusion of scarcity, no? Isn't this about a 20% drop?

In any case, Rolex has some stones. Many might say that their watches are already 100% overpriced. So what's another 20%?

Fun stuff. Me...I think my next serious watch is going to be an Omega "Bond" Seamster. ;D This forum has gotten me really interested in adding one of those to my collection.

-Ben

[toddb]

wow! alot to think about.

[talktime]

Another wrench in the works is the fact that one of their popular models (the no-date Submariner) which had been traditionally NOT COSC certified, now is- meaning all of those they used to sell now have COSC movements in them, which SHOULD increase the need for COSC movements, don't you think?

So, either they are doing as John said, or they are selling non-COSC watches as COSC? Not likely certainly, but it could be done I suppose, and the recent deletion of the paper certificate as well? Just trying to be more like Omega I guess... (sorry couldn't resist that one!)

Something is always brewing there, and it's a shame they couldn't be a bit more 'above board' and more open to new ideas. I for one spent my money with Omega (again) rather than Rolex this time because they are so slow to react to the market. It seems within the next five years they MAY have a watch for me... The question is: will I have the money for them???