Quote:
Originally Posted by Ihooper88
What is the deal with there being huge waiting list for Rolex sports watches? Surely a company like Rolex could meet the demand if they wanted to?
Without knowledge of whether or not they
could meet demand:
Lots of companies choose for one reason or the other to keep supply artificially low, even without raising prices. There are many potential good reasons. For example:
Let's say a Rolex is a $5000 watch. There's a market for $5000 watches. It's different than the market for $10000 watches.
Currently they produce X watches, which they sell at retail for $5000. But we believe they could in any given year sell 2X at the same price.
Why would they not do that? Examples: 1. Brand dilution: they might have a stake in keeping the feel of exclusivity for long term sustainability instead of immediate cash benefit. 2. They may have a stake in the secondary market, so that they don't actually give up 100% of the profits for the people who are willing to pay >$5000 for a $5000 retail watch. These examples play well together - secondary market buzz feeds consumer demand/hype when watches actually do hit the retail market, and keeps people interested in the brand.
So why not just raise the price at retail? Say they could (and maybe we have data from the secondary market) sell X watches for $10000 at retail. Again, they might have a stake, either financial or branding, in the secondary market. Or it's possible that if the watch at retail were a $10000 watch it would put it in competition with a different set of watches and brands that they don't want to be in competition with. Transactions on the secondary market might target different consumers (at the same price point!), who may or may not think of the brand(s) differently.
Sets of concerns like these (aside from the primary assumption that they could easily scale production) likely dominate. Other concerns are probably more minor, like whether or not they could provide service for a significantly larger base of owners over the long term.
There's some reasonably interesting economics literature you can find on a parallel set of questions: why don't popular restaurants either raise prices or add seats? I'm sure there are other areas where economists have done the research as well, I just know that there are some good, accessible papers on restaurant demand and pricing.