For The Drum’s retail focus week, Stelios Pardalakis of agency Stellar Search looks into the bold-but-potent tactic of artificial scarcity in luxury goods.
The other day I overheard someone say that he couldn’t get hold of a Rolex watch anywhere. He’d browsed the Rolex website and fallen in love with the engineering: sleek, reliable, exclusive, well-made, a real statement piece. He spent some time eulogizing about a particular watch inspired by “pioneers of the golden age of aviation, embodying the spirit of freedom”.
Knowing what was coming, I couldn’t help but smile.
He’d tried buying it on the website but there was no Buy button, only a link to download a brochure. Frustrated, he made an in-person trip to the Rolex store. The price tag steep, of course, but he also had to join a waitlist system to buy this new item. Annoyed, he asked the store manager how long he had to wait. “Possibly years!”
Second-hand, 50% above the retail price
I told our Rolex seeker what I knew from a marketing perspective. Despite producing over 1.2m watches in 2023, Rolex (like many peers in the luxury pace, including Hermès) intentionally limits the availability of its timepieces in retail stores. That’s why in the resale market, Rolex watches can reach more than 50% above the retail price.
It’s a highly effective marketing strategy, as I could tell from my energetic conversation with this senior leader.
By creating scarcity, Rolex generates anticipation and excitement among watch enthusiasts, driving up demand and reinforcing the brand’s desirability. This helps prevent market saturation and devaluation. They’re not just throwaway pieces, they’re investments you have to wait for, that hold their value over time.
This exclusivity has created a trend of videos on YouTube, Instagram Reels and TikTok, with influencers sharing how to supposedly skip the queue and even making fun of signs in Rolex stores saying that the watches are Exhibition Only.
The psychology of desirability
The former CEO of Hermès, Patrick Thomas, said it best: “The luxury industry is built on a paradox: the more desirable the brand becomes, the more it sells but the more it sells, the less desirable it becomes.”
It’s a psychological strategy that appeals to customers like our Rolex seeker, drawn to buying ultra-luxury items as a status symbol: the less he could have it, the more he wanted it. When will does finally get it, he’ll feel like he’s ‘earned’ something, so he’ll no doubt feel huge loyalty to the brand.
Ironically (or rather, brilliantly), Rolex continues to invest millions into marketing. You can see Rolex ads in all the Grand Slams, the Gold Tournaments, Formula One, and high-end newspapers and magazines. This is probably because it controls 30% of the watch market, with guaranteed sales for years to come from its waiting list. That’s why it can continue producing those 1.2m watches every year.
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The brand dominates not just offline but also online marketing. I did some research using Share of Search, a proprietary tool we developed at Stellar which shows paid search competition in various industries. Sure enough, the tool flagged that Rolex leads against its main competitors, getting 45% of share of search versus its main competitors. That’s remarkable considering a comparatively low number of product sales per year.
This unusual marketing strategy won’t work for most companies but if you’re a more established brand with an element of luxury, craftsmanship and exclusivity to your products, scarcity is a powerful tool.
Did he manage to buy a Rolex?
Nope. I checked with him last week and he’s still waiting. I tried steering him towards a different brand of watch that was more available, but funnily enough he wasn’t interested. When he gets the call, I’ll let you know.
For more deep analysis of the heroes and villains of retail in 2024, head over to our focus week hub.
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