If Rolex and Patek don't have to buy back their watches to maintain desirability, whereas GP does, isn't that a huge competitive advantage for Rolex and Patek?
Not so long ago a tanking secondary market was a given for every brand. What changed? Certainly Rolex and Patek didn't do anything to their practise or their product between 2010 and 2020, so it wasn't supply side. Indeed, it must be demand which generated their favourable outcome - easy interest rates and the concentration of wealth lead to a sudden increase in the amount of people gravitating to the most well known brands, especially with Rolex catching the trend of office casualization, eating the demand from people who suddenly can afford a luxury watch but who no longer wanted luxury dress watches.
But can you generate demand like that by playing tricks with supply? Maybe across the short term you get something that looks similar pricing wise. But longer term? More money spent on buybacks is less money spent on R&D.
Would Rolex and Patek be the brands that caught the demand wave if they didn't have their reputation for quality and innovation across their whole range? If Rolex spent money on stock buybacks instead of developing their own balances or the chronergy escapement and fitting them to everything they sell, if Patek bought back all those cheap Nautiluses instead of making sure all their movements were free sprung, silicon, and Geneva sealed? Another one of the things that impresses me about both brands (as the owner of neither) is their remarkable commitment to thinness and wearability across their whole range.
What does this add up to? Brands which are easy to recommend to newcomers because of their consistency across the board. You don't have to make sure the newcomer doesn't mind Omega's case thicknesses, tell them to avoid Vacheron's non Geneva seal lines, or to avoid buying an ETA UN. It's much easier to recommend "any Rolex and any Patek - just pick the one that looks good to you". This makes these brands immediately accessible to any sudden surges in demand, which is what generated demand-led scarcity in the past decade by funneling all the beneficiaries of the federal reserve's largess to these two brands. After a certain point, the hype and scarcity generates itself.
Can GP sustain itself by buying back stock? Probably in the short term - but it is a somewhat cynical and predatory way of doing so. It might ruin them in the long run if they spend money on market manipulation over improving the material quality of their offerings. They are already behind - personally even though I like the look of the Laureato 38, for that amount of money I would want at least a balance bridge, free sprung balance, probably an overcoil, a better than cosc guarantee (or indeed any at all) - after all, I get all of those on the cheapest Rolex - and failing that, if GP wants to differentiate rather than complete with Rolex, better movement decoration that has at least chamfered jewel settings and screws.
It would be a shame for a brand like GP with a history like this - www.hodinkee.com
- to go the way of Boeing...