By Carol Ryan
A handful of brands have what all luxury bosses want: a wait list to tide them over in quiet times. But resale values suggest that even rare goods such as Hermès Birkin bags and Rolex watches aren't pulling in crowds like they used to.
A scarcity-based business model, where a luxury company deliberately produces less than the market demands, can be a gold mine.
Take carmakers Ferrari and Porsche. Milan-listed Ferrari has a market capitalization equivalent to $59.6 billion at current exchange rates, to Porsche's $45.4 billion. The Italian brand delivers fewer than 15,000 cars a year, compared with more than 300,000 for the German company. Starving the market of supply and catering to the superrich means Ferrari can charge millions of dollars for limited-edition cars, while Porsche has to sell in much larger quantities at lower prices.
In the luxury-watch industry, privately owned Swiss company Patek Philippe makes 72,000 watches a year, according to the latest estimate from Morgan Stanley. Cartier, owned by luxury company Richemont, produces almost 10 times more.
Scarcity in the primary market tends to drive up secondhand values. Patek Philippe's watches fetch an 11% premium to their original price on average when they are resold, while Cartier watches resell for a 31% discount, data from WatchCharts show. Because the wait time for a new Patek can stretch to years for in-demand models such as the Nautilus and Aquanaut, shoppers are willing to pay up to get their hands on a watch today.
But value retention, a proxy for underlying demand, is falling even for scarce brands. Resale premiums for Patek and Rolex watches have been slipping for three years. Rolex's average premium has roughly halved to about 7% since January 2024, and Patek's slid from 38% to 11% over the same period, WatchCharts data show.
A few things could be contributing. The market is returning to normal after speculators sent prices for watches and other luxury goods through the roof during the pandemic. There is also more supply on the secondhand market as people try to liquidate expensive watches for cash, which is pressuring values.
And large price increases in the primary market are hurting value retention. Patek's prices went up 22% last year in the U.S., partly because of tariffs. As values aren't keeping pace in the secondhand market, resale premiums are shrinking.
A Bernstein analysis of auction results for Hermès Birkin and Kelly handbags shows a similar trend. The bags' resale premium is at the lowest level since 2017. Shoppers now pay 50% above retail prices for secondhand Birkin and Kelly bags, which sounds impressive. But strip out the popular Mini Kelly handbag, which flatters the average premium, and larger versions of the Kelly and Birkin sell at par to retail prices once the auctioneers' commission is factored in.
"Current resale premiums seem to suggest that waiting lists have shortened, and that the total supply for Hermès' bags is now closer to demand than before," says Bernstein luxury analyst Luca Solca.
Falling resale values can be tricky for brands such as Hermès that rely on a practice known as bundling. Although the company never explicitly spells it out, shoppers typically must spend thousands of dollars on other Hermès goods such as clothes and furniture to qualify for a Birkin, according to bag collectors.
This causes demand to spill over into other categories: The roughly 150,000 Birkin and Kelly purses that Hermès makes every year drive approximately 25% of the company's overall sales, Bernstein estimates.
Sales of Hermès' nonhandbag categories are weakening. In the third quarter, the leather-goods division grew 13%, but sales of products such as watches and perfume declined from a year ago. Coupled with falling resale values, this suggests that competition to buy a Birkin has become less intense.
Arguably, the scarcity business model comes with its own economic hedge: Wait lists expand during economic booms and are depleted in leaner times, smoothing out sales.
But the large cushion of pent-up demand is part of what has made scarcity-based brands a great long-term investment. Ferrari and Hermès have both delivered total shareholder returns of close to 700% over the past decade. For comparison, Gucci owner Kering managed just 140%.
A resale premium also becomes a form of free advertising. The rise of online secondhand retailers such as Watchfinder.com and The RealReal means shoppers can see at the click of a button which brands do and don't hold their value. This reinforces hype around scarce brands and might help to keep their marketing budgets unusually low. Hermès' annual ad spend is equivalent to just 4% of total sales.
The strategy is difficult to pull off, which explains why so few rivals have successfully mimicked it. Scarcity works only when customers believe that tight supply is the result of genuine capacity constraints, says David Dubois, associate professor of marketing at the business school Insead. Each Birkin is hand-stitched by a single leather worker, which slows production. A company that outsources manufacturing or makes its goods by machine would have a harder time convincing clients that its goods are truly scarce.
Then there is the delicate task of allocating goods to wealthy clients. To get the most coveted Patek Philippe watches, customers have to write a letter to the company's chief executive.
According to Oliver Müller, founder of watch-industry adviser LuxeConsult, the letter should lay out which Patek watches the collector has already bought and whether any of them have subsequently been resold. "New customers don't get access to these pieces," says Müller.
Ferrari's criteria for selecting which clients get its most coveted cars include how many Ferraris they already own -- collectors who qualified to buy LaFerrari or an Icona had bought an average of 10 new Ferraris beforehand, according to Hagerty data -- as well as whether they participate in the company's racing program.
Falling premiums in the resale market are a good sign for ultrawealthy shoppers, who will have to jump through fewer hoops to get what they want. But it is bad news for brands whose wait lists are dwindling.
Write to Carol Ryan at carol.ryan@wsj.com
(END) Dow Jones Newswires
January 26, 2026 05:30 ET (10:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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