My understanding was that Ferrari was in the business of selling a very specific badge, a very specific engine purr, a very specific shade of red and a certain relative level of dynamic performance - the absolute value of this last one changes with time. All this on 4 wheels.
Are you telling me that selling branding rights to Acer laptops and to cheap cologne is (an important) part of their core business?
I wouldn't call about 10% of their net revenue nothing, but also not a core part of their business. I think it goes more towards promoting the brand and image.
One should remember that Ferrari was effectively on the verge of bankruptcy for most of Enzo's tenure as leader. Eventually he was forced to sell to FIAT, and spent his last few years pretending that he was free to make the choices that FIAT's owner Agnelli wanted him to make. Ferrari eventually turned a corner once Enzo died.
Enzo Ferrari always wanted to make a better Alfa Romeo, and he did. Branding was a side effect that other people exploited later.
My neighbor is a huge car guy and owns everything but Ferraris because “they make you buy all the shitty Ferraris before they’ll let you buy the good ones” :p
My understanding is that that's pretty common in that part of the car market. I know you can't get the really high end McLarens unless you've bought one of the cheaper ones already.
Also common in certain parts of the watch and jewelry markets.
If you go to the Rolex subreddit, it's full of people getting waitlisted for watches they want to buy and excitedly posting when they finally "get the call" from the dealer — sometimes years later — that they are now allowed to buy the watch. It's a common "strategy" to buy lesser watches to ingratiate oneself with the precious Authorized Dealer™ demigod so that one day you might be able to buy the watch you actually want.
Go search /r/rolex for the phrase "got the call" and prepare to cringe.
>unless you've bought one of the cheaper ones already.
You don't even get a foot in the door with 1 from Ferrari.
I read a Reddit post from someone who had an acquaintance that speed-ran the process (clearly a 9 figure+ individual), and it was ludicrous.
I think it took him something like 3-5 years, while it normally takes double that. I think right out the gate he had to buy a few of them, then he could buy the nice ones, and the special editions, then he bought a used f40 or something like that which was 7 figures, and started participating in the racing experience they have, so there's a parallel track where you have to buy some track focused cars as well. Along the way he made sure to show up at all of the events, and it's important to, because to get on "the list" there is a scoring system behind the scene where everything that a customer does is assigned a point value, and only the customers with the highest level of points get the allocations. That includes things like maxing out options on every curve you buy, and paying up for the bespoke personalization services.
I think it was something like 3 years, 10+ cars, and 10 million dollars to get through the gauntlet.
It's even a thing in a company as "downmarket" as Porsche. Which is kind of joke, because during the pandemic, practically every 911 sold was a high-margin "hard to get" GT3RS.
>“We are not – we are not – a car company. We are a luxury company that is also doing cars.”
Replace Ferrari with Rolex and it's basically the same article. Veblen is such a good business model and place to work, if you can hack it that is.
Imagine you're a sales guy at Honda dealership, well you have to work hard to convince the middle aged dad why buy a CRV instead of a Toyota RAV4.
However, if you work at a Bugatti dealership, you don't need to convince the oil-rich Sheikh why he should buy the 2 million dollar car, he already wanted to buy it before he even stepped in. So not only is your job easier than the guy in the Honda dealership, it's also much better paid. The very definition of inequality. The same is true for other businesses. It's much easier and profitable selling Azure /Office 365 subscriptions to businesses, that some SW solution from a mom & pop shop.
> "However, if you work at a Bugatti dealership, you don't need to convince the oil-rich Sheikh why he should buy the 2 million dollar car, he already wanted to buy it before he even stepped in."
Respectfully disagreed. The sales people for veblen goods work extremely hard because competition is intense even within that space. The Bugatti salesman is competing with Ferrari, McLaren, Lamborghini, etc.
The margins per-sale are great, but because of your low volumes you experience a lot more volatility. Minor fluctuations in sales have disproportionate impact on your bottom line.
I once worked for a luxury real estate brokerage and had opportunity to talk to real estate brokers who dealt in ultra-high-end real estate (the kind of properties that people make YouTube videos about). One conversation stood out to me that's relevant here:
I asked him about a listing for a Manhattan penthouse that had been making the news (mid-8-figure buy-in), and his response was that it was an incredibly risky property to represent, because the list of potential buyers is perhaps a dozen people long. If none of them move on the deal then you're holding an absolutely immense albatross.
Ultra-high-end goods are generally susceptible to this. Your market is small enough that it doesn't take a lot to existentially threaten you, and there is no shortage of people who want to eat your lunch (just like with any other market).
>I once worked for a luxury real estate brokerage and had opportunity to talk to real estate brokers who dealt in ultra-high-end real estate (the kind of properties that people make YouTube videos about). One conversation stood out to me that's relevant here
Do you happen to have more sharable anecdotes / thoughts around this? I realize its off topic, however I think it still has value to warrant that.
I'd be interested in anything you can share about it. I'm curious how the 'day to day' folks see things vs how its sold and told to the rest of us via news magazines or books.
>Respectfully disagreed. The sales people for veblen goods work extremely hard because competition is intense even within that space. The Bugatti salesman is competing with Ferrari, McLaren, Lamborghini, etc.
Respectfully disagree. Which oil-rich Sheikh did you see who only has one supercar in their garage and not all of those you listed? These people aren't stock brokers or tech bros who need to work and save money for for years in order to be able to finally afford one dream car, but they own a multi generational empire that makes them enough money to afford all those cars.
>If none of them move on the deal then you're holding an absolutely immense albatross.
Comparing real estate to exotic cars is apples to buffalos. Most exotics are already sold before they leave the factory floor.
> he already wanted to buy it before he even stepped in. So not only is your job easier than the guy in the Honda dealership, it's also much better paid.
Luxury brands spend millions on marketing and brand awareness. In some sense, all the "sales work" have already been done before a person sets foot into a Bugatti dealership. Reputation takes decades to build but just a few missteps to destroy. Brand is way more fragile than people think. As soon as Bugatti stops making great cars, they'll fall into a place where they can't compete in the luxury market, nor the mass market Japanese car brands like Honda or Toyota.
In that sense, luxury fashion seems to be a easier market than watches or cars. You don't need an innovative engineering team. Just spend millions on marketing to uphold the common narrative you are a luxury brand. And that shirts with your logo on it costing 10x more than a similar product at say H&M, is not only justifiable, but sensible.
I would never own a rolex because where I live only ambulance chasers, businessmen who are definitely guilty of wage theft, morbidly obese elderly men in gold chains who reek of cigars, and street pimps wear them but from what I can gather they charge approximately $1,000 for a service and a mechanical watch needs servicing every 5-10 years depending on how complicated it is and how often it is worn.
So that's like a $100-200/yr. annual subscription to wear an already expensive watch.
No, you can go buy any Harley you want. You can't just buy any Ferrari or Rolex, you have to be invited, usually by buying lower level stuff they want to get rid of.
I’m surprised that the current AI boom isn’t called out in the comments or the article. From my POV technology investing is the poster child for the issue discussed. The internet bubble, online ads, crypto, and AI all fall short of the promise of RoI.
the problem with rarified air is that only Ferrari can race Ferraris. Given the low volume, high prices, and resultant engineering issues (cough cough overheating) that wouldn't exist in cars more on the mass market, requiring teams of engineers to support.
The average car enthusiast for track days will be seen running Mustangs, Corvette/Camaros, BMW M2/4s, Toyota GR 86s/Supras/Corollas, Honda S2000s, Nissan Z's, etc. But Ferrari is essentially irrelevant.
Sadly, I think Porsche is going that way; before, one could also run with the above gaggle with a decent 911 or Cayman. Now that the entry level is climbing well above the $100k mark new, and what was supposed to be their track car (GT3) is approaching Ferrari prices, they are becoming less and less relevant. And they might not even survive the China situation...
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Are you telling me that selling branding rights to Acer laptops and to cheap cologne is (an important) part of their core business?
To be fair, Rossa Corsa (i.e. "Ferrari red") has changed significantly over the years.
https://www.ferrari.com/en-EN/corporate/articles/2024-full-y...
Enzo Ferrari always wanted to make a better Alfa Romeo, and he did. Branding was a side effect that other people exploited later.
I suppose the fact that the #1 car guy in America won't buy Ferrari amplifies the signal that Ferrari isn't actually a car company
That they also won't let you modify your cars to your liking (see Deadmau5's fights with Ferrari) is another
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One of rich folks here I know automatically orders the latest Ferrari, gets it in some months or years, then sells it after driving one month.
Even for some profit. Because he is one of rare people who is "on the list."
Then orders the next one.
Ferraris are a bit like NFTs for boomer investment bankers.
If you go to the Rolex subreddit, it's full of people getting waitlisted for watches they want to buy and excitedly posting when they finally "get the call" from the dealer — sometimes years later — that they are now allowed to buy the watch. It's a common "strategy" to buy lesser watches to ingratiate oneself with the precious Authorized Dealer™ demigod so that one day you might be able to buy the watch you actually want.
Go search /r/rolex for the phrase "got the call" and prepare to cringe.
You don't even get a foot in the door with 1 from Ferrari.
I read a Reddit post from someone who had an acquaintance that speed-ran the process (clearly a 9 figure+ individual), and it was ludicrous.
I think it took him something like 3-5 years, while it normally takes double that. I think right out the gate he had to buy a few of them, then he could buy the nice ones, and the special editions, then he bought a used f40 or something like that which was 7 figures, and started participating in the racing experience they have, so there's a parallel track where you have to buy some track focused cars as well. Along the way he made sure to show up at all of the events, and it's important to, because to get on "the list" there is a scoring system behind the scene where everything that a customer does is assigned a point value, and only the customers with the highest level of points get the allocations. That includes things like maxing out options on every curve you buy, and paying up for the bespoke personalization services.
I think it was something like 3 years, 10+ cars, and 10 million dollars to get through the gauntlet.
It is basically like a kindle book - You aren't buying a car, you are buying a license.
Ferarri investigates you, and makes you sign a contract on how you use their car.
Replace Ferrari with Rolex and it's basically the same article. Veblen is such a good business model and place to work, if you can hack it that is.
Imagine you're a sales guy at Honda dealership, well you have to work hard to convince the middle aged dad why buy a CRV instead of a Toyota RAV4.
However, if you work at a Bugatti dealership, you don't need to convince the oil-rich Sheikh why he should buy the 2 million dollar car, he already wanted to buy it before he even stepped in. So not only is your job easier than the guy in the Honda dealership, it's also much better paid. The very definition of inequality. The same is true for other businesses. It's much easier and profitable selling Azure /Office 365 subscriptions to businesses, that some SW solution from a mom & pop shop.
Respectfully disagreed. The sales people for veblen goods work extremely hard because competition is intense even within that space. The Bugatti salesman is competing with Ferrari, McLaren, Lamborghini, etc.
The margins per-sale are great, but because of your low volumes you experience a lot more volatility. Minor fluctuations in sales have disproportionate impact on your bottom line.
I once worked for a luxury real estate brokerage and had opportunity to talk to real estate brokers who dealt in ultra-high-end real estate (the kind of properties that people make YouTube videos about). One conversation stood out to me that's relevant here:
I asked him about a listing for a Manhattan penthouse that had been making the news (mid-8-figure buy-in), and his response was that it was an incredibly risky property to represent, because the list of potential buyers is perhaps a dozen people long. If none of them move on the deal then you're holding an absolutely immense albatross.
Ultra-high-end goods are generally susceptible to this. Your market is small enough that it doesn't take a lot to existentially threaten you, and there is no shortage of people who want to eat your lunch (just like with any other market).
Do you happen to have more sharable anecdotes / thoughts around this? I realize its off topic, however I think it still has value to warrant that.
I'd be interested in anything you can share about it. I'm curious how the 'day to day' folks see things vs how its sold and told to the rest of us via news magazines or books.
Respectfully disagree. Which oil-rich Sheikh did you see who only has one supercar in their garage and not all of those you listed? These people aren't stock brokers or tech bros who need to work and save money for for years in order to be able to finally afford one dream car, but they own a multi generational empire that makes them enough money to afford all those cars.
>If none of them move on the deal then you're holding an absolutely immense albatross.
Comparing real estate to exotic cars is apples to buffalos. Most exotics are already sold before they leave the factory floor.
Neither is better, or more profitable over the long term than the other, but you really need to know which game you're playing.
Luxury brands spend millions on marketing and brand awareness. In some sense, all the "sales work" have already been done before a person sets foot into a Bugatti dealership. Reputation takes decades to build but just a few missteps to destroy. Brand is way more fragile than people think. As soon as Bugatti stops making great cars, they'll fall into a place where they can't compete in the luxury market, nor the mass market Japanese car brands like Honda or Toyota.
In that sense, luxury fashion seems to be a easier market than watches or cars. You don't need an innovative engineering team. Just spend millions on marketing to uphold the common narrative you are a luxury brand. And that shirts with your logo on it costing 10x more than a similar product at say H&M, is not only justifiable, but sensible.
When was the last time you saw an ad to buy a Bugatti Chiron?
Does Rolex have other revenue streams aside from overpriced watches?
So that's like a $100-200/yr. annual subscription to wear an already expensive watch.
Ferrari sells consumer cars to fund racing.
Ferrari is a very rare thing in modern motorsport. A team that races to fund racing.
https://www.sportspro.com/decision-makers/politics-and-gover...
The average car enthusiast for track days will be seen running Mustangs, Corvette/Camaros, BMW M2/4s, Toyota GR 86s/Supras/Corollas, Honda S2000s, Nissan Z's, etc. But Ferrari is essentially irrelevant.
Sadly, I think Porsche is going that way; before, one could also run with the above gaggle with a decent 911 or Cayman. Now that the entry level is climbing well above the $100k mark new, and what was supposed to be their track car (GT3) is approaching Ferrari prices, they are becoming less and less relevant. And they might not even survive the China situation...
Dead Comment