Article on Rolex vs Omega (Bloomberg & Today Spore)

[chrislkb]

For your weekend reading pleasure


Omega vs Rolex
by BLOOMBERG 05:55 AM Mar 20, 2010BASEL (Switzerland) - When it came to choosing a new watch, Mr Ma Jun had no hesitation in selecting a US$6,800 ($9,493) Omega Constellation over a Rolex.

"Omega's designs are newer and trendier," said the 30-year-old businessman from Hangzhou, near Shanghai. He bought the watch a month ago after seeing advertisements featuring American swimmer Michael Phelps and Chinese actress Zhang Ziyi.

"Rolex is old and traditional," he said.

That perception, together with a boom in Asian sales, helped Swatch Group's Omega snatch market share from Rolex in the US$35 billion Swiss watch industry last year, analysts say. Rolex, whose cheapest model is almost 60 per cent more expensive than Omega's, has also been hit harder by the United States recession.

Swiss watch exports fell 22 per cent last year, the biggest drop since the Great Depression, as retailers cancelled orders amid the global crisis.

But both Swatch Group and Cie Financiere Richemont, the owner of Cartier, have signalled their shipments outperformed the market, leading Mr Rey Wium, an analyst at Nedbank, to speculate Rolex's shipments dropped more than the market did.

"If these two outperformed, clearly somebody else suffered much more, and we all know it was probably Rolex," said Mr Wium. "These things are notoriously difficult to gauge, but Rolex definitely lost out in terms of sales to retailers."

Both Rolex and Omega are showcasing their latest models at Baselworld, the world's biggest luxury watch trade fair, now taking place in the Swiss city.

Omega is one of 18 brands belonging to Swatch Group, which also produces US$50 plastic Swatches and double- tourbillion Breguet timepieces for more than US$700,000. Bank Vontobel analyst Rene Weber estimates Omega's 2008 sales at about 1.48 billion Swiss francs ($1.96 billion), compared with Rolex's 4.5 billion francs and Cartier's 1.63 billion francs.

Omega, whose entry-level timepieces cost about US$2,500, gets 35 per cent of sales from greater China, estimates Mr Jon Cox, an analyst at Kepler Capital Markets. Rolex, whose watches start from about US$4,100, gets about 5 per cent of sales from the region, he estimates.

China, including Hong Kong, is the world's largest market for Swiss watches. Last year, the Chinese market consumed a fifth of total Swiss watch production.

A quarter of all Internet searches for watch brands in China last year were for Omega, compared with Rolex's 18 per cent, according to IC Agency, which analysed 500 million search queries in a study of 10 countries.

Rolex, which is owned by the Hans Wilsdorf Foundation, got about a third of revenue from the US before the credit crunch, Kepler's Mr Cox said. The US had the biggest drop in Swiss watch shipments in 2009 among the 10 nations that imported the most, declining 38 per cent. Omega relies on the US for about 10 per cent of its sales, according to Mr Cox's estimates.

Omega's revenue from its own boutiques, which normally makes up about a fifth of the brand's overall sales, increased 10 per cent last year, according to company president Stephen Urquhart. The brand doesn't disclose total revenue. Mr Cox estimates that sales at 105-year-old Rolex fell about 25 per cent in 2009.

Omega gained lustre with younger consumers when English actor Daniel Craig wore its Planet Ocean in the 2006 James Bond movie Casino Royale. Mr Craig's predecessor as 007, Irish actor Pierce Brosnan, also appeared with an Omega in the 1995 film Goldeneye. Rolex was in earlier Bond movies, with Scottish actor Sean Connery wearing a Submariner model in 1962's Dr No.

"I won't wear Rolex, that's a brand for my dad," said Ms Dani Wen, a 23-year-old student from Guangzhou as she eyed a US$3,800 ladies' Omega Constellation in a Hong Kong watch shop.

Still, Rolex may maintain its market share in coming years as smaller brands go out of business, Vontobel's Mr Weber said. Retailers have been cutting the number of brands they stock in order to focus on better-selling marques, and they are more likely to drop minor brands than established names like Rolex, he said.

"The big battle is Omega versus Rolex," said Mr Andre Polony, the owner of the Piguet jewellery and watch store in Nyon, northeast of Geneva. "Rolex is losing market share against Omega and over time this might weaken Rolex's hegemony."

Source:
http://www.todayonline.com/Business/...Omega-vs-Rolex

[sonikbyte]

Hanzhou is a nice place. Pretty modern :P

[deschen]

We were having a discussion about this article over at the Omega Discussion Forum.

The thing was that the article was originally published via Bloomberg Businessweek on the 17th, just in time for Baselworld.

It's an interesting read but I don't think any of the content was actually a surprise to anyone.

I wonder if Micheal Bloomberg has stocks at Swatch

[CKLinLA]

Interesting. The opening of markets as big as China (and soon India) will offer opportunities (and risks) to many of the big players in consumers products including luxury watches.

The article is undermined somewhat by the fact that the accompanying photo on the site labeled Rolex actually shows the new Tudor releases at Baselworld.

[Strut99GT]

As an owner of both I don't ever see Omega passing Rolex in terms of prestige. As I've stated over and over again, Rolex's brand power lies in their consistency, and general tendency to avoid trends; they are very slow to change, which is powerful in the watch business.

[ddnyc77]

Originally Posted by Strut99GT

As an owner of both I don't ever see Omega passing Rolex in terms of prestige. As I've stated over and over again, Rolex's brand power lies in their consistency, and general tendency to avoid trends; they are very slow to change, which is powerful in the watch business.

wise statement. before i bought my first rollex i almost bought an omega, after doing some research rolex was the only consideration. i just bought my second yesterday.

[ayecarumba]

Thanks for posting the article Chris. It was an interesting read.

Variety and competition are two elements that make the industry part of this an interesting aside. Kudos to Omega/Swatch Group for nibbling market share and aggressive marketing which is clearly paying off.

However, as noted in the article:

"Bank Vontobel analyst Rene Weber estimates Omega's 2008 sales at about 1.48 billion Swiss francs ($1.96 billion), compared with Rolex's 4.5 billion francs and Cartier's 1.63 billion francs."

Even my poor math skills tell me that Omega has a long way to go! Rolex still has 3X Omega's sales.

I'm also a bit peeved with Omega as I read Buzz Aldrin's recent book and he details some rather shabby treatment at the hands of the Omega folks...But I digress!

Cheers!

--Paul

[16610v]

No doubt that young Chinese will go to Omega because Omega has more choice and much cheaper for young guys in China (who are rich but not that rich)

Rolex are mostly for ppls >30 yrs old in China,,

[Fearsome Puppy]

My two pennies worth, from my observations living in Shanghai.

In both Shanghai and Beijing, Omega are having a huge push through both their Boutiques as well as ADs. Add to this the amount of money their are throwing at advertising and their sponsoring of China celebrities/ambassadors and it's not a surprise that Omega may been seen as more high value than Rolex by locals. From my office location within 5 mins I can walk to 3 Omega Boutiques and another 5 or so ADs that stock Omega compared with 2 Rolex ADs.

[ayecarumba]

Originally Posted by Fearsome Puppy

My two pennies worth, from my observations living in Shanghai.

In both Shanghai and Beijing, Omega are having a huge push through both their Boutiques as well as ADs. Add to this the amount of money their are throwing at advertising and their sponsoring of China celebrities/ambassadors and it's not a surprise that Omega may been seen as more high value than Rolex by locals. From my office location within 5 mins I can walk to 3 Omega Boutiques and another 5 or so ADs that stock Omega compared with 2 Rolex ADs.

As I hit the submit button I saw your post Kevin...Thanks for that insider insight!

Smart for Omega to go where the $ is at the moment. But makes me wonder if Omega might be "overexposing" themselves and risking becoming a fad or trend in that important market. Even though Rolex is everywhere they manage to maintain an air of exclusivity. The last thing a luxury brand wants is to be seen as "everyday joe" (what name would that be in Mandarin?).

Cheers

--Paul

PS - Should I pull back my Chinese portofolio? Will they devalue the currency!?

[SeamasterGMT]

When I said "Rolex is starting to get an image of "watch for older people"." in another thread, the forum was in uproar that I had said such a thing.
I was arguing the point because the discussion was about larger watches.
I'm glad Rolex are producing the new, larger models because I feel it shows Rolex is going in the right direction was shake off this image.

[mike]

Aw, I'm old and traditional too.

[Mockingbird]

Omega was what Rolex is now in the 50's and 60's. It looks like they're trying to make a comeback (new AT that came recently and the PO) but they may have some trouble, especially after their no-show at Basel this year.

[hhh007]

<<< "Omega's designs are newer and trendier," said the 30-year-old businessman from Hangzhou >>>


Just keep saying that to the buyer if you ever want to sell your used Omega.






<<< Rolex, which is owned by the Hans Wilsdorf Foundation, got about a third of revenue from the US before the credit crunch, Kepler's Mr Cox said. The US had the biggest drop in Swiss watch shipments in 2009 among the 10 nations that imported the most, declining 38 per cent. >>>


Wow, that's a huge number! I wonder if it's actually accurate though?

[Fearsome Puppy]

Just following up on Paul's question. I'd say that luxury retail strategy for global brands is different from established markets - it was after all less than a couple of decades ago when consumers didn't have much choice in what toothpaste they could buy. This means that there is no real heritage behind brands (beside whatever they male up - and some are very creative) and everyone is fighting for market share in a place which I still find absolutely staggering based on the level of consumerism which is still in its infancy.

Here, it's the case that high-end brand's prestige is less driven by exclusivity (as defined by limited numbers) but more so to keep up with the Jones's (for the very top brands like PP it may be different) which is I would guess the strategy for both Omega and Rolex who both will want to sell as much as possible to establish market share.

Another key factor with being successful in China is teaming up with the right local companies which both Omega and Rolex will be reliant on. From what I've observed Omega have got the advantage by a long way through their wider distribution network, their boutique strategy (Most Rolex ADs don't give the feeling of being special either from their environment or mix with other brands) and the money they are pumping into advertising (combined with their Chinese Ambassador strategy).

As for the Chinese currency (RMB/Yuan), at some point I'm pretty sure it'll revalue (and appreciate against the USD) as exports have already started to pick up again - so I'm pretty happy keeping currency/assets in RMB at the moment.

K.
PS: Not sure what Everyday Joe is in Mandarin (my language skills still leave a lot to be desired).

[teo]

Omega produced too many model of watches. Omega = fashion, and fashion don't last. Rolex= submariner, classic, history, in house movement = A life time watch.

[icnbne]

Originally Posted by teo

Omega produced too many model of watches. Omega = fashion, and fashion don't last. Rolex= submariner, classic, history, in house movement = A life time watch.

what a stupid comment..
Omega has an equally great history as Rolex..

[GradyPhilpott]

I find it interesting that some consider Omega's styles are trendier, since the Aqua Terras are styled after the Rolex Oyster line.

It's also interesting that the Sub is so connected with the Bond image, even though they have never put the name or 007 on any watch.

I'm not saying that Omegas aren't fine watches, but when you compare a so-called "entry level" Omega to an "entry-level" Rolex, the comparison is ridiculous.

Yeah, the Omega Deville Prestige Automatic can be had for around $2500, but look at the specs. It can't hold a candle to any Oyster Perpetual. Quality might account for the price differential.

I think the Deville is a fine looking watch and I might even buy one someday, but I'm not kidding myself by believing that it's anywhere near the watch a Rolex is.

Trendy just doesn't cut it for me, which is why if I were to buy an Omega, it would be the Deville Prestige, since it is one of the only Omegas, along with the Speedmaster that even remotely resembles the Omegas of yore.

[vjb.knife]

I like some of the Omega models but at least in the USA the Swatch Group's Service center is crap. And that alone may keep me from getting any more of them.

Rolex Service has always been excellent for me.

[chrislkb]

I woke up and surprised to see a small number of reading worms here

Omegas have moved along towards "jewellery & fashion" watches to cater for the burgeoning Asian market which favour blings & loudness especially the China. I noticed the yuppies in Singapore favouring the more trendy pieces too.

I can't see the value of buying a fashion watch that costs hundreds when you can easily get that a classic vintage piece for double or triple the amount spent on or Empor** A or Calv** K.

Give me a vintage Omega Floprof at a good price, I will still buy it!

Omega or any other watch houses is doing what any profit making companies would be doing, to target the market segment demands and cater for that range of consumers. And at the same time, create new market segments by offering new designs & choices. Don't underestimate the China market, they are huge!

I speculate that Omegas will have resale value issues as a number of them are priced 50% off their list price for 1-3 yrs old watches (of course they have more AD discounts too) as compared to 20% average to popular Rolex models

Any yes, even in Singapore there are lots of Omega boutiques & ADs around compared to Rolex. Even a 24 hour supermart Mustafa here in Singapore (ie Walmart) stocks a good range of Omegas right outside the groceries section Now that gives a new term of 24h Omega shopping experiece! I wouldnt think it will do good to the brand image though

Now, time for my coffee

[terrenceterrence]

Originally Posted by chrislkb

Any yes, even in Singapore there are lots of Omega boutiques & ADs around compared to Rolex. Even a 24 hour supermart Mustafa here in Singapore (ie Walmart) stocks a good range of Omegas right outside the groceries section Now that gives a new term of 24h Omega shopping experiece! I wouldnt think it will do good to the brand image though

Now, time for my coffee

Mustafa stopped selling Omega a couple of years back when Omega decided to pull back all the licenses and sell them directly through their own boutique or only bigger more prestigious chains like THG/Cortina/Sincere.

that's why u see overnight..smaller AD's with less than desirable addresses/locations lost their distributorship

[chrislkb]

Originally Posted by terrenceterrence

Mustafa stopped selling Omega a couple of years back when Omega decided to pull back all the licenses and sell them directly through their own boutique or only bigger more prestigious chains like THG/Cortina/Sincere.

that's why u see overnight..smaller AD's with less than desirable addresses/locations lost their distributorship

Thanks Terence for heads up. That's I why stayed away from that place since Cheers!

[RollieNZ]

Maybe Rolex's strategy of having a limited number of exclusive A.D.s
as opposed to Omega's more widely available stockists is working against them?

[landeriv]

Hi Guys! I live in Beijing and I can tell you that there are Omega boutiques all over the place. I walked into their flagship store the other day and it was mind blowing... the amount of $$$ they spent with that place! They even had an enclosed section where you could see their watchmakers in action. There are also quite a few Rolex boutiques but much more understated.

It makes you wonder how this strategy will affect their brand image. I agree with Kevin that luxury good sales are be driven by the act of keeping up with the Jones' but we are yet to see how the Chinese market evolves.

[16610v]

Nowaday most mainland Chinese come to HK to buy Rolex because they made by Gold/Diamond. Very few Chinese will buy SS watches as they think it is low-cost and not the price is not reasonable to for SS watches.

That's why Omega strategy cover this gap, provide much cheaper watch that young guy can be able to buy for the SS watch,,

Only very few next generation in CHINA will buy SS Rolex, who are those open minded and rich enough. Most buying SS watch in Asia is Hong Kong ppls and Japanese

By the way, what is "everyday joe"? I am a Chinese but cant even guess what it is

[fujitsupalm]

Originally Posted by 16610v

Nowaday most mainland Chinese come to HK to buy Rolex because they made by Gold/Diamond. Very few Chinese will buy SS watches as they think it is low-cost and not the price is not reasonable to for SS watches.

That's why Omega strategy cover this gap, provide much cheaper watch that young guy can be able to buy for the SS watch,,

Only very few next generation in CHINA will buy SS Rolex, who are those open minded and rich enough. Most buying SS watch in Asia is Hong Kong ppls and Japanese

By the way, what is "everyday joe"? I am a Chinese but cant even guess what it is

Everyday Joe is like an average person who can be found anywhere.

IF, a big if...

IF a Rolex entry level watches are affordable by an Average Joe, then you would see it very often from secondary schoole boys to just almost anybody.

And I think Omega has somehow penetrated the higher end of such segment of the market pretty well though I must say, with a lower entry point.

No offence to either brand

[BlackpoolRolexCoaste]

The Omega Constellation automatics are truly beautiful, i.m.h.o.

[ral]

Value for money, for a well know Swiss brand, Omega is hard to beat. The iconic moonwatch, trendy Planet Ocean or the new Seamaster Aqua Terra in SS, all cost less than an Air King.

[Deyn Man]

just imagine when the chinese "graduate" from their omegas! that would be an instant boom for rolex!

[Poom]

No way Omega can surpass Rolex no matter how many shops they will open.