Price increase bad for AD's?

[FlyingMoose]

I keep seeing people saying that the AD's are lucky with the price increase because they're able to sell watches they bought at a lower price for more. However, I think the opposite is true. An AD will want to maintain a specific amount of inventory, it's actually a cost of doing business (money tied up that can't be used for other things). Any watch that's sold will have to be replaced.

So, if there's a big rush to buy right before the increase, and then they end up having to replace the inventory after it, they're actually making a smaller profit margin. Granted their margin is still large enough to make a profit, but they're probably also hit by a slowdown at the same time (as a bunch of people just bought watches).

There may be some exceptions, such as a watch that didn't sell for a while, and that won't be replaced in inventory, or an AD that's going out of business soon and thus is "cashing out" by not replacing inventory. But, I think on the whole, the AD's don't really like it that much (the individual salespeople may be a different story).

[wantonebad]

It's one line of many that most AD's carry, I see your point but I've been told by people here, other forums and AD's that the increase is over due. So if it's bad for the AD's they aren't letting on, at least not to me

[Arturo]

Well, they need to move the watches, and the price they paid is relative to the price they sell them for. So when there is a price increase they pay more too. So I think this is negligible. They like to move the freight and refill the slot....just like a car lot.

[Defiancekofb]

The increase is more likely warranted since the dollar is an extremely weak currency, Rolex wants to get more into the black.

[puffnmo]

I'm thinking a lot of collectors are buying now to beat the price hike. After prices go up, Rolex sales will slow to a crawl for a good 6 months or more.
There is a recession in the U.S. - sales of discretionary items are down.

The AD's will never admit it, but luxury watch sales are down along with everything else.

We will without question be in for a whole new line of bs from the AD's, and it will go like this: "Our sales are better than they have ever been! The people who buy Rolex and Panerai (or whatever brand you are looking at) are not affected by the economy. Just 2 days ago a young guy in his 20's came in and bought 2 Rolex's and an IWC!"

It's BS. Trust me. Larry.

[Tools]

Profit always lags investment..

So, any profit made on older watches is a windfall and unexpected gift to the AD.

Practically any other business will sell you "last years model" at a substantial discount over current prices.. not so at your friendly AD ..A "D" will have the same MSRP sticker as an "M"..

Try that at your BMW Dealer and nobody will touch that "older" model, even though it too is still brand new.

[krattzz]

I've heard that Rolex is also taking away a larger cut from the AD's with this increase.

[SPACE-DWELLER]

Given that an AD can give up to 20 % discount on some Rolex models and still earn on the deal, I believe the AD's can still earn money, even with a price increase, even with giving a discount. The earnings of the AD's rise corresponding to the price increase.

[f16570]

With the values that the AD has tied up in the watch, I think that he will have the watches on consignment.
He will probably get 180 days free stocking, and then he will start paying for the watches.
When the price increase takes effect all his "consigned" stock will be re-priced so the AD will not benifit.
This is where he might see an avenue to make a few quid and pass them on to a grey dealer before the increase and everyone is a winner. The AD gets a quite backhander and rid of some old stock & the grey dealer gets to advertise a considerable saving after the price increase. Everyone's a winner.

[cbrenthus]

Let's face it, being an AD is like owning a McDonalds. Expensive as hell to start, and you have to put up with alot of corporate BS, but you WILL profit, and handsomely at that.