Extortion

[S.Explorer]

I see two markets, being AD and non-AD. I wouldn't say Rolex has therefore kept the price of their models below market price.

If they were to match the non-AD prices (assuming they are higher which isn't true for all models), the non-AD prices would fall then Rolex would have extremely overpriced watches sitting in the AD display cases.

[cleansocks]

Originally Posted by S.Explorer

I see two markets, being AD and non-AD. I wouldn't say Rolex has therefore kept the price of their models below market price.

If they were to match the non-AD prices (assuming they are higher which isn't true for all models), the non-AD prices would fall then Rolex would have extremely overpriced watches sitting in the AD display cases.

There are two markets you're right - but I don't think there needs to be.

Rolex price sets at the AD unecessarily. In your scenario Rolex is still telling the AD what to sell for: market value, which would likely reduce sales a lot. But if they just let the AD sell for whatever the AD wants to sell for, then the AD would adjust prices as they see fit to sell the watches. That could mean near where they currently are, but it could also mean market rate, or somewhere in between. If the AD would want to empty their shelves then they can just lower prices of their own accord.

The fact that Rolex sets a price at ADs is what creates these angry customers who can't get the special rate that Rolex forces ADs to sell for.

But it seems multiple brands do it so there must be some reasoning to doing this price setting. Probably it creates a sort of "treasure hunting" feeling appealing to human irrationality. It causes people to pay an exorbitant amount on jewelry or spend excessive valuable time cultivating relationships with ADs to get the watches for a few 1000 less, even when the investment to get that deal was substantially more.

This adds to the mystique of the brand in a way, making it feel like a treasure hunt, and also probably helps the AD a lot drive sales for their other products. So win win for them I suppose.

[Tricolore66]

It has always been a common brand, and that’s not to say they aren’t excellent watches, but literally the most common Swiss luxury brand, for decades.

Originally Posted by joli160

If they do that Rolex will destroy their own market. Rolex will be seen as a common brand and lose its allure for the opportunist buyer.