Rolex Business Model Change?

[msdaytona]

Hi everyone

Last year a SA at an AD said something that seemed odd at the time but as time passes I’m starting to believe it. He said that “Rolex has changed their business model. They want to focus on quality and being exclusive.”

Every AD nowadays says the same thing like a parrot “demand exceeds supply blah blah blah” when customers are looking to buy. I’m not believing that narrative. I really think that Rolex has changed their business model. They went from being customer-driven sales to AD-driven sales. What I mean by this is...pre-2021 customers would decide which model they will buy. They pick a model and buy it. Now, AD decides who gets to buy a Rolex hence AD-driven sale. Virtually every time a member posts an incoming the word that gets used a lot is “AD offered me x model”. By AD deciding who gets what they are effectively deciding on a certain of type customer that fits Rolex’s description of quality so maybe this is what the SA meant by quality...quality of customers. After all, ADs do not share how they allocate Rolexes. They have lists BS but we all know that they don’t follow it.

What do you guys think?

[KatGirl]

I think each AD uses their own criteria to decide, to whom they will allocate specific watches. Potential buyers know which models they want, and which exact color, bracelet, bezel, etc.I wouldn’t spend thousands of dollars, on a watch that wasn’t exactly what I wanted, just because it was the one offered to me. I chose the exact configuration of my OP. Had they called to offer a different, less desirable color, I would have said “No, thank you.” Your idea is not plausible. I do think ADs are getting more picky about who gets allocations, in an attempt to weed out potential flippers. I doubt Rolex really cares who wears their watches, as long as they all get sold.

Kat


Sent from my iPad using Tapatalk

[996marty]

I think as a business it’s been run in an exclusive way for quite a while

[Rolexken]

I think we have had a 3 year bubble where an AD could have sold any Rolex 10 times over so he could choose who to sell to.

We are now at the beginning of the end of that scenario and most ADs have some more difficult to sell PM and TT models in the window looking for buyers. I posted earlier that one of my local ADs had a SS DJ41 for sale in the display - the first I’ve seen for years.

I feel that we will soon see a lot of OPs, DJs etc in the window then other models over the next couple of years.

[JC316]

Originally Posted by Rolexken

I think we have had a 3 year bubble where an AD could have sold any Rolex 10 times over so he could choose who to sell to.

We are now at the beginning of the end of that scenario and most ADs have some more difficult to sell PM and TT models in the window looking for buyers. I posted earlier that one of my local ADs had a SS DJ41 for sale in the display - the first I’ve seen for years.

I feel that we will soon see a lot of OPs, DJs etc in the window then other models over the next couple of years.

[Krash]

Aren’t they building factories to ramp up production? If they’re going to produce more watches than ever before, then that sort of contradicts what your AD is saying re: quality vs quantity.

Either way, there will still likely be excessive demand relative to supply. So saying Rolex watches will be difficult to get isn’t exactly going out on the limb. It’s like saying the Sun will rise in the morning. It’s hard to get that wrong.

Also, ADs already sort of decide who gets their halo watches anyway, right? It’s been like that for about 5 to 6 years now.


Sent from my iPhone using Tapatalk

[Kevin of Larchmont]

Rolex doesn’t build watches only to decide not to sell them unless the perfect candidate comes along. And recent demand has exceeded supply in numerous other product categories as well, for instance vehicles, why is it so hard to believe about watches? OP, I think you are straining to manufacture an alternate explanation for the simple economic reality of supply vs. demand.

[amh]

Only the AD business model has changed. Rolex sells everything they produce each year, no need to change.

Before:
- 10% discount on any Rolex
- If you started to walk they'd offer to eat the sales tax!
- OPs and 'Hulks' were especially unpopular and were quietly bundled to Greys

Now:
- Fictional 'lists' for registration of interest
- Arbitrary threshold of non-Rolex purchases to advance within the 'list' (50k is solid but still not guaranteed)

This will work while some models remain in high demand. Once you can buy those SS pieces from Greys at [MSRP+Tax] there will be no reason to visit an AD. For many models (eg. Datejust) we're already there. For something like a Sub we'll probably need another year.

[Snowballs]

Originally Posted by amh

Only the AD business model has changed. Rolex sells everything they produce each year, no need to change.

Before:
- 10% discount on any Rolex
- If you started to walk they'd offer to eat the sales tax!
- OPs and 'Hulks' were especially unpopular and were quietly bundled to Greys

Now:
- Fictional 'lists' for registration of interest
- Arbitrary threshold of non-Rolex purchases to advance within the 'list' (50k is solid but still not guaranteed)

This will work while some models remain in high demand. Once you can buy those SS pieces from Greys at [MSRP+Tax] there will be no reason to visit an AD. For many models (eg. Datejust) we're already there. For something like a Sub we'll probably need another year.

Great summation

[brandrea]

It will be interesting to see how this thread and many others like it, age with time

[Nads786]

Originally Posted by Krash

Aren’t they building factories to ramp up production? If they’re going to produce more watches than ever before, then that sort of contradicts what your AD is saying re: quality vs quantity.

Either way, there will still likely be excessive demand relative to supply. So saying Rolex watches will be difficult to get isn’t exactly going out on the limb. It’s like saying the Sun will rise in the morning. It’s hard to get that wrong.

Also, ADs already sort of decide who gets their halo watches anyway, right? It’s been like that for about 5 to 6 years now.


Sent from my iPhone using Tapatalk

ADs really don't have any idea what Rolex's business model is. I've interacted with many across the US and most are not the sharpest tools.

[Nads786]

Originally Posted by amh

Only the AD business model has changed. Rolex sells everything they produce each year, no need to change.

Before:
- 10% discount on any Rolex
- If you started to walk they'd offer to eat the sales tax!
- OPs and 'Hulks' were especially unpopular and were quietly bundled to Greys

Now:
- Fictional 'lists' for registration of interest
- Arbitrary threshold of non-Rolex purchases to advance within the 'list' (50k is solid but still not guaranteed)

This will work while some models remain in high demand. Once you can buy those SS pieces from Greys at [MSRP+Tax] there will be no reason to visit an AD. For many models (eg. Datejust) we're already there. For something like a Sub we'll probably need another year.

This seems accurate. Demand will dissipate and then the rules will change. At the company I work at, we employed monopolistic pricing when we were the only game in town, once a new entrant came in - we had no choice but to cut prices and get competitive.

[Rolexken]

Originally Posted by amh

only the ad business model has changed. rolex sells everything they produce each year, no need to change.

before:
- 10% discount on any rolex
- if you started to walk they'd offer to eat the sales tax!
- ops and 'hulks' were especially unpopular and were quietly bundled to greys

now:
- fictional 'lists' for registration of interest
- arbitrary threshold of non-rolex purchases to advance within the 'list' (50k is solid but still not guaranteed)

this will work while some models remain in high demand. Once you can buy those ss pieces from greys at [msrp+tax] there will be no reason to visit an ad. For many models (eg. Datejust) we're already there. For something like a sub we'll probably need another year.

👍

[jimcameron]

[QUOTE=msdaytona;12854029]Hi everyone

“Rolex has changed their business model. They want to focus on quality and being exclusive.”

I'd say that they want to focus on generating more profit.......like they always have.

[CarlOver]

When demand is high the AD needs to decide who gets a certain watch. They have gotten to know potential customers and know their occupation, where they live, possible actual home address. Zillow can be used to check on home value. They can check LinkedIn and other social media if they choose. Some do this, others may not. But the AD has been deciding who gets a certain watch for years.

[KatGirl]

Originally Posted by CarlOver

When demand is high the AD needs to decide who gets a certain watch. They have gotten to know potential customers and know their occupation, where they live, possible actual home address. Zillow can be used to check on home value. They can check LinkedIn and other social media if they choose. Some do this, others may not. But the AD has been deciding who gets a certain watch for years.

I think a more accurate statement is that the AD is making sure the person they call, from “the list” has the means to pay for the watch, at a moment’s notice. Think about it! You’ve waited 15 months for a brand new Rolex. Your phone rings. It’s your AD calling to say, I have the watch you wanted. Can you come in this afternoon to pick it up? Not all potential Rolex owners are wealthy. I’m not. I was prepared for that call, and had my ducks in a row. But I can imagine that some folks who finall get the call, think, “Oh, crap! I can’t come up with 10 grand, by this afternoon!” That’s the only criteria any AD should use, when deciding who gets “the call”.

Kat


Sent from my iPad using Tapatalk

[fsprow]

Whatever their business plan is, it seems to be working extremely well. They sell every watch they make, they continue to build an already high reputation through endorsements, sponsorship of sports events, etc. I’m sure as the market changes, they will adjust their business plan accordingly.

[bp1000]

Rolex is a watchmaker not a retailer

The ADs are given guidance to follow and it is up to them to manage their customers.

ADs have milked the last 4 years but times might be changing, demand is falling, production is streamlining, robotics are automating more of the production and watches are becoming more modular, in other words less complex to assemble allowing them to sell more and rely less on skilled workers for that growth.

Manu people assume they are trying to move more into precious metal, well the market is cooling now and PM never sold well previously so if true, this will be an interesting few years until 2030. Time will tell how true the statement is about production and we will only find out with the feel of the next gen pieces.

I don’t think Rolex is repositioning at all. If anything their quest to catch up with demand is falling right at the time the market is cooling.

[superpop]

Rolex is nothing more than a fashion bauble manufacturer at this point. They make nice watches but the hype train is slowing way down. I sold a blue SS SKy D last year for 35K to a dealer, would be lucky to get 20k for it today. I said this a few years ago and stand buy it. Never buy a fashion item, or even a car as an investment. Your odds are much better in the stock market.

[dlddrrr]

Your “customer-driven” vs “AD-driven” logic doesn’t really make sense because ADs have always decided who they sell their watches to, not Rolex head office? If ADs get less watches from Rolex or because everyone see YouTubers and influencers they want one too, that scarcity is created by market conditions, not by Rolex. Also, if Rolex was trying to be more exclusive as you say, then I don’t think they would be building a new production facility?

[SS Oyster]

A business model change would be something like removing ADs and taking ownership of all boutiques, or building to request and fulfilling online. Neither of these are happening. Rolex continues to build watches and their go to market remains through independent ADs that Rolex vet and continue to monitor to maximize the purchase and ownership experience. Rolex wants to remain an aspirational brand, so they closely control everything, but this is not a change in business model. It is a constant refinement in reputation management just as they continuously refine their watches.


Sent from my iPhone using Tapatalk

[doublevanose82]

Originally Posted by SS Oyster

A business model change would be something like removing ADs and taking ownership of all boutiques

This would be the best option IMHO, just Rolex controlled boutiques and no more ADs trying to lure you in with jewelry you don't want or need.

I read Omega might be headed down this path, hopefully Rolex will follow.

[Subshark1861]

The new production facility is for the 33XX movements...

Exising watchmaker capacity used to fix the 32's.

I jest, of course.

[temporarychicken]

Rolex always knew that the day would come again where they would need glamourous, well-appointed boutiques to allow customers to browse, try, and buy their products.

If anything, they have doubled down on their current AD business model, by continuing to insist on defined standards at AD showrooms and necessary updates/upgrades.

For the last few years, they could arguably have sold all their stock on the internet, even out of the back of a van, but as normalcy resumes, the conventional 'holding and displaying retail stock' model will resume for many references.

[BroncoOne]

Originally Posted by SS Oyster

A business model change would be something like removing ADs and taking ownership of all boutiques, or building to request and fulfilling online. Neither of these are happening. Rolex continues to build watches and their go to market remains through independent ADs that Rolex vet and continue to monitor to maximize the purchase and ownership experience. Rolex wants to remain an aspirational brand, so they closely control everything, but this is not a change in business model. It is a constant refinement in reputation management just as they continuously refine their watches.


Sent from my iPhone using Tapatalk

Agreed. Rolex business model is to manufacture watches and force them to be purchased by their AD network. They sell every watch that they make. Every year. Regardless of social media etc.

The retail demand is at the AD level and while they all have the same dealership contract with Rolex that sets the same brand standards, they control their own retail interactions with their customers.

Maybe demand at retail has slowed, maybe not. I’ve been hearing about Rolex demand crashing and Daytonas being thrown free from parade floats for years. I’ve yet to see any meaningful drop in dammed beyond a few thousand up and down in the gray market. I have seen no evidence of people walking into an AD cold and having their choice of any popular steel Rolex, let alone at a discount from MSRP

Maybe PM model demand softens but only because there are naturally less buyers at such high price points than there are at steel.

I certainly hope that the market allows people to buy the watches that they want at MSRP without having to have bought dozens of watches from that AD. I just haven’t seen it yet.

[tictoc1]

The display models were created to allow them to hoard inventory in the back and allocate to customers at their choosing.

[amh]

Originally Posted by tictoc1

The display models were created to allow them to hoard inventory in the back and allocate to customers at their choosing.

That's a very good point - takes Rolex influence to make this happen.

And the CPO program is certainly driven by Rolex as well, wanting to get a piece of the lucrative Grey market.

If demand falls to pre-2017 levels neither of those will matter and AD 'hoarding' will stop. They're currently enjoying unprecedented sales of marked-up jewelry based on Rolex hype but once that dries up they'll be happy to sell you anything.

[Krash]

Originally Posted by Nads786

ADs really don't have any idea what Rolex's business model is. I've interacted with many across the US and most are not the sharpest tools.

Of course they do. It's pretty simple. Rolex's business model isn't rocket science. Nor are they changing it. Why would they? Their business model is to sell every watch they make through an authorized dealer network, and they excel at it.

I think people read too much into things.

[JettyOne]

Originally Posted by Krash

Of course they do. It's pretty simple. Rolex's business model isn't rocket science. Nor are they changing it. Why would they? Their business model is to sell every watch they make through an authorized dealer network, and they excel at it.

I think people read too much into things.

Amen.
Every two days, someone cracks Rolex hidden business model.
See you all here Sunday.


Sent from my iPad using Tapatalk

[Kevin of Larchmont]

Originally Posted by JettyOne

Amen.
Every two days, someone cracks Rolex hidden business model.
See you all here Sunday.


Sent from my iPad using Tapatalk

This is outstanding.