ROLEXROLEXROLEXROLEXROLEXROLEXROLEXROLEXROLEXROLEXROLEXROLEX
17 June 2009, 08:27 AM | #31 | |
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Actually, considering the prices that they have started charging and the fact that their watches don't change all that frequently (noting the exceptions of the new big cased watches), the only things that Rolex tends to change are dial options on DJs and the like, they could decrease their output. They would have to probably lay off some workers, but ultimately this may be better than than their current strategy. The sub has been the same for the most part for many years. If the want to charge the prices that they do, then they need to be more exclusive. The sheer volume they produce alone diminishes the air of exclusivity. Don't get me wrong, I like it that they can keep the secondary market prices higher, but that doesn't really affect me as I'm not looking to sell.
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17 June 2009, 08:42 AM | #32 |
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Well, there is a happy medium that you'd like to be at. A business normally would just set the price so that the marginal revenue equals the marginal cost. (dP/dq = 0, if I remember college correctly). You do not want to set the price too low (because although you'd be selling more units there will be too little profit per unit), nor would you set the price too high (because although you'd be making more profit per unit you'd be selling too few units). |
17 June 2009, 08:51 AM | #33 | |
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From the company's perspective, limiting production in bad times and increasing production in good times is extremely expensive proposition: they'd need to hire people, train them, lay them off, build new production lines, shut them down, etc. Especially in labor intensive, expensive labor, market. If they have the capital to carry the produced unshipped goods, it might be better to have a steady stream of units being produced, and warehousing them. But I must assume that Rolex knows very well what they are doing. |
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17 June 2009, 09:07 AM | #34 |
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i would assume rolex knows they have a huge mess on their hands. nobody is going to pay retail for a product they know was selling so badly it had to be bought back by the factory, sorry but people aren't that stupid. that would be like expecting auto buyers to pay retail for a new car now, it's not going to happen.
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17 June 2009, 09:32 AM | #35 | |
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I can remember the first time I read in a magazine article that Rolex makes between 750,000 and 1,000,000 watches a year. That sounded like Timex to me. I couldn't believe it! It probably makes sense but subconsciously we are programmed by advertising to think that only a few hundred thousand leave the factory for worldwide distribution. The fact that we see a windowed clean room with maybe a dozen people in white lab coats laboring over the movements (in no particular hurry) reinforces that. One thing you won't hear about is how many finished movements, cases without serial numbers or other assemblies are being stockpiled in order to maintain production. |
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17 June 2009, 09:39 AM | #36 |
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It's all very interesting, Rolex will probably be forced to reduce production. I was with Jess yesterday and he got a very good discount on a very popular model. Discount a typically very hard to obtain in Orlando and I have seen tire kickers laughed at and even asked to leave the store for asking for discount, that was in the past. You could tell the AD really did not want to give the discount and it took awhile to get, but they need to move watches and caved in.
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17 June 2009, 10:09 AM | #37 | |
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17 June 2009, 10:17 AM | #38 |
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I can't see why ROLEX will be forced to do anything. The ones forced to do something is the human race that has been affected by the economy, because there might not be as much credit available [as before] and some people got Madoff-tized or other little wicked investment schemes, but in the grand order of things, how many people have actually lost part of it or all of it from the total multi-billion population of planet earth?
Why do I opine so? There are enough of us that buy into the: "oh it's got such and such a movement...........", "yeah but it can go down to this depth............." "yeah but it can withstand electrical fields..............." "but this one passed the wiggle test............" We have given ourselves a reason to justify the expense, investment, or whatever we tell ourselves. The name is related to the coming of success, wealth, wannabe-ism, etc..... There are the new generations (that we are training) that will repeat the mantra of : "oh it's got such and such a movement...........", "yeah but it can go down to this depth............." "yeah but it can withstand electrical fields..............." "but this one passed the wiggle test............". If ROLEX is buying back stock, I won't be surprised. They must have cash stocks as large as the Federal Reserve. It's a mass produced watch but not many know that and those of us that do, don't seem to care. It's well made thou. Those of us that own them are happy and those that don't might want one. We are part of the 1,000,000.00 per year club, wow, how exclusive is that (lol)!!!!! Rolex does want it wants, not what we want...........they can do it because the 1million per year club continues to buy them despite the yearly increases, all Geneva needs to do is to keep making minor changes and giving it fancy names like (parachrome blue). It's not going to change until the buyers force it to change............look at the former largest corporation in the world, GMC. Change came and big time. But ROLEX is pretty much on firm footing and will probably never come in danger of us forcing them to do anything. When I say "us", I mean the market. My prediction is: Once the new TT/SUB becomes available later this year..........people will pay premiums to be the first to own one. 6 - 8 months later the prices will come down and settle.............but the first on the bandwagon, the ones that cannot wait for a better deal............now that dear reader is the power of the ROLEX NAME. It's amazing. Economy? What economy? |
17 June 2009, 10:21 AM | #39 |
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I think it makes sense and it's good for those who own or plan to own a Rolex. If they did nothing, then the value of a Rolex could go way down and lose the high end appeal. I would hope everyone on TRF would like to keep the image of their Rolex watches as special and not just a watch that everyone buys.
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17 June 2009, 10:44 AM | #40 |
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makes sense to me - they have a name and reputation to protect.
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17 June 2009, 11:04 AM | #41 |
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There was another thread on this forum about bad customer service at an AD. To make a long story short, this fellow "had a good sales month" and on the spur of the moment stopped in at his AD on the was home from work and was ready to drop down up to $20K except there was only one salesman and the guy was busy with another customer. He left emptyhanded. It didn't sound to me like he was doing Google searches at his office before he got in his car. I don't doubt that he probably knew roughly what kind of discount he could expect from previous purchases. There are a lot of people who walk into stores on Fifth Ave. or Rodeo Dr. and just buy what they like. Their accountant is the only one who sees the bill.
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17 June 2009, 11:07 AM | #42 |
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I get the idea of reducing supply on the street so when we break out of reccesion the prices and values for new watches won't be reduced by overstock in the marketplace but they should also do a price freeze because raising your prices with reducing sales is ussually a bad plan in any buisness.
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17 June 2009, 11:41 AM | #43 |
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17 June 2009, 01:27 PM | #44 | |
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17 June 2009, 03:38 PM | #45 |
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I would think this "buyback" maybe an option for AD's who are having problems. However, I still see watches that are several years old that are still sitting at AD's, the oldest is a W serial. I don't see Rolex buying those back and help the AD's out. Maybe they will only take back the more recent models?
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17 June 2009, 03:45 PM | #46 | |
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17 June 2009, 03:56 PM | #47 |
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Thanks for the post, very enlightening.
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17 June 2009, 04:05 PM | #48 |
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Good thing I got a rad discount on the GV in HK. Im wondering if this(OP) stated was a north america thing and not elsewhere? interesting both ways. I know from relatives in HK business is smooth as silk for luxury watches
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17 June 2009, 06:05 PM | #49 | |
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17 June 2009, 08:40 PM | #50 |
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good idea for rolex considering the second hand market pricing is at the lowest in years
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17 June 2009, 09:22 PM | #51 |
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Makes perfect sense, It's just like a cash rich company buying it's own stock to maintain it's share price and the value of shares for the shareowners. Normal supply and demand models are different for luxury goods, brands like Breitling and Omega go down the discount route and we all know what that does for resale values.
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17 June 2009, 09:34 PM | #52 | |
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don't get me wrong, there are a few people that will do that. the problem is once you have sold to that 1% then you have to get the other 99% of your customers to buy. in the car business those people are called a rollover. they just rollover and pay the price, they are few and far in between.
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17 June 2009, 09:41 PM | #53 | |
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I was a couple of weeks with my uncle ( he has enormous business contacts all over the world and one particularly with the owner of one of the largest watch stores in Hong Kong ) he recently bought a Richard Mille with 40% discount , but I still could not afford 25 % of that , we sat down at a terrace with some friends and family . A couple of people made remarks about my SDDS being it the latest Rolex ... blabla and how expensive they and hence as I got a couple of them how well I must be doing . Nobody remarked my uncle's , none had a clue what it was let along its price tag. Can't say that Richard Mille watches are discrete looking watches really . Just to say that ROLEX has this world wide image and they sell it well . |
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17 June 2009, 10:07 PM | #54 |
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Sounds a strange business model and/or is evidence that they have there pricing wrong and a panic measure to prop up their stance.
If it is true they are hoping that the economy gets back to levels of a couple of years ago, if not they are going to have egg on their faces and will have to admit pricing is wrong and start discounting or lowering prices before all the AD's go out of business |
17 June 2009, 10:51 PM | #55 |
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I don't have a MBA, but it seems all very simple to me. Let's pretend that Rolex isn't manufacturing and selling fine watches, but instead it's the lowly widget. They have an assembly line with widgets coming out at the end. Demand doesn't meet the supply of the widgets, so they start piling up at the end of the distribution chain. Market pressures prices down, as those who hold title to the amassing widgets want to turn them over, to free up capital.
There is only two ways of dealing with the problem: either decrease production, or increase consumer demand. Buying back inventory is not a solution. What buying back inventory does, is open a possibilty to take over full vertical distribution of their product. Being a global company, Rolex can not, all at one time, globally replicate their current distribution system with company owned retail stores, being the exclusive source for Rolex watches. But they can do it in a key market, provided the domstic antitrust alws permit complete vertical intergration. So my thought is, lets say they take a large market: USA, GB, or France for example. Pick a country. Start terminating AD's, and buy back their inventories, so as not to make waves in the marketplace, and keep things hush hush with as a condition of buying back the terminated AD's inventory, the AD agrees to sign a MDA. That way everything is kept quiet. I don't know the term of the distributor agreements with Rolex AD's but usually those agreements don't run more than a year or two, they have to be annually or biannually renewed. So they can cycle out all the existing AD's in the subject market, in a couple of years. Once the only legitimate way of buying a new Rolex in that particular market is at a Rolex boutique at full SR, then Rolex is complete control of the market for their watches. Now, the big issue is antitrust. I do not pretend to be an anti-trust expert, so I defer to the other memebrs of this board as to whether such a plan would violate price fixing laws. Once there is a restrain on the prices the consumer pays, it becomes circumspect to me. Whattya think? |
17 June 2009, 10:52 PM | #56 |
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Good info
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17 June 2009, 11:13 PM | #57 | |
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18 June 2009, 01:07 AM | #58 |
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I don't think antitrust really applies to the buyback program for Rolex. Antitrust would've applied if Rolex was buying back their competitors and increasing the prices on those watches to drive customers to buy Rolex. In Rolex case, all they are doing is buying back inventory AD cannot sell. And I'm sure they don't have to strong arm dealers either, as those are happy to free up capital to buy something they can move - either jewelry or other brand of watches. The only company with risk here is Rolex themselves. They either out wait the resession and keep the trademark of never decreasing prices, or being forced to allow bigger discounts or actually lowering MSRP. In both last cases they loose as they have to figure out what to do with old inventory.
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18 June 2009, 01:10 AM | #59 | |
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18 June 2009, 04:48 AM | #60 | |
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