How much does it REALLY COST to make a Rolex?

[manandjoe]

Bingo! I have seen high quality reps for $500 that are amazing. saphire crystal, cnc machined steel, detailed swiss clone movement.....
This stuff is not rocket science...

[Kapture1]

Its like any other high end brand...

I have no idea how much it costs, but you cant put a price on the feeling of wearing a Rolex for the first time.

Im sure you can assemble with all the same quality parts for much less, but it's not a Rolex. So that being said, a substantional part of the pricing is in the name, just like any high end quality name brand item (not saying its just because of the name Rolex, they are all very durable, very high quality watches).

[Joey_V]

It doesn't matter how much it costs to build - it matters how much value there is to the item.

To me, Rolex holds a majority (if not all) of its value even after purchase... this is the best part. Not only do I find the watch amazing, attractive, well-engineered, but it seems like a majority of the population does as well - keeping the market value up there!

Even if Rolexes are probably only 10% of their retail.... EVERYTHING else is probably at the same "cost" ratio. From Timex to Patek.

[rolexertion]

Originally Posted by manandjoe

Bingo! I have seen high quality reps for $500 that are amazing. saphire crystal, cnc machined steel, detailed swiss clone movement.....
This stuff is not rocket science...

Your post displays an immense lack of understanding of what is required to research, design, produce in quantity, warranty, market, package, distribute, and yes, defend the trademark, on a bona fide product line. The term 'high quality rep' is an oxymoron and a euphemism for 'counterfeit' or 'cheap fake'. The truth is, it's easy to sell something cheaply if you stole it in the first place, and don't back it up at all. That's the part that 'is not rocket science'.

Anyone who wants to can go buy a 'high quality rep'. Then try to sell it in 5 or 10 years. I can categorically guarantee I will lose less money on the authentic one, (not to mention that it will still function). So, which actually cost more?

[Welshwatchman]

Originally Posted by manandjoe

Bingo! I have seen high quality reps for $500 that are amazing. saphire crystal, cnc machined steel, detailed swiss clone movement.....
This stuff is not rocket science...

High quality fakes?

I believe that's what's known as an oxymoron.

Who'd spend $500 on a fake that shows like a $5,000 watch when in fact it's not even worth 5c? Seems like $500 wasted on a lie.

My stab (all prices rounded to nearest £100 for ease):

Average Rolex - £4,000 MRSP
Pre VAT - £3,400
Dealer Cost - £2,100

Raw Material Cost - £100
Factory Overhead Cost/Share - £1,000
Distribution Cost/Share - £100

"Cheapish" to make and the lion's share of the profit goes to the AD.

A $500 Rorex will have cost about £75 to make due mainly to the low overhead cost of a sweatshop environment and a distribution cost of a Hong Kong Air Parcel marked as a gift.

Rolex does pretty well out of the servicing though.

No service network for the Rorex, just throw it in the trash when the paint peels off and waste another $500.

[Welshwatchman]

....also remember that Rolex production PEAKED at 850,000 a few years ago.

Best guestimates place it currently at 600,000 steady with quite a bit of dealer trimming happening in line with some market re-positioning.

[JBat]

Originally Posted by rolexertion

Your post displays an immense lack of understanding of what is required to research, design, produce in quantity, warranty, market, package, distribute, and yes, defend the trademark, on a bona fide product line. The term 'high quality rep' is an oxymoron and a euphemism for 'counterfeit' or 'cheap fake'. The truth is, it's easy to sell something cheaply if you stole it in the first place, and don't back it up at all. That's the part that 'is not rocket science'.

Anyone who wants to can go buy a 'high quality rep'. Then try to sell it in 5 or 10 years. I can categorically guarantee I will lose less money on the authentic one, (not to mention that it will still function). So, which actually cost more?

Well said.

[greg8125]

Originally Posted by rolexertion

Your post displays an immense lack of understanding of what is required to research, design, produce in quantity, warranty, market, package, distribute, and yes, defend the trademark, on a bona fide product line. The term 'high quality rep' is an oxymoron and a euphemism for 'counterfeit' or 'cheap fake'. The truth is, it's easy to sell something cheaply if you stole it in the first place, and don't back it up at all. That's the part that 'is not rocket science'.

Anyone who wants to can go buy a 'high quality rep'. Then try to sell it in 5 or 10 years. I can categorically guarantee I will lose less money on the authentic one, (not to mention that it will still function). So, which actually cost more?

I believe the question was what does it cost to make or produce each piece, not what do they spend on marketing, distribution, or trademark enforcement. These costs are not production costs. Use of the phrase "produce in quantity" as a factor in arguing for higher costs is nonsensical. Almost everybody knows (even people who did not take econ 101 or have manufacturing experience, as I do) that cost per piece is lower the more you "produce in quantity".

Hypothetically Rolex could make a 10x or 10,000x increase in the amount they spend on celebrity endorsements, which could result in a huge increase to their annual budget, but this would not affect their cost to "produce" each piece. It would not surprise me at all if Rolex actually spends more, perhaps much more on marketing, advertising, and endorsements than on production and R&D.

Rolex CAN do this because of the popularity of their designs and effectiveness of their marketing. I am not faulting them, this is just good business. But make no mistake about it, a ss Rolex that retails for $7,000 might have less than $100 in materials and production in it. It also might have $150 of advertising costs. Keep in mind that the modern day mass-luxury watch business as operated by Swatch Group and Rolex is an astronomically profitable business. If Rolex or Omega or anyone else retailed for close to production costs they would go bankrupt. Rolex has the aura of exclusivity and is an aspirational purchase for a very large number of people globally. This is why they can mass-produce which creates a low per-unit production cost, and affords the ability to spend huge amounts on marketing and advertising. When a factory is cranking out 2,000 pieces per day largely with automation, I would say that qualifies as mass-produced. And automated mass-production drives down the per piece costs immensely. Just to put that in perspective, several hundred-thousand is the same order of magnitude of Toyota Camry vehicles produced every year. Both a common car and a Rolex benefit from mass-production and significant advertising. But one of these products has a production cost much closer to the retail price than the other.

I love luxury watches, including Rolex, which is why I am here, but I think an elephant in the room is the fact that a Rolex is essentially a mass-produced good that is priced as if it were bespoke or at least not very common. This is why Rolex is so guarded in their AD pricing and upward price changes. Because they know they have a situation of maintaining exclusive positioning and pricing, while at the same time selling through several hundred-thousands pieces annually. An extremely favorable problem to have! As a watch guy I am always observant of what people around me are wearing. This summer I was on a crowded shuttle buss at the airport - people hang on for balance showing their wrists. Of the three wrists immediately surrounding me, all three of them were Rolexes. Granted it was for a flight to a somewhat exotic local (Tahiti) but still. Safe to say that Rolex was probably more common than Timex, Citizen, or Seiko on that flight. Anyone who has worked in a large law firm, or has attended a PGA event, can attest that Rolexes are absolutely EVERYWHERE. I suspect this is true in almost every profession where people routinely make more than $100k. My point is that Rolexes are priced exclusively, but are at the same time extremely popular. Sure there are many other products that a priced at seemingly extreme levels - the $8,000 Hermes handbag, etc. But are they even 1% as common as Rolexes? I can think of no other product or brand that has ever had this type success - Veblen good extreme pricing but millions-sold commonality.