Anatomy of Rolex Daytona Pricing (swimming upstream)

[101031-28]

Originally Posted by WBaileyii

The OP was presenting a Value Analysis. If you have dump truck loads of disposable income and don't care about how much things that you want cost, then any sort of decision making process beyond "I want it, therefore I must buy it right now" is meaningless. I think that for many of us, however, that value does factor into our Rolex purchases (as well as the intangibles of desirability, beauty, workmanship, brand, etc.). For me, a Daytona at MSRP is a value proposition I would jump on. A Daytona at 3X MSRP is not something I would even consider. I found the OPs thread very interesting and a perspective that I appreciate.

My thoughts, precisely

[vh2k]

Originally Posted by Calatrava r

The actual number I have often heard is about $800 for materials and labor. Actually, marketing is a huge expense for Rolex.

I wouldn't doubt that. If a steel Tudor or Omega can retail for $4,000, a Hamilton or Tissot can retail for $2,000, and a Citizen or Seiko can retail for $500... it's obvious that the true COGS for an automatic movement timepiece (even a luxury one) is nowhere near $4,800.

[jaxex]

All luxurious items are overpriced, and the difference here is that most of the profit goes to the traders.

[jb335]

Originally Posted by minute_man

To decide yourself whether or not said product is worth its asking price.

Nope. Completely irrelevant.

[jb335]

Originally Posted by SlideRacker

What was Van Gogh’s cost to manufacture “Starry Night”?

Exactly.

[jb335]

My house was built in 1930. When I purchased it in 2016, should I have considered the manufacturing cost nearly 100 years ago?

[turkeysub93]

It is no mystery that Rolex is swimming up stream.

Someone else on the forum spoke to this observation earlier...look at Tudor's recent releases...all very "tool-ish" variations of their refined Rolex counterparts.

[peacocknation]

Originally Posted by WBaileyii

The OP was presenting a Value Analysis. If you have dump truck loads of disposable income and don't care about how much things that you want cost, then any sort of decision making process beyond "I want it, therefore I must buy it right now" is meaningless. I think that for many of us, however, that value does factor into our Rolex purchases (as well as the intangibles of desirability, beauty, workmanship, brand, etc.). For me, a Daytona at MSRP is a value proposition I would jump on. A Daytona at 3X MSRP is not something I would even consider. I found the OPs thread very interesting and a perspective that I appreciate.

Based on your profile pic it looks like shipmates support shipmates!

[ilovewatches999]

Don’t forget the million dollar overhead cost to open the Rolex space, plus the cost of labor, marketing materials, patent expenses, R&D, packaging, web design, shipping, insurance, lighting, champagne (I miss those days), training, and the lease on the building. Factor all those in and msrp looks a little closer to cost. This is why bundling started because pm pieces have much much higher margins, bundling turned into collection building with a local ad, and now here we are. But how do you quantify goodwill, brand recognition, and prestige over competitors in the COGS?

It’s all relative, buy what you love, and find me another automatic steel vertical clutch chrono with an in house movement and a 5 year warranty for under 20k from a reputable watch maker. Patek entry is 24k for a base calatrava with a manual movement and 50m water resistance.

[Robf52]

Originally Posted by Mystro

Regardless of trends, always use the msrp as the final word with Rolex watches if you are going to be a long term player/owner. History has shown, anything you pay above msrp has to be considered a potential loss for the convenience of getting a model quicker.

This. For me, it's AD or nothing.

[minute_man]

Originally Posted by WBaileyii

The OP was presenting a Value Analysis. If you have dump truck loads of disposable income and don't care about how much things that you want cost, then any sort of decision making process beyond "I want it, therefore I must buy it right now" is meaningless. I think that for many of us, however, that value does factor into our Rolex purchases (as well as the intangibles of desirability, beauty, workmanship, brand, etc.). For me, a Daytona at MSRP is a value proposition I would jump on. A Daytona at 3X MSRP is not something I would even consider. I found the OPs thread very interesting and a perspective that I appreciate.

Well said

Originally Posted by jb335

Nope. Completely irrelevant.

So you wouldn't mind being offered a mass produced suit at the price of bespoke, would you?

[Gab27]

This is an interesting discussion.

I figured ADs didn't make all that much on each sale, which figures given how they are generally only letting high demand pieces like the Daytona go if the economic conditions are more favorable through either charging more than MSRP or selling additional items prior to or with the sale. After ADs are factoring in their overhead, they may only be making a few thousand on the direct sale of a stainless Daytona. That really isn't much for something they get relatively few of each year.

I'd also assume each watch Rolex sells carries at least several hundred dollars in marketing overhead. Probably not with Rolex (mainly due to the skilled labor in assembling the mechanical movements as people are expensive), but with many other luxury items and especially ones that rely on greater levels of automation/lower skilled workforces, I would not be shocked if the marketing costs exceeds that of raw materials/labor/distribution combined.

[alphadweller]

I read somewhere Rolex's profit margin was 30% according to them (possible source Watchpro, not sure).

So the breakdown could be:

- 30% margin to Rolex
- 39% margin to AD
- 31% total cost (excluding sales and distribution)

A 10K watch would therefore cost 3,100 to manufacture and put to market, all included (R&D, raw materials, cost of machines, salaries, overhead, marketing etc.) except AD's added value.