What if Rolex doubled their Prices?

[malba2366]

Originally Posted by teck21

A lot of people want Rolex precisely because they are so hard to obtain at an AD.


Rolex’s real power today comes from the premise that ‘yes you can afford, but no you can’t have it’.


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That may be attractive to those who are jumping in now based on social media, but it will alienate many traditional luxury watch buyers. It is a very fine balancing act to create demand from scarcity, and typically requires complete control of supply and distribution (ie. Hermes with Birkin bags). In the case of Rolex it will eventually alienate the target market when the items is not available at the AD level but is readily available on the grey market at over retail and with the threat of no warranty.

[BLNR Nairobi]

Originally Posted by teck21

A lot of people want Rolex precisely because they are so hard to obtain at an AD.

Doubling MSRP works against that, and would leave a terrible taste in consumers.

Rolex’s real power today comes from the premise that ‘yes you can afford, but no you can’t have it’.


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Exactly.

[rolexjackson]

Rolex watches are already double any comparable brand of watch.


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[ce027772]

Originally Posted by jdg443

Rolex watches are already double any comparable brand of watch.
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People want Rolex, they don't want "comparable" brands.

[teck21]

Originally Posted by malba2366

It is a very fine balancing act to create demand from scarcity, and typically requires complete control of supply and distribution (ie. Hermes with Birkin bags). In the case of Rolex it will eventually alienate the target market when the items is not available at the AD level but is readily available on the grey market at over retail and with the threat of no warranty.

I would actually argue that Rolex does have this control you speak of, to a large degree.

It’s not as perfect as doing the distribution themselves, but everyone knows that’s not a model that Rolex wishes to go in.

The alienation of the target market is probably more a function of the extraordinarily large demand supply imbalance as opposed to a lack of control over distribution by Rolex.

ie without producing more, or raising prices, these alienated customers will continue to be alienated no matter what distribution model is adopted.

BNIB Birkin bags area available for sale as well after all on the grey market.

The complete elimination of the BNIB grey market (as opposed to ‘pre-loved’) is an impossibility once beyond a certain level or production (certainly at Rolex’s), and restriction of supply to it is the best that can be achieved and I feel Rolex is already doing an excellent job via its AD network.

I’m not suggesting that many Rolex watches are falling into the hands of deserving WIS from ADs at MSRP, just that fewer watches than popularly believed are going directly from ADs to greys.



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[ugoblue]

Originally Posted by Chute

Years ago, a manufacturer who was experiencing high demand and after market prices decided to double his price. I wonder what would happen if Rolex did the same?

Sure, Daytonas would be $27k and still in demand.
But OP’s at $12k
Subs and GMT’s $20k
Day dates and other yellow gold models to $70k

It was just a thought and wanted to share it.

I think it would fill a lot of cases and run off the speculative buyers.
It worked for that manufacturer back in the 90’s .

Rolex doesn't want to sell anything at less than MSRP. The current pricing model forces customers (mostly flippers) to buy up the unwanted models from the display case at MSRP so they can get a profitable SS model to flip.

Doubling prices would probably be too much and the flippers probably would stop buying the small DJ and other slow movers.

That being said, Rolex's price increases in the face of this demand have been surprisingly modest.

[nosignalbmwdriver]

20% is the play
safe and profitable

[nosignalbmwdriver]

We smoking on Tudor pack

Originally Posted by ce027772

People want Rolex, they don't want "comparable" brands.

[Gab27]

It would damage their brand and a lot of their models probably could not support the new pricing.

[dg1111]

I think an economist could probably explain it better than I can, but this is an interesting case to think about from a supply demand perspective. We all know what the watches sell for on the grey market, but a lot of watches are bought at retail and not re-sold. In other words, there are a lot of buyers that pay retail and likely would not be buyers at grey prices. I would put myself in that category. A modest price raise probably doesn’t alienate current buyers, but a drastic raise would.

[malba2366]

Originally Posted by nosignalbmwdriver

20% is the play
safe and profitable

From the looks of European pricing we are going to see almost 10% on SS sport watches.

[teck21]

Originally Posted by dg1111

I think an economist could probably explain it better than I can, but this is an interesting case to think about from a supply demand perspective. We all know what the watches sell for on the grey market, but a lot of watches are bought at retail and not re-sold. In other words, there are a lot of buyers that pay retail and likely would not be buyers at grey prices. I would put myself in that category. A modest price raise probably doesn’t alienate current buyers, but a drastic raise would.

Exactly, the grey market is simply far smaller than the AD market from a volume perspective.

The grey market today is for must-get-it die hards, and die hards are always just a small segment of any market.

A drastic raise would alienate almost the entire customer base.

Rolex has a very good understanding of its overall customer base, and it still comprises far more people for whom msrp already represents a sizeable (but still manageable) sum than people willing and able to pay the grey price for a Daytona.

The effects of this sort of drastic price increase would be both cascading and overwhelmingly negative for the brand.


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[Gab27]

Originally Posted by dg1111

I think an economist could probably explain it better than I can, but this is an interesting case to think about from a supply demand perspective. We all know what the watches sell for on the grey market, but a lot of watches are bought at retail and not re-sold. In other words, there are a lot of buyers that pay retail and likely would not be buyers at grey prices. I would put myself in that category. A modest price raise probably doesn’t alienate current buyers, but a drastic raise would.

I agree.

[Chute]

Originally Posted by GradyPhilpott

If Rolex immediately doubled their prices, they would be going against their founding principles and Rolex isn't likely to do that. In fact, I would say that as long as Rolex is structured the way they are now, it would not happen.

Yeah I forgot about the structure of the entity as a charitable foundation.
They probably couldn't do that to capitalize.

[kieselguhr]

I would no longer be able to afford Rolex. That’s what would happen.

Luckily. I love Tudor as well.

[ce027772]

Originally Posted by ugoblue

The current pricing model forces customers (mostly flippers) to buy up the unwanted models from the display case at MSRP so they can get a profitable SS model to flip.

When was the last time you visited a Rolex AD? I have seen mostly empty cases. No "unwanted models" to sell. Seems that nearly all models are wanted now.

[ce027772]

Originally Posted by nosignalbmwdriver

We smoking on Tudor pack

Lots of flavors readily available in the Tudor pack.

[m3tek44]

If they do, i'll expect open case back with higher quality (i.e AP/Patek/RM) not to mention availabilities.

[richardlo]

Depending on when you bought yours you could say this already happened.

[mml4]

If as someone said in an above post the gray market is a small segment and Rolex doubled the price and the margins remained the same there is a chance discounts off the new pricing would occur.

[NativeTxn]

If the price of a sub double to roughly $18K, I would 100% go for something like the VC Overseas. Obviously, a different style but my point being that once you start getting to the $20K and up price range you have the ability to get much higher end watches than Rolex offers.

I love my Explorer I, but doubling the MSRP doesn’t seem like it would achieve anything good for Rolex. But I also don’t have a clue, if I’m being honest. I’m sure people would still buy them, I would just be one seeking out different brands at that price point personally.


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[ndrs63]

Would give a chance for other brands to shine


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[russ86]

It would only work if they would also decrease their production, otherwise it would be a hot mess

[itsinthebag]

Double is too much, too quickly. As others have mentioned, would be a massive blow to its "affordability" to the masses. Short story: have a buddy who wants a submariner for his wedding watch and I told him to go grey. He complained about prices as his brother got a batgirl at retail for his first watch. Went through a 2+ hour education session on the grey market, massive luck his brother got, etc. Point being, a massive majority of people don't know about this, and that market is much larger than us who obsess about watches to the point we visit a 1980's style internet watch forum. (as note, I'm not convinced his brother got at retail, as the picture he sent me was still in the original dealer box, not rolex box, but I'm not going to reign on his parade, at least not publicly)

[Jack T]

Originally Posted by Chute

Years ago, a manufacturer who was experiencing high demand and after market prices decided to double his price. I wonder what would happen if Rolex did the same?

Sure, Daytonas would be $27k and still in demand.
But OP’s at $12k
Subs and GMT’s $20k
Day dates and other yellow gold models to $70k

It was just a thought and wanted to share it.

I think it would fill a lot of cases and run off the speculative buyers.
It worked for that manufacturer back in the 90’s .

Who is the manufacturer to which you refer?

And how did their tactics fare?

[Harry-57]

Why would Rolex seek to curtail high demand? Some people see it as a problem because it's a problem for them. Rolex don't see it that way.

[Lafaiete]

I think you might see some demand falling off with the new price rises.

A lot of people will have put their name down for a SS GMT, expecting to pay about £7750.
In the new year they are going to have to find about another £1000.

It would not surprise me if the AD’s start to get people quietly turning them down.

That may seem ridiculous to some people on this forum. After all, the SS GMTs are selling for well over £10K on the grey market.
But not everyone is buying to sell and people have other bills to pay. All these other bills are steadily increasing!

[Harry-57]

Originally Posted by Lafaiete

That may seem ridiculous to some people on this forum. After all, the SS GMTs are selling for well over £10K on the grey market.
But not everyone is buying to sell and people have other bills to pay. All these other bills are steadily increasing!

It's dangerous to generalise but to some extent it's unavoidable. My view is that if someone can afford to pay close to £8k for something as trivial as a watch, they can afford to add another £1k on to get it. If a £1k difference is a tipping point beyond which they cannot risk the financial exposure, they should probably keep their money and be safe.

When I was younger, poorer and had routine debt to service, there was a particular luxury item that I wanted and was setting aside money towards. The more I saved the more the MSRP kept going up. I never managed to come up with the money to buy it. I came to accept that I was not a target customer. If it had been something essential I might have cared.

[padi56]

What if pigs grew wings then we would have to shoot to get our morning bacon breakfast. I remember my Father taking on two jobs and saving for almost 5 years to buy his first Rolex watch back in the early 1980s, different story today though.

[Bigmozza]

Definitely wouldn’t pay double, but some people have got more money than sense these days