My new BLNR and perspective on Rolex’s inability to scale

[BroncoOne]

Originally Posted by BroncoOne

Another reason not to increase production capacity: a Rolex will last several lifetimes if it’s not abused. Once the watch is sold it can fill the demand of several generations of wearers (most people are not collectors with multiple expensive watches). Rolex is unable to create excess demand in those people no matter how many more watches it makes.

Originally Posted by Bill Mott

I don’t think it’s quite clear. Others have speculated in this very thread that it is too challenging or costly for Rolex to meet existing demand. So perhaps they really want to meet demand, but they can’t figure it out. I hope they do figure it out, because they are blowing money hand over fist on empty brick and mortar, as well as on payroll for bored sales reps.

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Rolex loses ZERO on brick and mortar because it owns ZERO retail stores. Those are all owned by the independent ADS who pay the sales associations. They are not employed by Rolex.

In reality, Rolex sells every single watch that it manufactures at wholesale, every single day, every single year.

[Benzsiam]

Originally Posted by airchitect

I’m always amused when people post what Rolex “should” do….. Define should and by whose standards….. Fact is, Rolex is selling some of the hottest products on earth right now. They don’t need any WIS to buy them and definitely don’t need our business advise. I’m pretty certain there board of directors feels it’s doing just fine. Sometimes people on here sound like android users griping about apple.


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[Gwai]

Originally Posted by Galaga167

Not even thinking about Rolex anymore.

Yes, you are. You are on the Rolex forum, remember? (Well done with your acquisitions, by the way!)

Cheers
Marc

[AJMarcus]

Originally Posted by superpop

Bit of a naïve post. It would be impossible to create a master list and even if they did do this, it would be filled with 99% speculative buyers. Rolex is not a small company, they cannot just ramp up production to meet demand, nor should they. That is like saying Boeing should just ramp up production on 737's because of a surge in demand. Tooling and factory costs are astronomical. The fastest way to fix this issue is to allow AD's to charge actual street price. That gets rid of the greys overnight as most of the speculation is greatly reduced. That is where Rolex is making a big mistake.

Allowing Rolex ADs to increase their profit margin by more than 150% on high demand models is the solution for the problem of Rolex product supply not meeting consumer demand? Did you really mean to say that??? I’m puzzled by that proposition. Kindly better explain because it makes little sense to me. All it does is eliminate the grey dealers but doesn’t fix the problem.

But from the Rolex perspective is there really a problem? I think not. Until this becomes a financial problem for Rolex as a company and brand they have no incentive to address it. Luxury goods are most valuable in the marketplace when they are relatively less common or even scarce. Think of Porsche and Ferrari not Boeing.

[Bill Mott]

Originally Posted by VogelPhoenix

Rolex is not blowing a cent on "empty brick and mortar" or "bored sales reps" - the stores are owned and operated by independent retailers. Those retailers are selling everything they get from Rolex with minimal effort, so they should be happy as well.

Even a minimal understanding of Rolex' market makes it clear that Rolex has NO interest in meeting demand. Trying to meet demand would quite literally be the dumbest move they could make.

Are you sure about that? What about the Rolex stores in nyc, the Wynn hotel in vegas, etc?

Yes, many jewelers have Rolex counters inside. But I think there are examples of Rolex having some brick and mortar. Although I could be wrong.

Also, what about AD’s that within the last 5-10 years leased additional square footage, often times its the space adjacent to them, and then called it a Rolex store. You mean to tell me Rolex did not help them with that new space that is entirely branded for Rolex? Because if they didn’t, if I was an AD, paying rent to house a bunch of empty cases with a Rolex sign on the door, I would be very angry. As I would be losing money on unused square footage.

But let’s say you’re right (which I don’t think you entirely are)....every single Rolex branded store in the world is bankrolled by an independent. You’ve gotta believe these independents are pissed about funding Rolex’s empty rooms. Either way....it’s a big problem.


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[Kevin of Larchmont]

Originally Posted by horseShu

Rolex isn't required to increase production. It is a luxury product; it can produce however many watches it likes, as long as it is within their own interests.

Again, there is no scarcity of their watches. There is only scarcity at MSRP. And everybody in this forum knows the smart money is to buy at MSRP. Maybe deep down, we know that the ADs and grey dealers are trying to pull a fast one on us. Doesn't stop most from wanting it more.

This forum is a gold mine of human psychology.

Or an outhouse of human psychology.

[teck21]

Originally Posted by Bill Mott

Are you sure about that? What about the Rolex stores in nyc, the Wynn hotel in vegas, etc?

Yes, many jewelers have Rolex counters inside. But I think there are examples of Rolex having some brick and mortar. Although I could be wrong.

Also, what about AD’s that within the last 5-10 years leased additional square footage, often times its the space adjacent to them, and then called it a Rolex store. You mean to tell me Rolex did not help them with that new space that is entirely branded for Rolex? Because if they didn’t, if I was an AD, paying rent to house a bunch of empty cases with a Rolex sign on the door, I would be very angry. As I would be losing money on unused square footage.

But let’s say you’re right (which I don’t think you entirely are)....every single Rolex branded store in the world is bankrolled by an independent. You’ve gotta believe these independents are pissed about funding Rolex’s empty rooms. Either way....it’s a big problem.


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He is right. Stop digging.

And Rolex authorised dealers aren’t pissed.

Every single one has been generating never before seen profit for the past few years. All thanks to Rolex.


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[Kevin of Larchmont]

Originally Posted by Bill Mott

....it’s a big problem.


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You’ve made it clear that it’s a big problem for you that you can’t get what you want when you want it without paying too much or trading in too many on a used watch and you are trying to make the case that this is Rolex’s problem when in reality Rolex engineered this “problem” because it is very good for their business as a manufacturer of luxury watches and consequently it’s good for the business of their ADs. Rolex watches are exquisite little machines that keep time and generate money in every hand they pass through and the only people complaining are the people who want them so bad they are willing to pay too much money for them.

[Bill Mott]

Originally Posted by teck21

He is right. Stop digging.

And Rolex authorised dealers aren’t pissed.

Every single one has been generating never before seen profit for the past few years. All thanks to Rolex.


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Don’t tell me to stop digging. It’s my own thread LOL

I’m questioning because I was in an AD in San Antonio a few months ago and what the rep was telling me does not jive with what you and the above poster just said. I guess many AD reps are just putting on a front these days, pretending to be disappointed with Rolex to their customer, while secretively high-fiving each other in the back.


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[watchwatcher]

The problem is, as in most of these type posts, you are comparing your business to Rolex.

Unless you deal with luxury watches, a thing absolutely nobody needs, but a lot of people want, it's the same as comparing apples to oranges.

[Kevin of Larchmont]

Originally Posted by Bill Mott

Don’t tell me to stop digging. It’s my own thread LOL

I’m questioning because I was in an AD in San Antonio a few months ago and what the rep was telling me does not jive with what you and the above poster just said. I guess many AD reps are just putting on a front these days, pretending to be disappointed with Rolex to their customer, while secretively high-fiving each other in the back.


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ADs and SAs don’t all go to the same seminars to pick up talking points, they are as varied and individual as voices on this thread. You are holding the exception up as the rule.

[Devildog]

Originally Posted by Bill Mott

Don’t tell me to stop digging. It’s my own thread LOL

I’m questioning because I was in an AD in San Antonio a few months ago and what the rep was telling me does not jive with what you and the above poster just said. I guess many AD reps are just putting on a front these days, pretending to be disappointed with Rolex to their customer, while secretively high-fiving each other in the back.


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Hi Bill and congratulations on your purchase.

With one possible exception (Rolex may own one retail outlet in Geneva) every Rolex boutique (including the Dubai flagship) on the planet is owned/operated by third parties.

Whilst there's no question some smaller/independent ADs have been impacted by what are probably global reallocations of an essentially fixed supply (going back to your original posts, Rolex is not "2 years behind" Rolex is most likely exactly where Rolex wants to be in terms of production) many of the larger group/chains have been doing exceptionally well.

I would suggest that the only parties for whom selling Rolex watches has been bad business practice are those smaller independents who are not seeing the volume of watches from Rolex required to justify the ongoing investment in brand identity that Rolex requires its AD network to maintain.

Despite having minimal stock ever on display my local AD (part of the Watches of Switzerland group) became a dedicated Rolex boutique last year. That's a significant investment were it not justified by sales. It still has minimal stock on display. Its the AD network, not Rolex that pay for it.

Rolex SA is a private company owned by a charitable trust, and Rolex SA (and its global subsidiaries) is extremely profitable.

As an example, the Rolex Watch Company Limited (the UK distributor) turned over nearly £415m ($590m) in the 12 months to 21 December 2019 - up from £367m ($521m) the year before. Whilst some of that is of course attributable to increased pricing, its hardly the indication of a production shortage from Rolex SA in Geneva. And I can confirm that availability in the UK was probably worse in 2019 than it was in 2018 (and it was as bad then as anywhere).

And according to this, that increase in sales for 2019 was reflected for Rolex as a whole

https://www.watchpro.com/rolex-grows...f-5-2-billion/

So I'd say with some confidence that Rolex SA is doing pretty well doing what it does.

The figures also debunk the often touted conspiracy in these parts that Rolex SA artificially restricts supply. I very much doubt they do.

Its a simple case that demand in an ever growing global market far outstrips what for Rolex is a massively profitable and successful supply.

[Bill Mott]

Originally Posted by Devildog

Hi Bill and congratulations on your purchase.

With one possible exception (Rolex may own one retail outlet in Geneva) every Rolex boutique (including the Dubai flagship) on the planet is owned/operated by third parties.

Whilst there's no question some smaller/independent ADs have been impacted by what are probably global reallocations of an essentially fixed supply (going back to your original posts, Rolex is not "2 years behind" Rolex is most likely exactly where Rolex wants to be in terms of production) many of the larger group/chains have been doing exceptionally well.

I would suggest that the only parties for whom selling Rolex watches has been bad business practice are those smaller independents who are not seeing the volume of watches from Rolex required to justify the ongoing investment in brand identity that Rolex requires its AD network to maintain.

Despite having minimal stock ever on display my local AD (part of the Watches of Switzerland group) became a dedicated Rolex boutique last year. That's a significant investment were it not justified by sales. It still has minimal stock on display. Its the AD network, not Rolex that pay for it.

Rolex SA is a private company owned by a charitable trust, and Rolex SA (and its global subsidiaries) is extremely profitable.

As an example, the Rolex Watch Company Limited (the UK distributor) turned over nearly £415m ($590m) in the 12 months to 21 December 2019 - up from £367m ($521m) the year before. Whilst some of that is of course attributable to increased pricing, its hardly the indication of a production shortage from Rolex SA in Geneva. And I can confirm that availability in the UK was probably worse in 2019 than it was in 2018 (and it was as bad then as anywhere).

And according to this, that increase in sales for 2019 was reflected for Rolex as a whole

https://www.watchpro.com/rolex-grows...f-5-2-billion/

So I'd say with some confidence that Rolex SA is doing pretty well doing what it does.

The figures also debunk the often touted conspiracy in these parts that Rolex SA artificially restricts supply. I very much doubt they do.

Its a simple case that demand in an ever growing global market far outstrips what for Rolex is a massively profitable and successful supply.

Oohrah, devildog. Thanks so much for the informative and respectful post.


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[VogelPhoenix]

Originally Posted by Bill Mott

Are you sure about that? What about the Rolex stores in nyc, the Wynn hotel in vegas, etc?

NYC = Wempe; Wynn = Watches of Switzerland; same story for almost all other Rolex boutiques.

[Tricolore66]

I would point out that anyone who can blame Rolex for the market as it currently exists is perpetuating it by paying a big premium from a grey dealer. If you have such an ethical issue with it, why add to what you see as some kind of unfair system. It’s a watch, nothing more. Nobody needs one and there are plenty of perfectly acceptable substitutes. If you can’t feel good about the experience, why would you pay the money to feel bad about it? Buy a Grand Seiko, a Tudor, an Omega…get over the brand and enjoy the hobby of actual watches. There is no cosmic scorecard that gives a s**t how many Rolex’s you have or thinks you’re a better human being because you have a BLNR in your wrist.

[Bill Mott]

Originally Posted by Tricolore66

I would point out that anyone who can blame Rolex for the market as it currently exists is perpetuating it by paying a big premium from a grey dealer. If you have such an ethical issue with it, why add to what you see as some kind of unfair system. It’s a watch, nothing more. Nobody needs one and there are plenty of perfectly acceptable substitutes. If you can’t feel good about the experience, why would you pay the money to feel bad about it? Buy a Grand Seiko, a Tudor, an Omega…get over the brand and enjoy the hobby of actual watches. There is no cosmic scorecard that gives a s**t how many Rolex’s you have or thinks you’re a better human being because you have a BLNR in your wrist.

I've owned many omegas, a grand seiko (which I just sold), and dozens of other watches. I wanted the BLNR, because, well, I like the watch! The problem is that I could not buy one from rolex/authorized dealer. And yes, to me, that is a problem.

Not sure where this whole "better human being" thing is coming from....sounds awfully dramatic and ominous. I'm sorry I came on a rolex message board and dared to criticize rolex. I'm sure I will go to rolex hell for it; but at least I'll be wearing a BLNR.

[Devildog]

Originally Posted by Bill Mott

Oohrah, devildog. Thanks so much for the informative and respectful post.


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My pleasure Bill

[RJRJRJ]

Your AD could have gotten you a BLNR, they just chose not to. They may have even had one sitting in the back while they looked you in the eyes and said "sorry." Once you can accept that, things will all make a lot more sense.

They get regular shipments, and anything even remotely popular stays in the back. Two-tone ladies DJs go in the case.

[hambone1983]

Originally Posted by liu_watch

Rolex is a nonprofit organization. They are producing and selling us watches out of charity. No wonder they are not in a hurry to ramp up production or increase prices! We should be thankful :-)

I am on the board of directors for well known non-profit organization. I think this view is a little naive about how non-profits work.

Non-profits must retain their earnings as assets of the organization. It's called the "non-distribution constraint." But they otherwise operate just like a for-profit business, and most must operate profitably or they will die.

In the US non-profits have to make public reports of their operations & financial condition. There doesn't seem to be much reporting transparency in Swiss law, so the Wilsdorf Foundation's finances & activities are largely unknown. But make no mistake, non-profits are very concerned about being profitable, they just don't pay it out to shareholders.

[Fleetlord]

Increasing or having excessive production is a disaster for luxury goods, especially in the modern market that is flush with money. Buyers absolutely DEMAND exclusivity (or at least the perception of it) as they want to have something others can't get. It's exclusionary and inclusive (part of the elite) at the same time.

Here are some examples. Ming and Kuronotokyo are both micobrands that make fairly nice watches, but in limited quantities and through very limited distribution. Ming hadn't used to be all that popular, but they certainly are now. Kurono has been limited since it's introduction. Both brands are red hot. They sell out instantly and have high resale on secondary market. Sometimes 5x their retail. These are micobrands with pretty pedestrian movements, limited heritage relative to other brands..etc.

Now look at Breitling, Heuer, IWC, Panerai (I could keep going..). They make tons and tons of watches. They make dozens of references and bunches of each one. They have lofty retail prices to match their bloated production. The result? Irrelevance.

Overproduction is toxic poison to a luxury good, no matter how "good" it is. Breitling has in house movements as does Panerai...the market doesn't care! It wants what it can't have and you can buy those brands by the bucketful now.

Rolex wants no part of that. They have been there themselves a decade or so ago. Watches filling the case, selling on the grey market for 20% off retail, some of their references being referred to as dogs and undesirable??? That won't happen again I would guarantee it.

[Kevin of Larchmont]

.

[AJMarcus]

Originally Posted by RJRJRJ

Your AD could have gotten you a BLNR, they just chose not to. They may have even had one sitting in the back while they looked you in the eyes and said "sorry." Once you can accept that, things will all make a lot more sense.

They get regular shipments, and anything even remotely popular stays in the back. Two-tone ladies DJs go in the case.

Spot on.

[rossi46]

Originally Posted by Mendota

I disagree. That was exactly how Rolex was for over 80 years up until this very recent insanity started. Rolex was doing just fine for decades and even ~5 years ago or however long it was... Rolex marketing created an image of class and quality, and you had to pay to play. Just because they were in stock didn't mean they were free. They still cost a lot of money.

Thank you for being one of the few to bring this up. How short a memory everyone seems to have. As if it's only in the extremely recent past that Rolex has become the brand it is? As if it took scarcity to make Rolex watches desirable?!

Hello, people? Rolex was already known as the most prestigious brand on planet earth for decades and decades before this inventory situation. The idea that only just now, when you have to go on a multi-year waiting list for a Submariner (which still makes me laugh), are Rolexes a hot item is ridiculous.

[drfrankenstein]

Originally Posted by AJMarcus

Allowing Rolex ADs to increase their profit margin by more than 150% on high demand models is the solution for the problem of Rolex product supply not meeting consumer demand? Did you really mean to say that??? I’m puzzled by that proposition. Kindly better explain because it makes little sense to me. All it does is eliminate the grey dealers but doesn’t fix the problem.

But from the Rolex perspective is there really a problem? I think not. Until this becomes a financial problem for Rolex as a company and brand they have no incentive to address it. Luxury goods are most valuable in the marketplace when they are relatively less common or even scarce. Think of Porsche and Ferrari not Boeing.

It doesn’t fix the problem of a shortage but does remove 1-2 middlemen before a watch gets to the end user. Most grays are making a minimum of $1,000 profit on SS sports models. The flipper is getting the majority of the profit above and beyond MSRP.

E-commerce makes things more expensive also- especially in contrast to Rolex’s AD/brick and mortar model. All things being equal, if you couldn’t list the watch you want to flip on Chrono or David SW where it has thousands (or more) of eyes on it and we’re simply limited to geography where people need to walk into the store and see it, I’d imagine hot models wouldn’t fetch nearly what they are now.

Lastly, I agree with Bill. I’ve spoken to a number of ADs and they don’t seem to be happy with the situation as it stands. To be honest, I’m not sure Rolex is happy with it either, although I understand the strategy the long term viability is questionable. People want the hot thing, that’s always true of luxury goods. If suddenly Omega had the hot models that everyone wanted and Rolex fell relatively out of popular favor and were suddenly available, no one would be buying Rolex “dip” in hope it would increase in value later.

[Fleetlord]

Originally Posted by rossi46

Thank you for being one of the few to bring this up. How short a memory everyone seems to have. As if it's only in the extremely recent past that Rolex has become the brand it is? As if it took scarcity to make Rolex watches desirable?!

Hello, people? Rolex was already known as the most prestigious brand on planet earth for decades and decades before this inventory situation. The idea that only just now, when you have to go on a multi-year waiting list for a Submariner (which still makes me laugh), are Rolexes a hot item is ridiculous.

The luxury market has changed dramatically over the last ten years.

It's very easy to see the sales performance differences in those brands who have adapted to the changing landscape and those who didn't. It isn't even close.

[bob sims]

Originally Posted by GGGMT

No risk of theft etc with Amazing sellers like DavidSW Thanh HQ, Bobs, Sohail, etc. many offer warranty. Many watches still under factory warranty. I’ve been treated better by most greys than the arrogant bull crap from ADs. #greyforever.


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Yeah the sellers you name are all foolproof. I did my research. No problems or worry at these places-other than the price.

[superspectral]

I agree with a previous poster that for 80 years people expected to be able to go into a Rolex AD and buy a Rolex. Rolex's website still hypes the experience and advantages of buying at an AD and talks about giving Rolexes as gifts. The Rolex FAQ does say "certain models *may* have limited availability from time to time."

But we all agree that in 2021 there are no watches to be found in ADs and the picture Rolex paints is horribly misleading.

Empty shelves my drive an appearance of exclusivity in some people's eyes, but when you combine it with the only way to buy is at 50% above retail from dodgy internet flippers then I think the whole experience is going to look like a scam to a lot of people.

I get that many people are defending the current situation as "brilliant planning" on Rolex's part. I don't buy it. Sure, maybe Rolex can still maintain demand indefinitely no matter how they treat customers. But they are transforming from a universally admired brand to a brand held up by fanatics that is pissing off the newly interested customers that used to have a good opinion of Rolex.

[Bill Mott]

Originally Posted by superspectral

I agree with a previous poster that for 80 years people expected to be able to go into a Rolex AD and buy a Rolex. Rolex's website still hypes the experience and advantages of buying at an AD and talks about giving Rolexes as gifts. The Rolex FAQ does say "certain models *may* have limited availability from time to time."

But we all agree that in 2021 there are no watches to be found in ADs and the picture Rolex paints is horribly misleading.

Empty shelves my drive an appearance of exclusivity in some people's eyes, but when you combine it with the only way to buy is at 50% above retail from dodgy internet flippers then I think the whole experience is going to look like a scam to a lot of people.

I get that many people are defending the current situation as "brilliant planning" on Rolex's part. I don't buy it. Sure, maybe Rolex can still maintain demand indefinitely no matter how they treat customers. But they are transforming from a universally admired brand to a brand held up by fanatics that is pissing off the newly interested customers that used to have a good opinion of Rolex.

Thank you.

We all agree that Rolex is crazy smart. I have high confidence that they will solve the problem.


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[Harry-57]

Originally Posted by Bill Mott

But let’s say you’re right (which I don’t think you entirely are)....every single Rolex branded store in the world is bankrolled by an independent. You’ve gotta believe these independents are pissed about funding Rolex’s empty rooms. Either way....it’s a big problem.


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He's right. There is no guesswork involved. Speak to some ADs. My AD spent £350k in 2019 on an in-store Rolex boutique. Rolex contributed zero. My AD's profits on Rolex sales continue to be at record levels year on year. Rolex sells every watch it makes, wholesale, to independent dealers the world over.

My AD could probably sell 100 SS BLROs next month and probably 150 SS Daytonas. Most ADs could, and would if they could get hold of them. But they make good profits and associated income from the Rolex inventory they routinely carry. If they did not, they would not waste time being pissed. They would sell something else. They've been in business for over 100 years, as have Rolex, and like Rolex they have become very good at it.

[liu_watch]

Originally Posted by hambone1983

I am on the board of directors for well known non-profit organization. I think this view is a little naive about how non-profits work.

Non-profits must retain their earnings as assets of the organization. It's called the "non-distribution constraint." But they otherwise operate just like a for-profit business, and most must operate profitably or they will die.

In the US non-profits have to make public reports of their operations & financial condition. There doesn't seem to be much reporting transparency in Swiss law, so the Wilsdorf Foundation's finances & activities are largely unknown. But make no mistake, non-profits are very concerned about being profitable, they just don't pay it out to shareholders.

Sorry, my comments were meant to be a sarcasm. Yes, profits are critical to non-profit organizations, although their mission is not to maximize profits. Part of the reason why most of them are poorly run strategically & financially.