Rolex, price hikes, exclusivity, and the Chinese market:

[Numismatist]

While it doesn't speecifically mention Rolex, it does Patek.

It's an interesting look at how going after a mass market like China can actually undermine your Brand in the long term.

http://www.cnbc.com/id/45282770/

The debate is, of course, are Rolexes becoming too common - even at these prices? This article, imho, is what justifies the continual price hikes. Rolex is trying to avoid what the article claims is happening to LV.

I find this stuff fascinating, what say you all?

[GerardoG]

It is an interesting article; but they have to stop and see WHO is making their profits. It is useless to have watches in the $50,000us and up range if only an handful of people can buy them. I would rather have a luxury, profit making company than ultra-luxury that makes a couple of sales a month.

[SteKos]

Personally, I highly detest the whole "price it out of range of the riff-raff" theory. I've seen that quite a few times before.

In my opinion, all it does is make those of us who are capable of critical thought, realize that there really is no reason at all to buy a $1000 bag to hold your stuff when a $50 bag is as good or better, functionally.

[Cru Jones]

So.....A brand like LV is an aspirational brand with big sales and margins, but, since the ultra ultra Chinese rich prefer something less common, the "problem" is that LV s no longer a brand sought out by "everyone"? Is the author trying to say that the risk for LV is that the masses will switch to the ultra ultra rich's brand, thereby costing LV in the long-run? Just not clear to me....

And, on one hand, the "more sophisticated" ultra rich consumer is shunning flashy logos, but, at the same point, Lamborghini and Ferrari sales are soaring? Again, it's hard to decipher a coherent argument.

Regarding the point on Audi vs. BMW and Porsche, I found that analysis to be superficial, at best. The author cites percentage increases for BMW and Porsche being greater without giving the raw numbers, and, cites Audi's market share dropping while not stating which makers are picking up the slack. Is it BMW and Porsche? Or, the lower end makers? Also, Audi and BMW price the same, so, it's all just really confusing and not well thought out.

[drtooth73]

Thanks for posting the article!

[Melanotaenia]

Some of the quotes from the mega rich interviewed in the article make me cringe.

[conrail]

It's an interesting discussion, because I think a lot of brands, including Omega, are jacking up their prices to avoid becoming too common; a watch that any middle manager, so to speak, can afford. Sure they've developed a nice in-house movement, but I don't think they've done much else to justify such drastic retail price increases in the past few years. I think Rolex is in this boat as well.

But it is a careful balance, because you cannot price your watches so far away from their inherent value as to become ridiculous. I think Rolex is getting close to, if not at, that point. For example, $8,000 for the Sub 116610!? Come on, its a simple diving watch...and they want $8k retail. $11,250 for the plain-jane Daytona!? That is absurd. Thank goodness for the secondary/grey-market :)

Maybe the way to go about it is to cut production, make less watches. Make each one more special, harder to get, and thus intrinsically, more expensive.

[mtrunner]

Originally Posted by conrail

It's an interesting discussion, because I think a lot of brands, including Omega, are jacking up their prices to avoid becoming too common; a watch that any middle manager, so to speak, can afford. Sure they've developed a nice in-house movement, but I don't think they've done much else to justify such drastic retail price increases in the past few years. I think Rolex is in this boat as well.

But it is a careful balance, because you cannot price your watches so far away from their inherent value as to become ridiculous. I think Rolex is getting close to, if not at, that point. For example, $8,000 for the Sub 116610!? Come on, its a simple diving watch...and they want $8k retail. $11,250 for the plain-jane Daytona!? That is absurd. Thank goodness for the secondary/grey-market :)

Maybe the way to go about it is to cut production, make less watches. Make each one more special, harder to get, and thus intrinsically, more expensive.

Agreed. If they truly want to be more exclusive then you cut down on production plain and simple. Hard to be exclusive when you turn out close to a million watches a year.

[rr-nyc]

Originally Posted by mtrunner

agreed. If they truly want to be more exclusive then you cut down on production plain and simple. Hard to be exclusive when you turn out close to a million watches a year.

+1

[GradyPhilpott]

It's an interesting take on the free market and what Marx called "false consciousness" and what Thorstein Veblen called "conspicuous consumption."

The thing is that Rolex sells a solid product with a history that any company would love to have. To wit: http://www.askmen.com/fashion/mens-w...the-truth.html

Not to rely too much on the Watch Snob, whom I've come to respect, there is the fact that "People care about Rolex."

Then there is the mighty Rolex. Would I put Rolex up with Patek or A Lange & Sohne? Not for a second. But, do I consider it a very important step above IWC, Zenith and even Vacheron? Most certainly. The reason is this: People care about Rolex; nobody really cares about those other brands. There are dedicated forums to Rolex, get-togethers, books, you name it. When was the last time you saw a Vacheron event or a book about IWC that people actually bought? Sure, their movement may be in slightly better shape than your average Rolex (debatable, surely), but in 20 years, your Rolex will be worth something -- and everything else will be scrap metal.

Read more: http://www.askmen.com/fashion/mens-w...#ixzz1do1gFPhZ

Rolex is not invulnerable, at least I think they aren't, but what applies to one product, doesn't necessarily apply to another, especially when you are speaking of the coronet, the crown for every achievement, the de facto international currency, the luxury watch for Everyman and heads-of-state alike.

We shall see what happens, but I don't think Rolex is sweating the issue too much.

[snowbird]

Interesting. Another thing I wonder about for a brand like Omega (which gets a large percentage of its sales in China) - is there a tipping point where it becomes perceived as a Chinese luxury brand rather than a global luxury brand?

For luxury brands, the global appeal and sales seem to be an important part of the formula.

[2careless]

It is actually quite simple to solve this. Once your brand has got mass marketed (relatively), chalk up another more up market brand - spend money in advertisements, try something differently etc etc. Case in point - a Toyota called Lexus

[Numismatist]

Originally Posted by 2careless

It is actually quite simple to solve this. Once your brand has got mass marketed (relatively), chalk up another more up market brand - spend money in advertisements, try something differently etc etc. Case in point - a Toyota called Lexus

The Rolexus!

[GradyPhilpott]

Originally Posted by 2careless

It is actually quite simple to solve this. Once your brand has got mass marketed (relatively), chalk up another more up market brand - spend money in advertisements, try something differently etc etc. Case in point - a Toyota called Lexus

The brands Lexus and Acura exist only in the United States where presumably consumers are more brand conscious and put a limit on what they will pay for a particular brand.

Everywhere else in the world, a Lexus is a Toyota and an Acura is a Honda.

Of course, China might turn out to be like the US in terms of brand consciousness.

Again, I don't see Rolex being affected by this phenomenon.

The thing about Honda and Toyota in the US is that there are still people around who remember when these brands first hit the US competing against the Detroit Luxo-Boats and how everyone laughed themselves silly.

Then along about the 1980's people began to notice that these little cars were solidly built, besides being good on gas.

Then suddenly, Toyota and Honda were selling family style cars and everything in between.

The trouble was that no one was going to shell out $35000 for a Honda or a Toyota any more than they'd shell out $1000 for a Timex.

Anyway, the rest is history, as they say.

[Zed Homme]

Originally Posted by GradyPhilpott

The brands Lexus and Acura exist only in the United States where presumably consumers are more brand conscious and put a limit on what they will pay for a particular brand.

Everywhere else in the world, a Lexus is a Toyota and an Acura is a Honda.

While this was initially true when those brands first hit the market in the late 80s early 90s, the concept has been standardized so you can buy a Lexus not only in the US, but in Europe, Africa, Asia, and Australia.

That conspicuous consumption you mentioned is a human phenomenon not limited to the states.

As far as the original article is concerned, that has always been the challenge of any luxury goods maker. How to develop an exclusive product that could be sold to everyone. This debate started long before the rise of Chinese consumerism.

[Numismatist]

Originally Posted by Zed Homme

While this was initially true when those brands first hit the market in the late 80s early 90s, the concept has been standardized so you can buy a Lexus not only in the US, but in Europe, Africa, Asia, and Australia.

That conspicuous consumption you mentioned is a human phenomenon not limited to the states.

As far as the original article is concerned, that has always been the challenge of any luxury goods maker. How to develop an exclusive product that could be sold to everyone. This debate started long before the rise of Chinese consumerism.

Exactly! This is what Rolex does SOOOOO well

[dddrees]

Thanks for sharing Chris. It will be pretty interesting to watch and see how this goes over the next couple of years.

[Rolex Junky]

Originally Posted by conrail

It's an interesting discussion, because I think a lot of brands, including Omega, are jacking up their prices to avoid becoming too common; a watch that any middle manager, so to speak, can afford. Sure they've developed a nice in-house movement, but I don't think they've done much else to justify such drastic retail price increases in the past few years. I think Rolex is in this boat as well.

But it is a careful balance, because you cannot price your watches so far away from their inherent value as to become ridiculous. I think Rolex is getting close to, if not at, that point. For example, $8,000 for the Sub 116610!? Come on, its a simple diving watch...and they want $8k retail. $11,250 for the plain-jane Daytona!? That is absurd. Thank goodness for the secondary/grey-market :)

Maybe the way to go about it is to cut production, make less watches. Make each one more special, harder to get, and thus intrinsically, more expensive.

Originally Posted by Zed Homme

While this was initially true when those brands first hit the market in the late 80s early 90s, the concept has been standardized so you can buy a Lexus not only in the US, but in Europe, Africa, Asia, and Australia.

That conspicuous consumption you mentioned is a human phenomenon not limited to the states.

As far as the original article is concerned, that has always been the challenge of any luxury goods maker. How to develop an exclusive product that could be sold to everyone. This debate started long before the rise of Chinese consumerism.

The problem with LV is that mass production can never be exclusive. For this products need to be hand made from top quality materials and they need to be rare; or at least be perceived as such. Like the SS Daytona. All criteria must be met. Otherwise except for inflation there are limits as to how far brands can keep increasing prices. There is a 6 month waiting period on Hermes Berkin bags. That is the difference between these two brands. Of late I have noticed that LV is producing some very expensive handbags in the 3-5k range. Perhaps this is their attempt at remedying this problem. The filthy rich have always looked for über exclusive products/ brands by which they can distinguish themselves from the masses. Nothing new there.

[Art 1]

Interesting.

[fusionstorm]

I doubt LVMH (the parent company of Louis Vuitton and dozens of other luxury brands) is losing too much sleep at this loss of cachet amongst the Chinese uber-wealthy. LV had long ago cemented its rank at the top of the pecking order of "luxury" brands, but had never invested much time or effort into attempting to move into the "ultra-luxury" category. Chanel and Hermes are the flagbearers there.

There are clear parallels with Rolex and LV. Even the most ardent Rolex aficionado would hesitate to claim that it was an ultra-luxury marque. Patek and a variety of boutique Swiss manufacturers fight amongst themselves for the "eff you" monied crowd. Rolex just chugs along as the "go-to" luxury piece while shrugging off the APs and Panerai's of the world.

I think of one mythical Harry Callahan who quipped "a man's gotta know his limitations". IMO LV & Rolex have done quite well for many decades in understanding their place in the luxury world.........

[Zed Homme]

Originally Posted by fusionstorm

I doubt LVMH (the parent company of Louis Vuitton and dozens of other luxury brands) is losing too much sleep at this loss of cachet amongst the Chinese uber-wealthy. LV had long ago cemented its rank at the top of the pecking order of "luxury" brands, but had never invested much time or effort into attempting to move into the "ultra-luxury" category. Chanel and Hermes are the flagbearers there.

There are clear parallels with Rolex and LV. Even the most ardent Rolex aficionado would hesitate to claim that it was an ultra-luxury marque. Patek and a variety of boutique Swiss manufacturers fight amongst themselves for the "eff you" monied crowd. Rolex just chugs along as the "go-to" luxury piece while shrugging off the APs and Panerai's of the world.

I think of one mythical Harry Callahan who quipped "a man's gotta know his limitations". IMO LV & Rolex have done quite well for many decades in understanding their place in the luxury world.........

I think you hit the nail on the head.

Sad part is that I have vinyl giveaway bags that are softer than the leather that passes for a LV bag. I simply dont understand the fascination. For the same money there are much better options....

[GradyPhilpott]

Originally Posted by Zed Homme

While this was initially true when those brands first hit the market in the late 80s early 90s, the concept has been standardized so you can buy a Lexus not only in the US, but in Europe, Africa, Asia, and Australia.



That conspicuous consumption you mentioned is a human phenomenon not limited to the states.

Thanks for the update on the branding issue.

I didn't mean for the first paragraph to be limited to any particular demographic. Marx and Veblen saw these concepts as human nature. Of course, that's a simplistic statement, but it's enough for now.

[Zed Homme]

Originally Posted by GradyPhilpott

Thanks for the update on the branding issue.

I didn't mean for the first paragraph to be limited to any particular demographic. Marx and Veblen saw these concepts as human nature. Of course, that's a simplistic statement, but it's enough for now.

They may be simple, but I believe they are very applicable in this scenario.

[fusionstorm]

Originally Posted by Zed Homme

I think you hit the nail on the head.

Sad part is that I have vinyl giveaway bags that are softer than the leather that passes for a LV bag. I simply dont understand the fascination. For the same money there are much better options....

Funny, the same applies to Rolex in certain ways. But both Rolex and LV have resale value that far outstrips their competition. Both have a growing following for their vintage pieces. And both are active in trying to protect their brand (although LV is far more aggressive as they actually take unsold stock and shred them at several secret facilities around the globe).

[conrail]

Originally Posted by fusionstorm

Funny, the same applies to Rolex in certain ways. But both Rolex and LV have resale value that far outstrips their competition. Both have a growing following for their vintage pieces. And both are active in trying to protect their brand (although LV is far more aggressive as they actually take unsold stock and shred them at several secret facilities around the globe).

Yikes. Shows how much inherent/intrinsic value is actually in their pieces of sewn up leather with a thousand dollar logo on it.

[cbusjer]

Originally Posted by conrail

Maybe the way to go about it is to cut production, make less watches. Make each one more special, harder to get, and thus intrinsically, more expensive.

I think this has definitely been a successful strategy for Panerai. Look at all the different limited editions they make, and even how few 111s and 005s they make a year. I know my 005 has a slightly modified simple Unitas movement, but I love the watch, and I love knowing what number mine is in a limited series. Now, looking at my sub, for all I know it could be 211,345 for that year...