Rolex Going Upmarket?

[No SUBctitute]

One often stated theory here to explain the dearth of stainless steel sports models in stores is that Rolex is trying to go upmarket a' la Philippe Patek. My numbers below aren't exact, but I'm just trying to theorize about how this strategy would work for Rolex.

PP sells what...about 60,000 watches a year?

Rolex sells maybe 800,000 watches per year? What percentage of each metal? Two-thirds TT/SS and one-third PM? I'm guessing its even less PM than that.

So is there really a market for Rolex to stop selling 500,000 TT/SS watches and sell, let's say, 150,000 additional PM watches instead (to make about the same revenue as it does now)?

Rolex's most popular model is something like a 36mm TT Datejust for around $10,600. I'm not sure that Rolex will be able to go upmarket and sell the quantity of watches it would need to in order to maintain its current revenue while turning its back on its icon. And if Rolex wants to move upmarket while still selling s decent amount of its iconic TT Datejust, then why not also sell Pepsi GMT, BLNR, Sub, and Hulk at $10,000 a pop which would make Rolex a lot of money. That's a lot of revenue to turn down, as a vast majority of $10,000 sports watch buyers will go to another brand rather than spend $30,000 on a watch.

I think that Rolex will do a better job maintaining its status as a luxury brand desired by the world by selling lots of $10,000 watches rather than fewer $30,000 watches. In order to be desired by the masses its helpful to be able to be afforded by the masses. A $10,000 watch is obtainable by a multitude more people than a $30,000 watch.

I'm sure there are holes in my thinking here, I'm just trying to figure out how an upmarket move would work for Rolex. I would love to hear other opinions.

[GreatScott]

The theory of stopping selling steel is nonsense, Rolex is just not increasing production as fast as some people think they should because if a down turn happens again they don't want to be stuck with a bunch of extra stock. Their commitment to steel is strong, just look at the Basel releases.

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[Easy E]

Originally Posted by GreatScott

The theory of stopping selling steel is nonsense, Rolex is just not increasing production as fast as some people think they should because if a down turn happens again they don't want to be stuck with a bunch of extra stock. Their commitment to steel is strong, just look at the Basel releases.

It's this, 100%. The strategy is simply do not spend any additional resources on production, certain market segments, for Rolex, had a huge increase in demand last year. Increase demand, do not increase supply, presto-change-o shortage.

[Fabrice M]

Originally Posted by GreatScott

The theory of stopping selling steel is nonsense, Rolex is just not increasing production as fast as some people think they should because if a down turn happens again they don't want to be stuck with a bunch of extra stock. Their commitment to steel is strong, just look at the Basel releases.

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I think you are right, demand is higher, but Rolex probably, and wisely I believe, decided that supply would remain about the same.

[Dirt]

Originally Posted by Fabrice M

I think you are right, demand is higher, but Rolex probably, and wisely I believe, decided that supply would remain about the same.

If they are producing at a capacity that they are happy with and it's their comfortable maximum, then it follows that supply will not change.

With lead times to production and all else factored in.
It's not realistic to expect them to be able to just ramp up production.
Especially when there is always a high degree of human input. At the end of the day they still have to train replacement staff as well as employ new staff and it's one of the hardest parts of being a manufacturer of goods requiring highly skilled labour.

[Old Expat Beast]

Originally Posted by No SUBctitute

One often stated theory here to explain the dearth of stainless steel sports models in stores is that Rolex is trying to go upmarket a' la Philippe Patek.

Who?

[No SUBctitute]

Originally Posted by Old Expat Beast

Who?

I just read a post tonight postulating that and that's not the first. I've seen lots of discussion theorizing Rolex is doing this, starting with the infamous "CONFIRMATION" thread earlier this year.

[Speed]

Ahh... good old "Philipe Patek"

[77T]

Originally Posted by Old Expat Beast

Who?

Originally Posted by Speed

Ahh... good old "Philipe Patek"

Well, it’s still PP to me...

OP - take a quick look at your initial post.


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[No SUBctitute]

Originally Posted by 77T

Well, it’s still PP to me...

OP - take a quick look at your initial post.


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PP or PP. Either way, its a watch that doesn't appeal to me and I've never even looked at in my many trips to ADs.

So I'm not surprised I don't know the order of a name that I barely even know how to spell!

[No SUBctitute]

Originally Posted by Speed

Ahh... good old "Philipe Patek"

Oh, and next time you want to offer some gentle ribbing for a mis-written name, at least spell it correctly.

[Speed]

Originally Posted by No SUBctitute

Oh, and next time you want to offer some gentle ribbing for a mis-written name, at least spell it correctly.

Shoot

I should have cut / paste from the OP!

[Cato]

On a side note, I find it hard to believe that almost a million Rolexes are sold every year.

And 50,000 Patek’s?

Whenever I’m at a Rolex AD, I never see folks buying. I see people joking about how expensive they are, even random guys “talking” watches, but never people handing over cards.

Maybe they are being bought over the phone? Maybe guys buy early in the mornings when I never visit?

[Hogtown Fatty]

Originally Posted by Cato

Whenever I’m at a Rolex AD, I never see folks buying.

I don't either, but what are the chances someone will be buying within the few moments we're there? They're not high-volume sales items like most other things one buys on a day-to-day basis. Of course it varies drastically based on location, but I'd hazard a guess that even in high traffic North American cities the AD's don't sell more than three or four Rolexes a day (and some days probably only one, or none). Am I far off with that guess? Also a lot of the watches that watch guys want are most always out of stock, so they try to push DJ's, YM1's, or- at best- EXII's on you and most guys pass on those, hence why they sit for so long.

[Zakalwe]

Originally Posted by Cato

On a side note, I find it hard to believe that almost a million Rolexes are sold every year.

And 50,000 Patek’s?

Whenever I’m at a Rolex AD, I never see folks buying. I see people joking about how expensive they are, even random guys “talking” watches, but never people handing over cards.

Maybe they are being bought over the phone? Maybe guys buy early in the mornings when I never visit?

It works out as very roughly 2000 Rolexes sold per day. Across the whole world. I have no idea how many AD's there are, but it seems unlikely that each AD would have to sell on average more than 2-3 watches/day to achieve that figure. If anybody knows how many AD's there are, then the numbercan be calculated accurately. But if you accept my guesstimated figure of 2-3 watches, if you're only in an AD for 10 minutes at a time, the chance of you seeing a watch being sold in that time is pretty low.

In any event, it only seems hard to believe if your threshold for disbelief is low.

[jrs146]

Originally Posted by Zakalwe

It works out as very roughly 2000 Rolexes sold per day. Across the whole world. I have no idea how many AD's there are, but it seems unlikely that each AD would have to sell on average more than 2-3 watches/day to achieve that figure. If anybody knows how many AD's there are, then the numbercan be calculated accurately.



In any event, it only seems hard to believe if your threshold for disbelief is low.

It does seem hard to believe. But if they’re not being sold where are they going? Sure, a platinum DD may sit in the case for a while but even that eventually sells. I figure Rolex cares little about SS production because they’re actually selling everything else they produce. I would submit that Rolex not only sells every watch but they sell quicker than one may think.


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[Zakalwe]

Originally Posted by jrs146

It does seem hard to believe. But if they’re not being sold where are they going? Sure, a platinum DD may sit in the case for a while but even that eventually sells. I figure Rolex cares little about SS production because they’re actually selling everything else they produce. I would submit that Rolex not only sells every watch but they sell quicker than one may think.


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I may not have worded my previous post with sufficient accuracy.

Personally I don't find it hard to believe at all that Rolex sells 2000 watches per day. They could quite probably manage that solely selling to members of TRF if they only produced PepC's, BLNR's and LVc's!

They clearly do sell every single piece they produce - stockpiling watches doesn't really make any sense from a business point of view. Though of course they sell to AD's so having to get rid of nasty looking Pearlmaster's or every single variation of Datejust isn't Rolexes problem, it's the AD's. Now whether the actual AD always manages to sell everything without offloading watches to greys is another matter entirely...

[Aventura]

Originally Posted by Cato

On a side note, I find it hard to believe that almost a million Rolexes are sold every year.

And 50,000 Patek’s?

Whenever I’m at a Rolex AD, I never see folks buying. I see people joking about how expensive they are, even random guys “talking” watches, but never people handing over cards.

Maybe they are being bought over the phone? Maybe guys buy early in the mornings when I never visit?

Very good comment. I think the same. What I see coming is that there will be no more sports watches in the dealers' windows. And I'm going to tell you something imaginary ... it's not something that happens but something that I feel. I have no reason to say this but I know what happened with some very desirable brands of cars
A dealership sells a Daytona ... I suppose its utility is more or less than $ 3700 but I could also give it in consignment to a gray dealer who would try to sell it at $ 18400 and share the profit. So in that case apart from the 3700 would have another 3000 extra. I repeat that all this is imaginary but ..........

[NativeTxn]

The reason I don’t think Rolex will move as far upmarket as Patek is that a lot of the price of Patek is, correct me if I’m wrong, due to the hand finishing, engraving, etc. that goes into a Patek. Whereas Rolex has a utilitarian movement and more “machine work” than a Patek.

I’m not saying that Rolex might not try to increase prices on their SS sports models (say make the Sub date a $10,000 watch instead of $8,500, and the YM a $15,000 watch), but I’m not sure that they can justify a price higher than AP, let alone Patek.


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[Watch Admirer]

no

[Fleetlord]

I was in Houston last weekend and stumbled into the Galleria Boutique with an ally of mine who was looking for a DJ.

The store was PACKED with people. Watches that were being SOLD while I was there were TT YM, DJ and a WG DD.

No allocated watches on display. Just Exp2, EXP1 and YM from the SS line.

PACKED with PM and DJ. Whole wall full of them, ready to go..

While my ally was looking at the DJ, I asked the SA how things were going with the "shortage"...

Essentially standard Subs were a 2 month wait...and it goes up to "5yrs" for Black Daytona. White Daytona list is closed...they get asked constantly for Daytonas, but it's just flippers looking to cash in, or dreamers wasting time, so they don't really care about them.

In terms of hurting overall business, the allocation has had little effect. Just move them into GOLD or go with YM or DJ. Not a problem really...

So, that's the scoop from a high volume store. People wander in and BUY what they have...even the PM...

[sensui]

Originally Posted by Fleetlord

In terms of hurting overall business, the allocation has had little effect. Just move them into GOLD or go with YM or DJ. Not a problem really...

So, that's the scoop from a high volume store. People wander in and BUY what they have...even the PM...

This is exactly what I'm thinking (though with no real hard data behind it because I don't sit @ ADs staring @ people buying watches). All the hype behind their popular sports models are real.....but how many people go to an AD completely educated about all the different models and their nuances/complication like forum guys here versus the majority of the buyers who walk into an AD saying I want to buy a Rolex.....and guess what, the most recognized Rolex outside of the Submariner is without a doubt the Datejust with the fluted bezel. I do not believe this "shortage" hurts Rolex one bit as most of their sales are not the sports models and they'll keep selling everything else (PMs, Datejusts etc) that's readily in stock. Same goes for Patek and their Nautilus etc.....most people @ the local AD buying Pateks don't know anything about the brand....could be the demographics but it's the elderly with obviously no more bills to pay and are living their lives with spare capital to spare. They just want a pretty watch they like that's in stock that's a Patek Phillipe. They could care less about a list for a stainless steel Nautilus.

[rominvicta]

Imagine, only Chinese customers that may afford spending over 20 k per year for a Swiss brand watch increase by 1 mln per annum. How many years do you think will market need until Swiss watch industry settles and stops relying on extensive market increase?

[peterpl]

I find it hard to believe that there are heaps of ppl buying PM. When the price of housing, food and general bills/utilities are soaring including healthcare not many can afford $20k+ on a non essential item like a luxury watch.

Might work for Rolex in the interim but long term that is a crappy business model. They will need to restock their SS models sooner or later and supply will get back to normal.

I would think sooner rather than later that would occur. Its already April - this years financial year comes and goes very quickly.

[jagwap]

Non essential luxury markets tend towards going higher end when markets diminish in volume, to keep revenues similar.

[Andad]

Wot, no smilie Adam?

[Old Expat Beast]

Originally Posted by directioneng

Wot, no smilie Adam?

Just look my avatar instead, instead, Eddie.

[glamorama]

Rolex is moving upmarket but it doesn't matter if they loose some volume SS sales as they fill that and more with Tudor.

[American Jedi]

Logistically it makes sense so yes. Also Rolex is very smart marketing, and they know that something is not coveted if it is easy to get.


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[AK797]

Rolex are not moving so much as being pushed upmarket due to their being so much demand that they can price many models now far above their mid-lux competitors and really distinguish themselves, not that they hadn't already. I don't see them making moves to tap into the Haute market, they will just look to strengthen their brand position as the go to luxury watch in their market in the tough years ahead, but maybe things like decorated movements and chamfers etc will be introduced in future to help justify the higher prices and higher brand positioning.