Anatomy of Rolex Daytona Pricing (swimming upstream)

[SS Oyster]

Just thought I’d go through this exercise.

Yes, I know the value for something is what someone else is willing to pay, but thinking through the numbers, just gasp at the real mark up.




116500 MSRP = $13,150
Tax in the US 0-10%

Dealer gets 39% discount, so wholesale is $8,021.50

Rolex must have at least a 40% margin built in, so their cost to manufacture (all in) is $4,812.90

So below are the numbers in order:

COGS = $4,813
AD cost = $8,022
MSRP = $13,150
Flipper = $30,000 - 34,000
End Buyer (Gray Pricing) = $39,750

That’s nearly 10x the cost to build! And who knows, maybe Rolex’s margin is even higher.


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[vh2k]

Newsflash... There’s no way COGS is $4,800. Probably under $2,000.

[seabreeze60]

Probably close. Rolex is a high cost producer. They should work on 60% margin selling to dealers after counting for COGC and a bunch of overhead added in (sales, marketing, advertising, corporate overhead, etc.). A Daytona at MSRP is a bargain.

[JacksonRain]

Originally Posted by SS Oyster

Just thought I’d go through this exercise.

Yes, I know the value for something is what someone else is willing to pay, but thinking through the numbers, just gasp at the real mark up.




116500 MSRP = $13,150
Tax in the US 0-10%

Dealer gets 39% discount, so wholesale is $8,021.50

Rolex must have at least a 40% margin built in, so their cost to manufacture (all in) is $4,812.90

So below are the numbers in order:

COGS = $4,813
AD cost = $8,022
MSRP = $13,150
Flipper = $30,000 - 34,000
End Buyer (Gray Pricing) = $39,750

That’s nearly 10x the cost to build! And who knows, maybe Rolex’s margin is even higher.


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You're incorrect about 39%. It's about 36% and change

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[jb335]

As an end user why do I care what the cost to manufacturer is?

That would only be relevant if I could personally manufacture a 116500.


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[scooba]

My Dealer told me about eight years ago his margin had just been reduced from 34% to 32% .

[Aquinas]

People spend hundreds of USD/EUR on sneakers, which are manufactured for pennies in a Chinese prison camp. You don't buy the product, you buy the illusion that you are young and athletic (sneakers), or a "man of wealth and taste" (watches).

[RJRJRJ]

Originally Posted by jb335

As an end user why do I care what the cost to manufacturer is?

That would only be relevant if I could personally manufacture a 116500.


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This.

[bonsai-man]

Originally Posted by Aquinas

People spend hundreds of USD/EUR on sneakers, which are manufactured for pennies in a Chinese prison camp. You don't buy the product, you buy the illusion that you are young and athletic (sneakers), or a "man of wealth and taste" (watches).

Or a “luxury watch investor”.

[minute_man]

Originally Posted by jb335

As an end user why do I care what the cost to manufacturer is?

That would only be relevant if I could personally manufacture a 116500.


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

[Andad]

I think I have read all this before?

At the end of the day the numbers mean nothing.

Only AD availability and Grey pricing have meaning.

[brandrea]

I conclude from this that there’s money in Rolex

[Harry-57]

Cost and value have very little to do with each other in this sector. Cost may come into play if the watch is freely available from ADs and there is a possibility of negotiating downwards. Which doesn't apply here.

It's the same old argument and the answer is the same too. Don't buy it if the numbers are unacceptable to you.

[Marcjvr]

It’s just funny to me that Rolex themselves are saying “we made this watch, we know best, don’t pay a cent over X for it”

Yet people pay 3X for it

[Pongster]

Gray pricing is now USD39,750? Really?

[SS Oyster]

Originally Posted by Pongster

Gray pricing is now USD39,750? Really?

DSW listed one for this.


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[Gwai]

Originally Posted by brandrea

I conclude from this that there’s money in Rolex

Hahaha, good one. A sound and sophisticated analysis!

Cheers
Marc

[padi56]

Originally Posted by brandrea

I conclude from this that there’s money in Rolex

Well just like any business even Rolex has to make a profit,but as to movement manufacture the most costly are the design and tooling to make the designed movement.Once thats done you can churn them out by the million, and like most all movement parts mainly made from quite cheap materials like brass.The most costly bits would be the escapement parts and the time the robots got to assemble the parts.

[Dougiebaby]

Originally Posted by SS Oyster

Just thought I’d go through this exercise.

Yes, I know the value for something is what someone else is willing to pay, but thinking through the numbers, just gasp at the real mark up.




116500 MSRP = $13,150
Tax in the US 0-10%

Dealer gets 39% discount, so wholesale is $8,021.50

Rolex must have at least a 40% margin built in, so their cost to manufacture (all in) is $4,812.90

So below are the numbers in order:

COGS = $4,813
AD cost = $8,022
MSRP = $13,150
Flipper = $30,000 - 34,000
End Buyer (Gray Pricing) = $39,750

That’s nearly 10x the cost to build! And who knows, maybe Rolex’s margin is even higher.


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Now do the analysis of the canvas LV duffle bag ($1,950) and Burberry Trench coat ($1,970) + 7.25% NC sales tax I bought at Christmas.

Point being, luxury goods are all way over priced ... but we buy and love them all the more for it. (BTW, notice my BLNR in the pic?)




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[brandrea]

Originally Posted by padi56

Well just like any business even Rolex has to make a profit,but as to movement manufacture the most costly are the design and tooling to make the designed movement.Once thats done you can churn them out by the million, and like most all movement parts mainly made from quite cheap materials like brass.The most costly bits would be the escapement parts and the time the robots got to assemble the parts.

Agreed

Setting aside the raw materials cost, the design and engineering that goes into making these little mechanical marvels is pretty mind boggling.

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[Amanubis]

Anyone thinking that the Zenith Daytonas should go up higher in value? Seems like a comparative bargain now!

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[macplee]

As an owner of this watch i am of two minds - the math is crazy - and when i see so many copy cats that are just as good - the zenith and esp the tudor chrono and couple that with the history or lack of history or lack of complications i just scratch my head.

isnt the daytona relative basic chrono movement and hyped due to a nice movie star owning it?

the tudor chrono that just came out - for $5k and prob cost rolex/tutor $2k or less to make and prob does 90% of the daytona?

on the other hand ....who cares...i drink alcohol grape juice for $100+ which cost the winery 10 bucks to make?

life is short - do what makes you happy. i feel great when i wear my watches....right now i LOVE my batman the most at least today.....yesterday it was the PP 5205

i am grateful for this hobby!

[SlideRacker]

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

[Mystro]

Originally Posted by Marcjvr

It’s just funny to me that Rolex themselves are saying “we made this watch, we know best, don’t pay a cent over X for it”

Yet people pay 3X for it

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.

[1665fan]

Originally Posted by Amanubis

Anyone thinking that the Zenith Daytonas should go up higher in value? Seems like a comparative bargain now!

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They should, especially the inverted 6 models.....the white zenith is certainly prettier than the ceramic white

[prnceofpersia23]

Originally Posted by Amanubis

Anyone thinking that the Zenith Daytonas should go up higher in value? Seems like a comparative bargain now!

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Haven't they already?

Great watch. I prefer the Zenith white to the ceramic white.

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[WatchGuy1966]

Originally Posted by jb335

As an end user why do I care what the cost to manufacturer is?

That would only be relevant if I could personally manufacture a 116500.


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I don't "Care" either.

But "Curious" is another matter. I am very curious. And I appreciate the OPs post as well as other commentaries.

[Calatrava r]

Originally Posted by vh2k

Newsflash... There’s no way COGS is $4,800. Probably under $2,000.

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

[faimag]

Well, and the profit margin for your Starbucks coffee is probably 1000%. I appreciate the info but it's of little use to us (end consumers).

[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.