Cost vs value vs worth of a Rolex.

[Josunese1975]

Ever wondered how much it costs Rolex to produce a watch? I understand that any given item is only worth what someone is willing to pay. Whether it is a car, plane, watch, house, painting etc.... just curious what it costs Rolex, or any other watch brand, to manufacture or produce a single watch. If a Submariner or GMT is $10,000 MSRP then does the AD purchase from Rolex at $5,000 ~$6,000? Then did it cost Rolex only $2,000 ~ $2,500 to actually produce? Everyone has to make a profit. So when we say "that's a 10K watch", it's really a $2,500 watch? Just bored today so I pose this question.

[PenDelicate]

Before you build your first Rolex you've to build a factory and hire thousands of people.

So that first watch will _reeeeeeally_ sting.

[Guppydriver]

https://millenarywatches.com/rolex-markup/

Here is a decent article. Rolex, like any luxury goods brand, goes to lengths to avoid revealing production costs. There is no doubt there are some healthy margins though, especially in PM models.

[aftereffector]

Anybody with real numbers is likely to be under NDA until the heat death of the universe but I expect the cost to the manufacturer for a relatively high end (not completely hand built) watch like a Rolex to be 10-15% of MSRP.

[enjoythemusic]

Originally Posted by PenDelicate

Before you build your first Rolex you've to build a factory and hire thousands of people.

So that first watch will _reeeeeeally_ sting.

Yup ^^^^

But WAIT, there's more!

Setup distribution, deal with various import regulations.... and of course service locations and staff.

So, how are people to find out about your company's newest Thingamajigger?

[996marty]

Whatever the cost is to manufacture a watch looks like they are clearly doing something right

[Krash]

I have seen people on other forums say a Rolex costs way more than it should. To be clear, I don't buy watches as an investment. That is the furthest thing from my mind, but when someone says the MSRP cost of a Rolex is overpriced, it makes me chuckle.

I bought a Submariner in 2018 for $7,500, and today it's worth north of $10,000 on the open market. I just don't know how anyone can consider the watch over-priced. Now, if my Submariner was worth $4,500 instead, then maybe we can have that discussion.

[Tim Plains]

It wouldn't surprise me if their actual cost/unit was in the $200-$300 range.

[bluestreak]

Originally Posted by Tim Plains

It wouldn't surprise me if their actual cost/unit was in the $200-$300 range.

Not when you include labor and rent/depreciation.

[Tricolore66]

The watch hasn’t changed, you money is just worth less than it used to be.

Most manufacturers of consumer goods markup 10-20x actual manufacturing cost, not including R&D, tooling, etc. Of course a watch is more complicated than a purse or pair of shoes, and less markup. I could see a watch with a $10k MSRP, that they wholesale to the dealer for $6500 costing $650 in materials and actual labor.

There are some YouTube videos of a guy tearing apart luxury purses and discussing how they are constructed and what the manufacturing costs are likely to be. Very interesting.

Originally Posted by Krash

I have seen people on other forums say a Rolex costs way more than it should. To be clear, I don't buy watches as an investment. That is the furthest thing from my mind, but when someone says the MSRP cost of a Rolex is overpriced, it makes me chuckle.

I bought a Submariner in 2018 for $7,500, and today it's worth north of $10,000 on the open market. I just don't know how anyone can consider the watch over-priced. Now, if my Submariner was worth $4,500 instead, then maybe we can have that discussion.

[Subshark1861]

Originally Posted by Tim Plains

It wouldn't surprise me if their actual cost/unit was in the $200-$300 range.

Come on, it probably takes a half a day just to assemble the movement. I would guess that a fully trained watchmaker would like to earn at least £150 a day.

[Subshark1861]

Originally Posted by enjoythemusic

Yup ^^^^

But WAIT, there's more!

Setup distribution, deal with various import regulations.... and of course service locations and staff.

So, how are people to find out about your company's newest Thingamajigger?

I just love your avatar. I spend much more time than I should looking at it!

[Mrngrz46]

The ratio between product cost and price is 5.5
+/-

[Calatrava r]

Originally Posted by bluestreak

Not when you include labor and rent/depreciation.

Just labor and materials, he is probably close.

[Chewbacca]

I walk like a tripod when I wear it. That’s priceless.

[Driver8]

Originally Posted by Tim Plains

It wouldn't surprise me if their actual cost/unit was in the $200-$300 range.

Maybe in material cost alone, but not when everything else is factored in.

That said (and somewhat predictably where Rolex is concerned!) no-one knows for sure. A quick Google search throws up various "expert" opinions that range anywhere from $800 to $4000 for steel models.

[Krash]

Originally Posted by Tricolore66

The watch hasn’t changed, you money is just worth less than it used to be.

.

Not sure that’s a good argument. It’s outpacing inflation.


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[MikeyV]

There's only about $6000 worth of platinum in a Daydate - the other $55,000 comes from somewhere. :)

[JDsnewwatch]

I see this every once in a while in regards to healthcare. People are outraged at the cost (sorry, just for Americans) Yes, a bandaid costs like a nickle, and a Tylenol costs like 30 cents. That nurse who helped triage you? She makes 130K per year. That physician that did your stitches? He bills at 650/hour. The MRI machine that you were in? That cost 2.8 million dollars. So, yes, your bandaid and Tylenol are grossly over charged, but you didn't juts come in for a bandaid and a Tylenol, did you?

So, maybe a Rolex in raw materials costs $600.00. That balance spring will run you an additional $600.00 - $800.00. Then you need the parts to fit right? So, you need a watchmaker. By now you know that those cost big bucks.

You want it to look nice? well, (dont hate me), someone is going to have to polish it.. you need machines for that and people who can do it..

[GradyPhilpott]

No one is going to know or admit to knowing any hard numbers when it comes to Rolex.

However, there are some good articles on the internet that make it known just about everything that Rolex does in the process of building a watch, from making their own alloys, to testing each and every watch for accuracy, after it comes back from back from COSC. Then there's the R&D that is an ongoing process year after year after year.

These are the things that one must appreciate, before trying to attach a production cost to any Rolex.

I'm not posting any links, because everyone knows how to use Google and doing one's own research will yield a greater appreciation for the brand.

[Robf52]

Originally Posted by GradyPhilpott

No one is going to know or admit to knowing any hard numbers when it comes to Rolex.

However, there are some good articles on the internet that make it known just about everything that Rolex does in the process of building a watch, from making their own alloys, to testing each and every watch for accuracy, after it comes back from back from COSC. Then there's the R&D that is an ongoing process year after year after year.

These are the things that one must appreciate, before trying to attach a production cost to any Rolex.

I'm not posting any links, because everyone knows how to use Google and doing one's own research will yield a greater appreciation for the brand.

Good points.

[MILGAUSS88]

Doing a little internet research. They make a 1,000,000 watches a year and employee 30,000 people. So each employ accounts for 33.3 watches a year.
The average salary (according to the internet) is $50,000/yr, which would equal $1,500/watch + materials and manufacturing+ $50 advertising per watch.

I'm guessing about $3,000 for a SS watch.

[Gab27]

The number could vary drastically depending on if you are just talking about physical materials, or if you are also counting things like labor (including training, healthcare, retirement, etc.), R&D, tooling/equipment, expected warranty claims, shipping/packaging/storage, loss/theft, marketing/promotional items, AD management/training, project/operational management, various administrative services, subcontracted services, etc.

Materials costs would also vary considerably if we are talking about PM vs SS. Presumably, they make a lot more SS than they do PM and, averaged out, materials costs alone would still likely be pretty low. But materials costs don't really tell us more than the cost of the materials and this is usually only a small portion of the production costs.

[joli160]

Originally Posted by MILGAUSS88

Doing a little internet research. They make a 1,000,000 watches a year and employee 30,000 people. So each employ accounts for 33.3 watches a year.
The average salary (according to the internet) is $50,000/yr, which would equal $1,500/watch + materials and manufacturing+ $50 advertising per watch.

I'm guessing about $3,000 for a SS watch.

Sounds about right, the Suisse average salary is even a bit higher, closer to 95000 USD yearly.

[csaltphoto]

One way to look at it is what it costs other manufacturers to make a similar watch. Take Steinhart for example. A sub homage costs around $600. The movement is ~$200, probably a lot less in bulk. They are using EU labor costs, at least for part of the process. I've seen one and it's no Rolex but they aren't terrible either and more or less do the same thing with the same water resistance. They sell direct so I'm guessing their costs are around $200-300 per watch.

Even a COSC ETA movement is only about twice as much (~$350) and COSC is COSC. Certainly comparable to a Rolex movement. Rolex spends more time on finishing, marketing and so on. There is the inhouse support of making the movements (BUT... ETA can still make a COSC certified movement in the EU and sell if for ~$350 and make money...) The point is sometimes bringing manufacturing inhouse is to save money, at least in the long run.

Sooooo.... Given the better finishing, fairy dust, marketing and so on I'm guessing a SS Rolex costs Rolex something on the order of 1-2K to make. $1500 is a reasonable number.

[Krash]

Originally Posted by MILGAUSS88

Doing a little internet research. They make a 1,000,000 watches a year and employee 30,000 people. So each employ accounts for 33.3 watches a year.
The average salary (according to the internet) is $50,000/yr, which would equal $1,500/watch + materials and manufacturing+ $50 advertising per watch.

I'm guessing about $3,000 for a SS watch.

Glad someone is looking at it the right way…

So if those employee numbers are right, then total salary expense is $1.650 billion. Let’s assume that payroll represents 30% of all expenses (which is fairly typical for manufacturers), then total expenses would be approximately $5.5 billion.

So if total expenses are $5.5 billion and they produce 1 million watches, then it costs an average of $5,500 per watch.

That’s a rough estimate, but if you produce widgets, and you want to know how much each widget costs to make, you would divide total expenses by number of widgets produced.


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[INC]

I don't understand the topic.

In the case of a manufacturer that could sell all of its models above MSRP, the question is not how much a piece of material and labor costs, but why Rolex doesn't sell more expensively so that they can actually be bought at ADs?

Anyway, this kind of socialist thinking is simply incomprehensible, the only good is that you didn't go yet so far as to measure a Picasso painting by the value of the paint and canvas used...

[KatGirl]

Under $1000, for sure. The best Chinese made 1 : 1 clones cost about $1,200, and they certainly make a profit, so under $1,000 sounds logical, and, of course, their workers are paid less. So, if they make a healthy profit selling clones, that gives us a reasonable guess of the true initial value.

Kat


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[chris242]

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[Krash]

Originally Posted by KatGirl

Under $1000, for sure. The best Chinese made 1 : 1 clones cost about $1,200, and they certainly make a profit, so under $1,000 sounds logical, and, of course, their workers are paid less. So, if they make a healthy profit selling clones, that gives us a reasonable guess of the true initial value.

Kat


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As a business man and a Sr Executive, I’m thinking the only way Rolex could get under $1,000 per watch is if they outsource either all or a huge percentage of production to China. And that would entail laying off a huge percentage of their workforce. Otherwise, the math is never going to work out for you.


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