Rolex Needs a New Business Model

[Krash]

Let’s think things through here…

The AD network provides a filter in terms of who has access and who doesn’t have access to their watches.

If they start selling watches on their website, then that opens up the flood gates quite a bit.

Millions and millions of people—that don’t have a local Authorized Dealer near them—would suddenly be one click away from making an attempt to buy a white dial ceramic Daytona or perhaps a simple 124060 Submariner.

Of course, when they do, all they’ll get is a message saying, “product not currently
available.”

The supply/demand problem wouldn’t be any better. I think it be would be a lot worse.


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[brandrea]

I think they know what they’re doing

[Bizcut1]

Too many notes, Mozart...

[Mathematoxic]

Originally Posted by Coronette

Rolex needs to sell direct to consumer. That would completely eliminate the unfair lists the jewelers manipulate. Once the watch is purchased from Rolex its sent to an authorized jeweler that has all the fakes in the case to try on and they set the watch up once it arrives at the AD of your choice. This would eliminate all the AD grey market and waiting list shenanigans. I wouldn't hesitate to go on a Rolex corporate wait list because you know its going to be handled fairly and you wont get smoke blown up your A$$ as the ADs are doing now.

It’s actually already in place and ongoing, but not operational ready yet. Rolex has indeed set up “Boutiques” for trial. Don’t have the details but that’s what I heard.
This may result in fairer wait list, but it might not and unlikely will destroy grey markets.

[Fritzli]

Rolex needs nothing not even to gift chocolate to frustrated people!

[teck21]

Originally Posted by Mathematoxic

It’s actually already in place and ongoing, but not operational ready yet. Rolex has indeed set up “Boutiques” for trial. Don’t have the details but that’s what I heard.
This may result in fairer wait list, but it might not and unlikely will destroy grey markets.

Those are not set up or owned by Rolex.

They are still AD owned and might be a concept Rolex decided on to further separate Rolex from the rest.

These ADs still know how much you spent on other merchandise at their other branches.

A fairer wait list is not at the top of any luxury brand’s priorities.

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[mquarter]

It's funny how, despite Rolex watches themselves being a real luxury product, the pre- and after-sales customer experience is anything but. Sacrifice your dignity sucking up to ADs while they treat you poorly. Dealing with scummy greys, or at the very least visiting them in stores that fall well short of luxurious. Not having the freedom to customise your watch after you bought it through dial or bracelet swaps. It's the opposite of customer centric.

But even if Rolex were moving to a corporate owned boutique model like AP, where you can at least experience a degree of politeness and a nicely furnished boutique to spend some time in, ​it's probably a ~10 year journey to get that retail footprint up. I'm guessing there's at least hundreds of ADs and to phase them out and replace will take so long and still wouldn't address the terrible customer experience problem.

The terrible customer experience is a risk to the brand of Rolex. Clearly it's damn durable because there's still no shortage of people after them. But it's not invincible.

[EEpro]

Nope


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[rmwill]

The customer experience at my AD has been fantastic. I have very little spend history besides my Explorer II and bracelet links. I recently bought a used Panerai and contacted my SA about straps. Given they sell Panerai, I was concerned that not buying a new one from them would be bad optics. Instead, the SA helped me pick out a nice replacement strap, and then told me it would be free of charge due to the loyalty points I earned from my Rolex purchase. That can't be beat. I have gotten calls for other watches since, but I only buy the references I want. This AD is top shelf.

Originally Posted by mquarter

It's funny how, despite Rolex watches themselves being a real luxury product, the pre- and after-sales customer experience is anything but. Sacrifice your dignity sucking up to ADs while they treat you poorly. Dealing with scummy greys, or at the very least visiting them in stores that fall well short of luxurious. Not having the freedom to customise your watch after you bought it through dial or bracelet swaps. It's the opposite of customer centric.

But even if Rolex were moving to a corporate owned boutique model like AP, where you can at least experience a degree of politeness and a nicely furnished boutique to spend some time in, ​it's probably a ~10 year journey to get that retail footprint up. I'm guessing there's at least hundreds of ADs and to phase them out and replace will take so long and still wouldn't address the terrible customer experience problem.

The terrible customer experience is a risk to the brand of Rolex. Clearly it's damn durable because there's still no shortage of people after them. But it's not invincible.

[Dougiebaby]

Originally Posted by mquarter

It's funny how, despite Rolex watches themselves being a real luxury product, the pre- and after-sales customer experience is anything but. Sacrifice your dignity sucking up to ADs while they treat you poorly. Dealing with scummy greys, or at the very least visiting them in stores that fall well short of luxurious. Not having the freedom to customise your watch after you bought it through dial or bracelet swaps. It's the opposite of customer centric.

But even if Rolex were moving to a corporate owned boutique model like AP, where you can at least experience a degree of politeness and a nicely furnished boutique to spend some time in, ​it's probably a ~10 year journey to get that retail footprint up. I'm guessing there's at least hundreds of ADs and to phase them out and replace will take so long and still wouldn't address the terrible customer experience problem.

The terrible customer experience is a risk to the brand of Rolex. Clearly it's damn durable because there's still no shortage of people after them. But it's not invincible.

My AD experience has been nothing except ... exceptional. They never did any of the negative practices you or anyone has claimed on this forum. I have never purchased anything from them except the watches I wanted. I had to wait for some of them but nothing unreasonable (actually quite reasonable time considering the current demand).

My total purchase history (no jewelry or anything else):

March 2019 - TH Monaco
May 2019 - DJ41
July 2019 - BLNR on jubilee (received day I asked)
December 2019 - black Daytona 116500LN (58 day wait)
December 2020 - 2nd black Daytona 116500LN (10 month wait)
December 2021 - 126610LV Starbucks (7 month wait)

Three plus years of a great relationship and wonderful customer service.


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[francoamerican]

Nothing wrong with speculating on what you would do differently if you were in charge. Or speculation about why things are so different from a five years ago.

I don’t think Rolex orchestrated the conditions, but it’s probably not hurting them. The illusion of exclusivity is a large part of being a successful luxury brand in an Industrial Age. We’re just insecure enough to buy into it.

Price at MSRP is already a barrier for most humans and market price only is frustrating because of the stories that make it appear that 1 in 10 seem to being “gifted” $10k subsidies and the fear that if you do pay market price you could lose a second time when or if demand softens.

My recommendation- if you’re out of the game and want into modern Rolex you just buy a black sub date at market price. Just buy the one sub and keep it for life and move on.

Collecting/following Rolex from there is only going to be fun if you are NOT the type of person who overthinks market timing. If you are an overanalyzer, best to get to a certain zen. Also to realize there are even cooler things than Rolex.

[rolexpatek363]

Originally Posted by Tim Plains

The situation is already out of hand and the only solutions really are to increase supply or decrease demand.

Neither of those will happen, demand is rising and production is fixed. So long as Rolex sell every watch they make, they are happy, and they probably don't care about the secondary market, because it's none of their business.

[francoamerican]

Originally Posted by rolexpatek363

Neither of those will happen, demand is rising and production is fixed. So long as Rolex sell every watch they make, they are happy, and they probably don't care about the secondary market, because it's none of their business.

Rolex certainly care about the secondary market as an indicator of expected primary demand. Demand over the next twenty years could soften for many reasons.

[904VT]

Originally Posted by RamyAshour

Tough crowd for OP! So many unnecessarily condescending comments from people to OP’s post, making me think that it is no longer enthusiasts on this forum.
Anyway, although OP wrote Rolex “needs to…”, which they obv don’t, so many people are so confident that Rolex will “never” change. What time horizon is “never”? Of course they absolutely don’t need to do anything now or in the foreseeable future, but could things change in 5 years? In 10 years? In 20 years? Of course. Would a different business model fit better with market conditions in 15 years? Who knows

I do think many people (not just TRF’s) are tired of the games and the difficulty to buy anything, which really polarizes the brand perception. Maybe some people who are not able to buy from AD’s and who wants them to change for the sake of availability are just entitled, but so are the people who got their watches in the current model and who doesn’t want to lose the exclusivity.

Again, Rolex obviously don’t need to change anything, but I don’t think the idea of selling directly to consumer is that terrible. So a few thoughts on how it could work:

- You would need to have a verified profile. Eg., when you sign on to an investment platform you need to upload a picture of your passport, take a live picture of yourself to verify the passport etc etc, and validation can take a few days. Perhaps some blockchain technology could be used as well, so I think the argument that bots/flippers would just crush the lists and make it worse is wrong.

- There would at least be some type of limit to what you can buy, so no one buys the same watch multiple times (having the Pepsi with both bracelets are apparently not excessive to some). Limits would of course be changing according the market conditions.

- You get an estimated wait time, and you make a non refundable down payment of 10%. Or perhaps a bigger down payment depending on the model. These three points should to an extent discourage flippers as it will be difficult to acquire significant stock and with potentially a few years wait time, it will be risky to buy in bulk as you cannot predict the price of a given model 2 years down the line. And that is assuming that you can even create enough profiles in your mom and dads names.

- The AD’s would go. As en example, in Denmark there are 7 AD’s in this tiny country, and for trying on a watch and delivery pick-up, 1-2 locations would be enough.

The benefits for Rolex would primarily be increased margins by eliminating the middleman, and forecasting/production efficiency would be optimal (although obv not hard atm). Also something could happen in the next 5-10 years, where it could be beneficial for Rolex to increase its customer base. Imagine how many people who now wants to buy at retail, but don’t want to or can’t afford going grey. Some of them are turned off the brand forever, but maybe some of these customers would be nice to have in 2035. Maybe those additional customers are completely unnecessary at that point (as they are now), but would Rolex really lose such a massive amount of buyers if their watches were less “exclusive” than they are today by going to a B2C model? I have no idea.

I am not saying this is the way to go for Rolex, just trying to bring a little more nuanced perspective to this topic, which is quite interesting. The model Rolex use obviously works and don’t need to change, but it is also basically a century old and with all the disruption going on in the world, it is not unfathomable that even Rolex will eventually change.

ADs take the profit margins. So if still keeping ADs for pick up are those only boutiques? How does Rolex handle the consumer questions and those that want to see the watches in person? Seems like a recipe to drive more consumers to resellers that have brick and mortars, perhaps increasing problems.

Originally Posted by rmwill

Edited for you:

That demand also comes from resellers that hoard watches artificially driving pricing. So implied it is demand.

Originally Posted by Krash

Let’s think things through here…

The AD network provides a filter in terms of who has access and who doesn’t have access to their watches.

If they start selling watches on their website, then that opens up the flood gates quite a bit.

Millions and millions of people—that don’t have a local Authorized Dealer near them—would suddenly be one click away from making an attempt to buy a white dial ceramic Daytona or perhaps a simple 124060 Submariner.

Of course, when they do, all they’ll get is a message saying, “product not currently
available.”

The supply/demand problem wouldn’t be any better. I think it be would be a lot worse.


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Exactly it would make the situation a lot worse. If it was easy to run a digital storefront with high demand items I would ask why is the GPU market having such a tough time fighting off resellers. It's been a disaster, for consumers at least.

[paxjedi]

Originally Posted by Coronette

Rolex needs to sell direct to consumer. That would completely eliminate the unfair lists the jewelers manipulate. Once the watch is purchased from Rolex its sent to an authorized jeweler that has all the fakes in the case to try on and they set the watch up once it arrives at the AD of your choice. This would eliminate all the AD grey market and waiting list shenanigans. I wouldn't hesitate to go on a Rolex corporate wait list because you know its going to be handled fairly and you wont get smoke blown up your A$$ as the ADs are doing now.

Yep, tell them what you really think. In fact, send them all your business credentials that go back 40 years in senior management positions in Fortune 500 companies with turnaround experience so you can go apply for the CEO or COO position. Tell them you have an MBA from Harvard Business School and you had a startup in Silicon Valley that you sold for $4 billion.

Good luck.


.

[dpt.calvin]

Originally Posted by RamyAshour

Tough crowd for OP! So many unnecessarily condescending comments from people to OP’s post, making me think that it is no longer enthusiasts on this forum.
Anyway, although OP wrote Rolex “needs to…”, which they obv don’t, so many people are so confident that Rolex will “never” change. What time horizon is “never”? Of course they absolutely don’t need to do anything now or in the foreseeable future, but could things change in 5 years? In 10 years? In 20 years? Of course. Would a different business model fit better with market conditions in 15 years? Who knows

I do think many people (not just TRF’s) are tired of the games and the difficulty to buy anything, which really polarizes the brand perception. Maybe some people who are not able to buy from AD’s and who wants them to change for the sake of availability are just entitled, but so are the people who got their watches in the current model and who doesn’t want to lose the exclusivity.

Again, Rolex obviously don’t need to change anything, but I don’t think the idea of selling directly to consumer is that terrible. So a few thoughts on how it could work:

- You would need to have a verified profile. Eg., when you sign on to an investment platform you need to upload a picture of your passport, take a live picture of yourself to verify the passport etc etc, and validation can take a few days. Perhaps some blockchain technology could be used as well, so I think the argument that bots/flippers would just crush the lists and make it worse is wrong.

- There would at least be some type of limit to what you can buy, so no one buys the same watch multiple times (having the Pepsi with both bracelets are apparently not excessive to some). Limits would of course be changing according the market conditions.

- You get an estimated wait time, and you make a non refundable down payment of 10%. Or perhaps a bigger down payment depending on the model. These three points should to an extent discourage flippers as it will be difficult to acquire significant stock and with potentially a few years wait time, it will be risky to buy in bulk as you cannot predict the price of a given model 2 years down the line. And that is assuming that you can even create enough profiles in your mom and dads names.

- The AD’s would go. As en example, in Denmark there are 7 AD’s in this tiny country, and for trying on a watch and delivery pick-up, 1-2 locations would be enough.

The benefits for Rolex would primarily be increased margins by eliminating the middleman, and forecasting/production efficiency would be optimal (although obv not hard atm). Also something could happen in the next 5-10 years, where it could be beneficial for Rolex to increase its customer base. Imagine how many people who now wants to buy at retail, but don’t want to or can’t afford going grey. Some of them are turned off the brand forever, but maybe some of these customers would be nice to have in 2035. Maybe those additional customers are completely unnecessary at that point (as they are now), but would Rolex really lose such a massive amount of buyers if their watches were less “exclusive” than they are today by going to a B2C model? I have no idea.

I am not saying this is the way to go for Rolex, just trying to bring a little more nuanced perspective to this topic, which is quite interesting. The model Rolex use obviously works and don’t need to change, but it is also basically a century old and with all the disruption going on in the world, it is not unfathomable that even Rolex will eventually change.

Yeh that would drive me away from the brand more than the current situation. Try again.

[rmwill]

Quote of 2022 so far!

Originally Posted by Bizcut1

Too many notes, Mozart...

[rmwill]

The demand comes from people with wealth all over the world willing to pay the market price for Rolex watches. The resellers have zero to do with that.

Take some 100 level Econ courses and you might find dealer conspiracy theories a little far fetched.

Originally Posted by 904VT

That demand also comes from resellers that hoard watches artificially driving pricing. So implied it is demand.

[rmwill]

But conspiracy theories are much more fun!

Originally Posted by rolexpatek363

Neither of those will happen, demand is rising and production is fixed. So long as Rolex sell every watch they make, they are happy, and they probably don't care about the secondary market, because it's none of their business.

[Tricolore66]

My $.02

I'd like to see some sort of official certified pre-owned program from Rolex and encourage dealers to take trade-ins. They could eliminate international warranties and make their warranty coverage valid for only the original owner or on certified used pieces sold through AD's. If anyone else wants a warranty for a watch purchased outside of the official Rolex dealer network they can send their watch to an RSC for service and a warranty, which they have to pay for.

If there were no international warranties I promise you'd see a lot fewer watches moving from Europe and North American into China.

If an AD takes a trade in that's less than a year old they can't resell it as used. This keeps AD's from immediately turning new watches into used BNIB watches to be sold at market price.

Make AD's deliver new watches to bonafide buyers within a reasonable time of receiving them. This would keep AD's from filling their safes with the hot pieces to dole out to the $100k club.

[PureCoconut]

You tell em, boss.

[dchernikoff]

The amazing thing to me is that in a market situation where you are selling a product that is in such high demand that retailers can't keep them on the shelves, the normal reaction is for the manufacturer to raise prices. Classic supply and demand economics. But Rolex isn't doing this. Why not??? Yes, for us mere mortals the prices are effectively going up since Greys and flippers snatch up the inventory and sell them at 2x. But Rolex isn't getting any of that, and they are the creators.

What is Rolex thinking???

-Dan

[francoamerican]

Originally Posted by dchernikoff

The amazing thing to me is that in a market situation where you are selling a product that is in such high demand that retailers can't keep them on the shelves, the normal reaction is for the manufacturer to raise prices. Classic supply and demand economics. But Rolex isn't doing this. Why not??? Yes, for us mere mortals the prices are effectively going up since Greys and flippers snatch up the inventory and sell them at 2x. But Rolex isn't getting any of that, and they are the creators.

What is Rolex thinking???

-Dan

They are keeping supply levels where they are because they do not know what demand will be in 20 years and it’s worse for the brand (if you take the long view) to have 1 watch too many for the next 20 years than too few.

Also if they raised retail prices to meet demand today, many of the aspirational customers would go away over the coming years

AP and Patek can relatively veblen because their customers are self screening already

[VegasBaby]

Originally Posted by Kevin of Larchmont

Tesla didn’t have to blow up an established dealer network and completely reconfigure their existing distribution, did they.

Originally Posted by Stranger

I think it would make sense for Rolex to control the lists and allocation but to let the ADs gather the names and do the final distribution. A potential customer would have to go to an AD to give their name & info (incl. email). The AD would enter that into the system. A few weeks / months / years later, Rolex would email the customer & the AD that there watch will be available for pick up at the AD at a given date. They could even send the watch 2 weeks early to the AD to "fill the cases".

The advantage of such a system is that it keeps the AD happy, it's (more) transparent & fair for the customer, and the list management is quite simple to manage. There's still a question of whether to limit the number of entries per person on the overall list, but that's a small problem compared to the current situation.

[francoamerican]

AP incidentally is going direct to consumer - but it’s a much smaller ship to turn.

[Tricolore66]

Rolex has dramatically increased pricing with the introduction of the 6-digit series, and has continued to slowly increase since. Their respective MSRP's are pushing top of the market for a mass produced Swiss watch relative to their most direct competitors, current open-market pricing madness notwithstanding. It wasn't ancient history (around 2008-09) that the Swiss watch industry was in serious, serious trouble. Rolex fared better than most, but other than Daytonas you could pretty much buy anything out of the case and it wasn't hard to get a discount, and PM model discounts started at 20% without much pushing. Some major brand powerhouses were buying back their inventory from their AD's and destroying watches to keep them from being dumped on the secondary market for pennies on the dollar and destroying their brand equity. I think that this period is what really empowered the grey market dealers, as they were the outlet that many AD's were using to try to stay liquid, and manufacturers generally turned a blind eye, at least for awhile.

Point is, all luxury brands have to be careful about price increases, because you can't ever really go backwards if you get it wrong.

I'm not sure we'll ever see a normal Rolex market again, but this isn't sustainable and there will absolutely be reset.

Originally Posted by dchernikoff

The amazing thing to me is that in a market situation where you are selling a product that is in such high demand that retailers can't keep them on the shelves, the normal reaction is for the manufacturer to raise prices. Classic supply and demand economics. But Rolex isn't doing this. Why not??? Yes, for us mere mortals the prices are effectively going up since Greys and flippers snatch up the inventory and sell them at 2x. But Rolex isn't getting any of that, and they are the creators.

What is Rolex thinking???

-Dan

[904VT]

Originally Posted by rmwill

The demand comes from people with wealth all over the world willing to pay the market price for Rolex watches. The resellers have zero to do with that.

Take some 100 level Econ courses and you might find dealer conspiracy theories a little far fetched.

Trust me I have way more education in economics than most.

There is no conspiracy, it's extremely straightforward. Look beyond one layer and look to Econ 400 level courses at minimum. ADs sell to big purchasers (including resellers), that in turn buy watches they don't want in order to move up the purchase list for the hot items. ADs move slow selling watches as desired, along with supporting high secondary market prices. Their profit margins are the same if selling to 10 small buyers or 1 reseller if selling the same quantity. There are no discounts anymore. It's desirable for them to encourage.

As others have mentioned what we have today, boarders a Veblen good with no close substitute (unless you consider Rolex a Giffen good relative to Patek and AP). As a result resellers that hoard inventory hold all the power in setting secondary market pricing, which in turn impacts MSRP demand aka the part you are focusing on most. The inventory sitting in reseller safes that is not getting in hands of consumers i.e. low inventory turnover, is deadweight loss to the consumer.

You're thinking way to much about basic finance/economics and not enough behavioral finance or econometrics. Now go do some multiple linear regression and try again with a multi-factor relationship, not simple linear demand. Do a cross on global currency valuations vs Swiss Franc, along with public sector spending trends and inflation, all against the pricing of Swiss Watches and Crypto trends. It's not as simple as people with money, want big fancy watch. People have been saying for years now that it's just increased demand. Historically that's how it worked, but that's an out of date mindset proven incorrect over and over again the last 5 to 6 years that does not hold true today.

[rolexpatek363]

Originally Posted by rmwill

But conspiracy theories are much more fun!

Apparently so!

[SubMillennial]

if you believe Paul Thorpe, this VIP shenanigans is coming to an end as Rolex moves more exclusively to the boutique model where you won't be forced to buy jewelry or other brands, and Rolex will have much more strict guidelines for how pieces are allocated

[bluestreak]

Originally Posted by 904VT

Trust me I have way more education in economics than most.

There is no conspiracy, it's extremely straightforward. Look beyond one layer and look to Econ 400 level courses at minimum. ADs sell to big purchasers (including resellers), that in turn buy watches they don't want in order to move up the purchase list for the hot items. ADs move slow selling watches as desired, along with supporting high secondary market prices. Their profit margins are the same if selling to 10 small buyers or 1 reseller if selling the same quantity. There are no discounts anymore. It's desirable for them to encourage.

As others have mentioned what we have today, boarders a Veblen good with no close substitute (unless you consider Rolex a Giffen good relative to Patek and AP). As a result resellers that hoard inventory hold all the power in setting secondary market pricing, which in turn impacts MSRP demand aka the part you are focusing on most. The inventory sitting in reseller safes that is not getting in hands of consumers i.e. low inventory turnover, is deadweight loss to the consumer.

You're thinking way to much about basic finance/economics and not enough behavioral finance or econometrics. Now go do some multiple linear regression and try again with a multi-factor relationship, not simple linear demand. Do a cross on global currency valuations vs Swiss Franc, along with public sector spending trends and inflation, all against the pricing of Swiss Watches and Crypto trends. It's not as simple as people with money, want big fancy watch. People have been saying for years now that it's just increased demand. Historically that's how it worked, but that's an out of date mindset proven incorrect over and over again the last 5 to 6 years that does not hold true today.

This is all based on the assumption that ADs are just shoveling watches to greys and that the resellers are hoarding watches. I don’t think anyone has given any evidence that those things are happening.

This is not an Econ 400 problem. It’s a price ceiling and arbitrage problem. Hoofbeats usually equal horses and not zebras.

But I guess I’m impressed you know a bunch of economic terms.