Rolex cost vs. MSRP

[txbikerdude]

I am sitting here wondering, a YG day\date is 24K... how much do you think it cost rolex (excluding soft costs) to make the watch... 10k? less?

[ijen0311]

Originally Posted by txbikerdude

I am sitting here wondering, a YG day\date is 24K... how much do you think it cost rolex (excluding soft costs) to make the watch... 10k? less?

At least their profits go to charity

[txbikerdude]

suuuuuuure they do

[Bisquitlips]

If you are only talking materials, I would bet a lot less than that.

If you factor in all the R&D, robotics, salaries, and so forth I would think about 6 - 8K, but we really have no way of knowing.

[aelvin]

more like 7-8K

[penangite]

I was told the ADs get less than 30% off list. So my guess is 28% for retail. Does anyone know the exact retail margin?

[DrSheily]

What do you mean by "soft cost"?

[Frank 21]

AD's make 40%..I was told this from an AD.

[Parachrom]

Are ypou asking what are rolex direct laid down costs to make a specific watch?

They robotics and machines have probably been written down a long time afgo, leaving a fair bit of profit. If 18kt gold is worh x dolars per gram, weigh a case which is 18kt and you multiply to, get the cost of the case. at lweast inn terms of its gold.

[penangite]

Wow! If ADs really make 40% ... then this is the time (recession) to ask for 30% plus discount. What's the maximum discount on new watches has any of you ever heard? 20% max?

[eminere™]

Just over 20% at my dealer.

[Yume-sama]

The actual cost depends on the watch. Some have a much higher mark up than others. It's not uniform across the board.

[landroverking]

Originally Posted by Frank 21

AD's make 40%..I was told this from an AD.

I would say most watches and AD's work on a Keystone mark up. So if a watch retails for 10K they have about 5K in it. So in these times a 20 to 30% discount still brings money into the store. This does not take into account the AD marking the price up on old stock when Rolex or some other company takes a price increase.

[BigHat]

Originally Posted by Yume-sama

The actual cost depends on the watch. Some have a much higher mark up than others. It's not uniform across the board.

This is true.

That the AD has a 40% mark-up from what he pays means little in answering this question of what they cost ot make other than we know Rolex isn't work for nothing so we know the cost is less than that.

Cost of metals and diamonds isn't a huge factor. The difference in price between a SS GMT-IIC and the 18kt YG version far exceeds the precious metal cost.

As was said, we have no clue. Comments like the robots are already paid for show an absence of understanding that their manufacturing processes constantly evolve and equipment is replaced, upgraded, etc.
In the case of Rolex, I'd bet 10% of the "expense" involves marketing efforts alone.
As was said, it a pure guess because they disclose nothing, but with the economies of scale that come from a million units a year, I say the cost of the watch and the box is less than 20% of the sales price on average.

[m2steven]

They have many standard pieces mass manufactured by machinery which only needs to be kept within tolerance. They don't change styles very often.

Economics dictates that each piece, if manufactured and then sold, gets cheaper to produce. Rolex's standard models must be very inexpensive to manufacture even when adding in the cost of gold, platinum, and diamonds. The sales price to marginal cost is huge.

They manufacture the same movements by the millions. Again this would tend to drive the production costs down. It's a great business model.

Production costs are small. Add in advertising to promote and maintain image, sponsorships of sporting events, etc, ups the cost.

If Rolex is run by smart people, they should be making a literal fortune on their products. Even when they do a small run of diamond encrusted meteorite with a live elephant skin strap - they price it such that it's impossible not to make a huge margin.

It's like Ferrari, Porsche, and yes, Corvette. If you just keep meeting and exceeding expectations - you can keep your margins high because you can absolutely COUNT on the experience you are buying.

[sub2004]

I was watching a CNN/BBC news item on TV and they were talking about the crashing car industry.

The average car takes only $800 US Dollars in steel to make it. Such car then costs retail around 15-20 grand etc.

It was an interview on the cost of retired car workers health insurance per car being more then the cost of steel in the car, so large car companies with lots of retired workers were facing huge medical care costs per car sold eating into profit.

But goes to show, $800 bucks of steel in a car. And a car is pretty big.

I'm guessing the cost of an ss sub would be like around a hundred bucks!!

[BigHat]

Originally Posted by sub2004

I was watching a CNN/BBC news item on TV and they were talking about the crashing car industry.

The average car takes only $800 US Dollars in steel to make it. Such car then costs retail around 15-20 grand etc.

It was an interview on the cost of retired car workers health insurance per car being more then the cost of steel in the car, so large car companies with lots of retired workers were facing huge medical care costs per car sold eating into profit.

But goes to show, $800 bucks of steel in a car. And a car is pretty big.

I'm guessing the cost of an ss sub would be like around a hundred bucks!!

I think your premise is fine, but your conclusion that it's a "hundred bucks" is a gross exaggeration. A car and a watch are pretty different and you seem to be comparing them by weight.
That said, the materials alone means little in the cost of fabricating a precision timepiece. Okay, total forget indirect labor and overhead (though totally unfair to do so) costs, the direct labor and machine time involved is significant.

[cody p]

the bottom line is that none of us really know, but i'm guessing i overpayed for it by thousands!

[sammiepug]

I was offered 25% for Exp II white dial in beginning of this year

[Tombstone]

I don't know what it costs. I was told $500.00 for a SS Sub. I can see that as true. I know AD mark up is 40%. Like anything else it cost little to make and it's marked up. My childhood friend grew up and works for Ford Motor Co. A Ford GT Mustang costs $7,000 to build then Ford asks up to $29,000 (just an example of profit).

[rijowysock]

i would say since AD's get 40%, the distrib more than likely gets another 15% and the manufacturer sells and makes 15% leaving 30% as the cost of item...

because i mean, rolex wouldnt sell watches unless THEY were making money... then rolex USA is separate entity and they need $ and then AD's want money...

the actual costs per watch would be very low BUT this is same with any good... you must then build profit into the piece for each person that handles it to encourage sales.

[Z-Sub]

Well, it's interesting to know but the bottome line is, no one is going to get one at the price that is anywhere close to whatever that cost is

[Andad]

Originally Posted by BigHat

This is true.

That the AD has a 40% mark-up from what he pays means little in answering this question of what they cost ot make other than we know Rolex isn't work for nothing so we know the cost is less than that.

Cost of metals and diamonds isn't a huge factor. The difference in price between a SS GMT-IIC and the 18kt YG version far exceeds the precious metal cost.

As was said, we have no clue. Comments like the robots are already paid for show an absence of understanding that their manufacturing processes constantly evolve and equipment is replaced, upgraded, etc.
In the case of Rolex, I'd bet 10% of the "expense" involves marketing efforts alone.
As was said, it a pure guess because they disclose nothing, but with the economies of scale that come from a million units a year, I say the cost of the watch and the box is less than 20% of the sales price on average.

Hi Matt,

Yes, I think your figure is fairly close but I would guess more in the 25% - 35% depending on the model after factoring in all the variables from advertising to equipment replacement costs etc etc etc.
Having said that we also need to consider the expertise and skill required to turn a few ounces of gold into a YG GMT IIc for example and all made in-house??

[BigHat]

Originally Posted by directioneng

Hi Matt,

Yes, I think your figure is fairly close but I would guess more in the 25% - 35% depending on the model after factoring in all the variables from advertising to equipment replacement costs etc etc etc.
Having said that we also need to consider the expertise and skill required to turn a few ounces of gold into a YG GMT IIc for example and all made in-house??

Hi Eddie,
See your point. As is often the case, we start with a nebulous question and then answers stem from the perceptions of what's asked. If you dismiss: the indirect labor such as janitors, admin, logistics folks etc. (globally), costs of advertising, all other image branding, RDT&E, training costs, etc. Now of course, that's impossible to do in an assessment of true profit but for humor's sake. Now add up: the cost of raw materials, the amortized cost of equipment to fabricate those materials for that specific unit, the cost of direct labor to assemble the watch and all supply chain part expenses like Millie GV crystals etc. What percent of retail to you think that is?

I'm thinking 10% max and if we add in all those necessary but indirect expenses, I say 30%.

[argee1977]

An AD makes about 40% off the watch, but with that he's got to pay the government their money and run the stores, so there's no real chance of 30% discounts as the 10% they make would twindle down when tax is taken off.

As for the cost of a watch, well i doubt they cost that much, even the amount of gold in a watch isn't that much, look at a solid gold GMT IIC, how many grams is really in that watch, remember the glass, movement, bezel and dial aren't gold, that leaves the case, bracelet and finishing parts, so maybe 2 ounces (55 grams), at current market value that $1800 worth of gold, now multiply by 0.75 (18k gold is 75% pure), that's $1350 worth of gold, even if it's double that in weight that's only $2700 worth of gold in the watch!

I'm in the UK and a quick example is the GMT IIC, the SS model retails for £4360, the Gold model is £15900, that's a difference of £11540, that equates to 500 grams of gold!!!!!

[Rolex Lover]

Originally Posted by aelvin

more like 7-8K

I can guess so, Aelvin!!!!!!!!!!

[argee1977]

Originally Posted by Rolex Lover

I can guess so, Aelvin!!!!!!!!!!

If you remove the tooling costs for rolex as i would say it's all paid for now then you're talking about:

Movement - cost to produce = $200 or less
Bracelet - cost to produce = $150 or less
casing - cost to produce = $100 or less
Dial and hands = $50 or thereabouts
Assembly = $100

It's not a lot of money, you just have to look at what the likes of Seiko produce for a similar style watch and the cost of that, Rolex use a similar material for all of it, so $7-8k is way too high in my opinion.

[boa2]

Originally Posted by sub2004

I was watching a CNN/BBC news item on TV and they were talking about the crashing car industry.

The average car takes only $800 US Dollars in steel to make it. Such car then costs retail around 15-20 grand etc.

It was an interview on the cost of retired car workers health insurance per car being more then the cost of steel in the car, so large car companies with lots of retired workers were facing huge medical care costs per car sold eating into profit.

But goes to show, $800 bucks of steel in a car. And a car is pretty big.

I'm guessing the cost of an ss sub would be like around a hundred bucks!!

If you can get around town on a $800 block of steel, you will have revolutionized the car industry.

There's a bit more to it than that, just as there is when it comes to delivering a Rolex. The cost of the raw parts--which we're guessing at--is a mere fraction of the true cost of producing the final piece, maintaining the machines, paying the light bills, labor, taxes, patents, attorneys, administrative fees, COSC certification, parts waste, promotional events, marketing, ambassadors, packaging, plus transporting it to a convenient place where you can purchase it...with probably hundreds of additional costs that I've failed to name, all of which can be associated with every piece produced.

Sounds easy enough. Why not give it a go?

[Spark]

Originally Posted by argee1977

If you remove the tooling costs for rolex as i would say it's all paid for now then you're talking about:

Movement - cost to produce = $200 or less
Bracelet - cost to produce = $150 or less
casing - cost to produce = $100 or less
Dial and hands = $50 or thereabouts
Assembly = $100

It's not a lot of money, you just have to look at what the likes of Seiko produce for a similar style watch and the cost of that, Rolex use a similar material for all of it, so $7-8k is way too high in my opinion.

You can't forget tooling it is never paid for when you continually upgrade and change things as Rolex do, or any business trying to stay ahead of the game does.
As Matt (Bighat) has also mentioned you need to factor in indirect labour advertising etc etc.
Big businesses have BIG overheads, premises, labour, pensions, corporation tax and the list goes on.
Other than just fun guess work on a forum like this you would need to have all of the company accounts and production line schedules of each particular model to work out the cost of each particular watch using time invested, parts invested, advertising and all other corporate expenses including the directors lunches

[argee1977]

Originally Posted by Spark

You can't forget tooling it is never paid for when you continually upgrade and change things as Rolex do, or any business trying to stay ahead of the game does.
As Matt (Bighat) has also mentioned you need to factor in indirect labour advertising etc etc.
Big businesses have BIG overheads, premises, labour, pensions, corporation tax and the list goes on.
Other than just fun guess work on a forum like this you would need to have all of the company accounts and production line schedules of each particular model to work out the cost of each particular watch using time invested, parts invested, advertising and all other corporate expenses including the directors lunches

Yeah, but people seem to think tooling adds thousands, in reality you're talking about a million watches a year being produced, Rolex may spend $50 million on machinery which equates to $50 per watch, put that in with the assembly.

As i stated, the same type of machinery is being used by Seiko, Citizen, etc to produce watches, if it's cost effective for a $300 watch then what is it going to be for a $20000 watch!