Is Rolex moving up market long term?

[francoamerican]

First off I believe Rolex is interested in maximizing their long term returns (with appropriate stakeholder model) regardless of who owns the equity. So setting aside arguments that Rolex just does whatever it "feels" like doing because it's owned by a charitable trust...

If demand is to remain extremely strong and supply is constrained (or even if supply is not actually constrained but to seek higher margins) do you see Rolex going the direction of selling a higher proportion of PM models over time? (going the way of say patek as far as capturing that higher margin with PM pieces and steel pieces being pretty explicitly gifts to good PM clients) They could be doing this very slowly as we contemplate already.

In the current environment there would be a lot of happy AD, customers and of course Rolex would bring in greater profits. We see this to some degree with the yachmaster 42.

I personally do not believe there is enough long-term demand for Rolex watches for this strategy to work but for those of you who are extremely bullish on Rolex, do you think this is the way Rolex is headed?

(For those of you who will say this would cheapen the perceived value of PM models, that's essentially admitting that there isn't enough demand at those prices for production to increase however carefully and slowly - they still have the platinum and jewlery pieces as well)

Finally, I would not personally buy a day-date, or gold professional model at MSRP other than to flip. Other ways i would blow USD40K

[blargle]

Originally Posted by francoamerican

If demand is to remain extremely strong and supply is constrained...

you lost me here

i believe demand peaked, and is going to crash harder than crypto is right now :)

[Fleetlord]

I believe that Rolex will continue to focus on supplying the dealer with a consistent distribution of TT and PM references as they have a higher factory margin and the retail price concerns have been broached over the last few years.

The SS Professional references will be distributed accordingly to continue to drive hype and "want" among enthusiasts.

This is the way.

[ThatOtherGuy7]

It’s an interesting question. I am not sure how they would do that for the two reasons below:
- Rolex is not the best in terms of quality or inventions/movements vs other high end brands. So unless they improve on those things, I don’t see why people would pay much more for it vs VC, AP, JLC., etc.
- up market makers produce much smaller amounts of watches vs Rolex. Is it really up market if you’re a run of the mill producer? I could see them somehow introducing a separate, higher end brand.

[Solo118]

Originally Posted by Fleetlord

I believe that Rolex will continue to focus on supplying the dealer with a consistent distribution of TT and PM references as they have a higher factory margin and the retail price concerns have been broached over the last few years.

The SS Professional references will be distributed accordingly to continue to drive hype and "want" among enthusiasts.

This is the way.

Honest question, but do you think Rolex produces less PM and more SS in bad economic times?

I can definitely see PM/TT becoming easier to attain at AD level due to their margins and such, but curious if Rolex adjusts with the ebbs and flows of the worldwide economy.

[TswaneNguni]

Originally Posted by francoamerican

a charitable trust...

do you see Rolex going the direction of selling a higher proportion of PM models over time?

Trust instructions dictate percentages,it is binding .

[francoamerican]

Originally Posted by blargle

you lost me here

Supply constraint means:

"Our current production cannot meet the existing demand in an exhaustive way, at least not without reducing the quality of our watches – something we refuse to do as the quality of our products must never be compromised."

[francoamerican]

Originally Posted by TswaneNguni

Trust instructions dictate percentages,it is binding .

I'd be curious what the evidence is for this?

[JRell]

I don’t think the demand will stay this strong. Healthy demand, yes. Crazy I need to have it right now i will pay whatever for it, no.

[Fleetlord]

Originally Posted by Solo118

Honest question, but do you think Rolex produces less PM and more SS in bad economic times?

I can definitely see PM/TT becoming easier to attain at AD level due to their margins and such, but curious if Rolex adjusts with the ebbs and flows of the worldwide economy.

They might have in the past, but I don't think they will now.

[wclowe]

I’ve definitely noticed an increase in Rolex marketing of TT & PM models over the last few years coupled with the introduction of several TT and PM variants to existing references.

Call it what you will but I think the OP is correct in that there is a strategy shift for Rolex playing out before us…


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[Fleetlord]

Originally Posted by ThatOtherGuy7

It’s an interesting question. I am not sure how they would do that for the two reasons below:
- Rolex is not the best in terms of quality or inventions/movements vs other high end brands. So unless they improve on those things, I don’t see why people would pay much more for it vs VC, AP, JLC., etc.
- up market makers produce much smaller amounts of watches vs Rolex. Is it really up market if you’re a run of the mill producer? I could see them somehow introducing a separate, higher end brand.

From a WIS perspective, I can certainly see this line of thinking..

But, we WIS also tend to overthink things when it comes to those outside our realm.

While Rolex may not be the "best" in the terms described above, it is absolutely the BEST in terms of its promotional marketing to persuade the "general public" to thinking they are, indeed, the best.

So when the Rolex buyer stumbles in to the AD and the SS watches aren't available, they will more than likely go upscale and acquire a higher end Rolex (TT or PM) as they WANT ROLEX and the cost of those references aren't as off-putting as we all thought they were to the general public.

GP buyer goes into AD

WANTS ROLEX

AD Only has TT or PM "available"

GP Buyer undeterred by higher cost.....because ROLEX

Buys ROLEX

Owns ROLEX. NOW OWNS the BEST! Makes him or her THE BEST!

Rolex just went upscale...EASY

IMHO, Rolex has always been an UPSCALE or UPMARKET brand, who just happened to have "cheaper" watches.

Perhaps not Patek level of "upscale", but they certainly aren't tool watches anymore.

[train-time]

Originally Posted by Fleetlord

I believe that Rolex will continue to focus on supplying the dealer with a consistent distribution of TT and PM references as they have a higher factory margin and the retail price concerns have been broached over the last few years.

The SS Professional references will be distributed accordingly to continue to drive hype and "want" among enthusiasts.

This is the way.

Absolutely the new reality! Been in the works since early 2018 - interrupted by a pandemic.

[francoamerican]

Originally Posted by ThatOtherGuy7

It’s an interesting question. I am not sure how they would do that for the two reasons below:
- Rolex is not the best in terms of quality or inventions/movements vs other high end brands. So unless they improve on those things, I don’t see why people would pay much more for it vs VC, AP, JLC., etc.
- up market makers produce much smaller amounts of watches vs Rolex. Is it really up market if you’re a run of the mill producer? I could see them somehow introducing a separate, higher end brand.

By up market I mean just PM - not horological or finishing standards. I’m not talking about decreasing production.

[alexwatchguy]

Why fix something that isn’t broken? Sure, economy is bad right now and demand has peaked, but brand prestige is still there. To most people, a Rolex is still “the” luxury watch to have in your collection. It doesn’t need to compete with the high horology big boys, as Rolex is just as desirable as PP, AP, VC, etc…while producing and selling more watches than all of them combined.

[Adam84]

Interesting question.

In isolation if you look at supply restraints, hype etc I would say they’re trying to move up into the ‘holy trinity’…..problem is to do that they have to do more than just produce machine made, mass produced items.

I suspect the reality is supply chain issues mixed with a bit of moving themselves up. I think they’re trying to position Tudor to compete with Omega (hence the metas black bay) and separate themselves from that ‘comparison baggage’ just as omega start to catch up.

[boricuajr]

Originally Posted by blargle

you lost me here

i believe demand peaked, and is going to crash harder than crypto is right now :)

no way it will crash harder than crypto, they just got slaughtered, hopefully, they find support levels soon

as for the demand peaking, we could be close, but if models become available everyone would be ready to hand out their hard-earned cash for hot models even with a looming recession

[RyanJ]

Originally Posted by ThatOtherGuy7

It’s an interesting question. I am not sure how they would do that for the two reasons below:
- Rolex is not the best in terms of quality or inventions/movements vs other high end brands. So unless they improve on those things, I don’t see why people would pay much more for it vs VC, AP, JLC., etc.
- up market makers produce much smaller amounts of watches vs Rolex. Is it really up market if you’re a run of the mill producer? I could see them somehow introducing a separate, higher end brand.

You make good points but..

The Rolex brand is worth far more than the watches themselves. I would argue that most that buy a Rolex could care less about the watch or other brands that are better horologically... They want Rolex on the dial period.

[Fleetlord]

Originally Posted by RyanJ

You make good points but..

The Rolex brand is worth far more than the watches themselves. I would argue that most that buy a Rolex could care less about the watch or other brands that are better horologically... They want Rolex on the dial period.

I completely agree with this.

Rolex ONLY

[francoamerican]

Originally Posted by Fleetlord

I believe that Rolex will continue to focus on supplying the dealer with a consistent distribution of TT and PM references as they have a higher factory margin and the retail price concerns have been broached over the last few years.

The SS Professional references will be distributed accordingly to continue to drive hype and "want" among enthusiasts.

This is the way.

Thanks - it sounds like it's happening then in some fashion. They have to be very careful to hold back steel pro models to make the strategy work, as i think if you can get a second hand like new hot steel pro for 20K or less you'd not be readily willing to pay 40K for gold.

[teck21]

Originally Posted by RyanJ

You make good points but..

The Rolex brand is worth far more than the watches themselves. I would argue that most that buy a Rolex could care less about the watch or other brands that are better horologically... They want Rolex on the dial period.

Absolutely, Rolex is much more a brand than a watch.

Very few Rolex buyers care about the watch, and any appreciation of its wonderful qualities almost always comes from a place of blissful ignorance about all other watches.

I have absolutely no doubt they would succeed is selling anything they wanted to besides Rolex, because they’re Rolex.

Just look at the AD freebies up for sale. Free stuff given out by ADs taking on an economic life of their own. Amazing.

There is only one long term trend for Rolex demand, and only Rolex themselves can ruin that.

Emphasis on long term. Decades.


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