Reply With QuoteOriginally Posted by Enoch
Judging by some of the prices on SC for second hand Rolex......some folk have already added in the price increase
I read on WUS Steinhart is adjusting its RRP +10%, nothing on their webpage yet
Judging by some of the prices on SC for second hand Rolex......some folk have already added in the price increase
Ah.
So prices in shops are based on future replenishment cost and have no relation to book value based on what it cost to buy in.
Wow. That certainly is new economics for me.
No wonder you and me don't have the same view on horology.
Yup. You nailed it. Thorstein can be proud of you.
Just about everybody with two working brain cells knows this. That Swiss luxury branded watch prices are detached from the tangible
The crystal ball question is whether the world market of luxury goods buyers will ever see it as the emperor's cloths or not. I think not. I do expect informed watch enthusiast to start wondering and read up below the surface on their hobby.
It is all VERY recent history. Only just before the internet. As such almost prehistory to some, not right under the finger tips but it is easily available in tangible paper format. One would expect mechanical watch lovers to appreciate that medium ;-)
But you don't lose out by selling at RRP today, you still make your margin as always. By keeping hold of stock the AD is hoping to add a little extra cream on top by having bought it at the old prices and selling at the new. At no time does the AD lose any profit or is his margin eradicated in any way.
Yup.
Holding on = hoping to make extra profit on the exact same watch.
Bought at the old exchange rate, sell at the excuse of the new one.
Or get caught out because the informed caught on.
Alas; the mass of buyers buys the brand, not the watch so will simply fork out more regardless/oblivious.
All in all the currency hike will be another windfall for the luxury brands. Not just the Swiss because it will create room for the German brands too.
Many businesses work this way....
I have a friend that supplies high volumes of heating oil.....
Say he buys in 500,000 litres at 30ppl. That's £150,000 pounds..... He plans on selling it at 35ppl so he makes 5ppl (he doesn't make 5ppl because of distribution costs) but you get the point..
But before he can sell any, the price drops by 2ppl...... Now he has to sell at 33ppl as that's what the market and his competitors are selling at.....
Likewise if the price goes up by 5ppl he has to sell at 40ppl.... If he doesn't he doesn't generate the £200,000 for the next delivery of 500,000 litres
In this instance it won't be a windfall for the luxury brands because they're adjusting to maintain their margins in their currency.
Unless of course they are able to purchase their raw materials cheaper. However, as the vast majority of the watch sales price is margin then the savings on the raw materials are relative very small.
It does help the likes of Rolex to make their brand all the more exclusive... but it sure will make many of the enthusiast's options limited..
Yep, that's how business works. It's pretty simple and obvious if you think about it. You use incoming funds to replenish stock, and if all incomings suddenly rise 20% your budgetplan goes out the window. Especially since projected sales could be heavily affected, we don't know yet. There are many parameters at play here.
Of course, it happens that the odd discontinued model that's been sitting for years, enjoying price rises, falls under your example. What we have today is a whole different ballpark.
Good example!
Now try the statement taking out the word Swiss, and the drum banging hatred, also try to enlighten me how a £6K Rolex is detached from the tangible any more than a £6k GS is?
Yes!
Nearly gave me a hissifit!
Daddel.
Got a new watch, divers watch it is, had to drown the bastard to get it!
No it's not!
Apart from the maths being wrong, it's an example of a volatile commodity product with tiny margins and is an unusual case.
Take a normal business and the stock is purchased, sold at a margin and then stock replenished at whatever the current wholesale price may be. This stock is then sold at a margin relative to its wholesale cost.
If the retail price goes up in the meantime you then have the option to sell at your current price and make your margin of increase the price to make extra margin.
Luxury watches can bee seen as a commodity. Many containing diamonds and gold, which are commodities.
Commodity prices can be affected by supply and demand, and as in this case, currency fluctuations... This is true for any retail business... Textiles, computer chips, LCD screens... whatever. Prices go up instantly, not with the next batch of products from the wholesaler, its just common business sense.
The requirement for 'Swiss Made' is >25% of cost incurred in Switzerland.
You are indeed correct though that the by far largest chunk of the retail price is margin.
For the non Swiss watch brands any following in price increase is not (or less) caused/negated by the currency hike.
All in all I can see an increased appreciation for the Japanese products, most specifically Grand Seiko which was in the up of appreciation anyway.
I agree.
The 'value' has nothing much to do with the horology inside.
Good thread leading to insight after all!
Maybe, because of the long depreciation of the Yen, of course, nothing to do with the watches themselves. Lower price and super low 2nd hand values, great entry into low/midrange luxury watches.
Wrong, A watch can only be classed / marked as 'Swiss-Made' according to Swiss law if,
1) its movement is Swiss
2) its movement is cased up in Switzerland
3) the manufacturer carries out the final inspection in Switzerland.
The definition of a Swiss movement is tied into rule 1) as above, and states that: A watch movement is considered Swiss if
1) the movement has been assembled in Switzerland
2) the movement has been inspected by the manufacturer in Switzerland
3) the components of Swiss manufacture account for at least 50% of the total value, without taking into account the cost of assembly.
According to Federation of the Swiss Watch Industry (FH), So I think they'd know better than you what makes a Swiss watch, Swiss.
The FH successfully had a motion passed by a majority vote in The Swiss National Council to raise the figure from 50% to 60% back in 2013
Went past local Rolex AD last night. Totally cleaned out of SS Sports Rolex! Two weeks ago had SDc, SubND, GMT BLNR and Blue DSSD.
Looks like folks are noticing!
In what way are the maths wrong??
Got it..... If price goes up he has to sell at 45ppl..... But the point still stands:)
Last edited by Enoch; 22nd January 2015 at 13:45.
It'd be interesting to know if a few are tucked away in the AD's safe, though... I think its a mix of both :)
I can confirm that there is stock-piling going on in some quarters :-)
Haywood
What are you talking about?
If the old stock was bought at 100, and sold at 200, prior to the price rise, then the dealer made 100.
If the new price increases to 240, then they make 140 on each one held back.
It doesn't matter that the replacement costs 120, they still made 40 extra by not selling the old stock at the old price.
I know kicking Petrus is a hobby in itself on here, but if you're going to talk crap about basic maths, just make sure you're fully prepared to get pulled up for it!
Well at least three of us agree!
You're missing what I quoted there, which was that all the "profit gets pocketed",
The point was that the increased margins don't get pocketed, they go towards paying the new wholesale price.
Again, think of it like a commodity... which it is. Economics, not maths :)
The point you're missing Rob, is that the 50% you talk about, is the manufacturer's cost.
In other words, if it costs 400 for them to make a watch, then 200 of that must be directly relatable to Switzerland.
What Petrus is talking about, is the percentage against retail, which in many, if not practically all, is double what the manufacturer sells it for.
So if they sell their 400 watch for 600, then the retail is likely to be 1200 – ergo the 50% Swiss 'total value' is now less than 25% of the cost to the consumer, 20% using those figures.
No luxury brands are near 50% margin... industry standard is around 40%.
Either way, that's weird reasoning, and could just as well be applied to "Made in Japan" watches with equal result.
No, I missed nothing – profit is profit, end of story.
Of course the increased profit gets trousered – he makes 40 on the old price, of which half still remains when buying the new stock at 120.
Petrus never said anything about retaining all the profit, he only said "profit maximising" or in proper English, 'profiteering'.
If the AD sells off old stock at current prices, then new stock is going to have more of an impact on his cash-flow as he has to fund an extra 20% (just to stick with this scenario) out of his present profits.
None of this is rocket science, since the petrol forecourts (here at least in the UK) pull this stunt all the time – prices of crude rise, up goes their prices immediately.
Prices of crude drop, their prices don't fall for a few days or longer.
Frankly I don't give a monkeys bright red ring piece, as Rolex models get larger and more garish, my desire for them diminishes in direct proportion, but then the Swiss watch industry is clearly taking the p*** when it comes to pricing.
Depends on what you're defining as luxury.
Many Swiss brands are 50%, especially those with a lesser cachet. So if you're referring only to the likes of Rolex, PP, AP, and so forth, then I'll concede that those are probably less.
I'm not sure why you're now targeting the Japanese – we're talking about the Swiss and prices relating to the CHF no longer being pegged to the Euro at a fixed price.
There's bugger all connection to Japan, Seiko, or the Yen, but there is a knock-on effect for many of the German brands.
Which is what Petrus constantly Rams down our throats. He is of course absolutely right but then we all know that and yet still buy the things!
I do see buying Rolex as a low cost option to owning watches however as they do tend to rise in value so you'll almost always recoup more than you paid for it if you keep it long enough.
You are missing something alright. We're talking about margin, not profit. Margins on what you sell covers lots of things, including buying in new stock. In the scenario where the AD sells old stock at a new, higher price, his margin increases, but not his profit, since the price of the commodity (swiss watches), has gone up. Like you said, it's not rocket science.
If he was to stop selling watches altogether, then yes, he would make more profit on the old stock with the new price...
It's been a week since the CHF appreciated, and RRPs have not officially been raised, have they? So there's a delay there, which is why some punters are raiding the ADs for Rolex, and some ADs are stockpiling watches.
Sorry, but you missed the point there, Petrus said
Which it is not, incurred cost in Switzerland is now set at 60% to meet the 'Swiss-Made' requirement as Petrus put it.
The final manufacturing cost per unit is not relevant to final retail price, as manufacturing cost is only a %-age of the total cost of anything, on top of which you need to add R&D, Marketing, Distribution, Retailers %-age and profit, as without those no manufacturer would bother making anything, as what would be the point?
Don't know if others have heard this, but I have been told that Rolex GVA are temporarily refusing orders from eurozone ADs. One imagines that this is so that they can put in place a price revision and avoid supplying watches at what would now, effectively, be a great discount from their SFR value.
Could be cobblers, though. If I had a mil sub for every price rumour I've heard from ADs and the trade this last week......
Haywood
I don't think you are Haywood, everyone with half s brain can see that it's an ideal opportunity for the Swiss watch manufacturers to increase their prices.
I don't believe any of them will pass up such an opporunity!
Funny that as I have approached four AD's in regards to 3 different watches and all have stated 4 weeks eta when I know in the past it's been a lot quicker.
And I agree with you, each of the Rolex watches I've owned I've kept for a for a few years and never lost money, my statement was merely to explain why a Rolex price increase wont bother me, as time moves on I find the brand less and less appealing, I guess I'm slowly turning in to a vintage WIS, take that whichever way you will,
Last edited by number2; 22nd January 2015 at 15:49.
Are they UK ADs, though? By "Eurozone" I meant those countries whose currency is now the Euro, rather than those countries which are part of Europe the continent / political union.
Haywood
but by waiting for long enough your money does not buy the same as when you first bought it so you have to spend more to reach the same level of watch if you sell?
Aren't Rolex watches sold in CHF ? If so how do the Eurozone AD's stand to get a discount? If sold in EUR then yes, that would be some deal...
I believe that each territory's ADs will pay that territory's Rolex office in the local currency. UK ADs pay in GBP, French ones will pay in Euros.
How the territory's proprietary company ( The Rolex Watch Company Limited here in the UK, for example ) pays Geneva I do not know, but I am not sure that this is so relevant.
If the payment from AD to local Rolex territory office is in local currency, it is that local currency vs Swiss Franc where the price is effectively discounted if the local currency is worth less than it was. By discount I mean less value to the supplier, where they work in Swiss Francs.
Haywood
I see. Well here in Scandinavia there's no regional Rolex office, ADs buy directly from Rolex SA and pay in CHF. So it seems some ADs are motivated to order as much as they can then, while others hold on to pieces as long as they can :)
I'm monitoring all the grey dealers and even with the pound getting stronger against the euro they have raised their prices
Yes, because the pound has also dropped against the Swiss Franc.
UK prices are widely touted to be increasing by 5% or more.
Existing Eurozone stock is being snapped up by UK dealers where it is available at anything close to the prices at which it had been available prior to the Swiss Franc move. I've never really liked the unworn market, but committed to about £54k at cost when someone offered me a parcel of very commercial bicolour / diamond models this afternoon. It seems a safe bet.
HM
Ahh ok.
Any yacht masters at all haha!?
Only one that I'd committed to weeks ago, a full size bicolour 16623 with blue dial at my cost 30% off UK RRP. An unsustainable market imbalance.
Eurozone dealers, already facing a tough time, will find it even harder to sell their stock, so despite higher prices they will be even more desperate to move it along and the grey market may in fact thrive further.
HM
Never thought of it that way. I have the issue where I have 3k in cash and 3k available on a 0%cc. I would prefer to save the circa 6k to get one from a grey dealer but I'm now pondering paying 3k in cash and 3k on 0% credit
This thread is, imho of course, a sad indicator of the wis world when we're all talking in terms of finance and markets - I'm not remotely interested in all that, I enjoy wearing, collecting and discussing the merits of all kinds of watches - and when it all turns to the world of money and finance I start to glaze over. Sadly that's how I feel when I look in an AD's window - they all cost the same as a decent car and I start to glaze over.......I don't need to be a financial genius to know the prices are going through the roof, to the point where sadly I've lost interest. Emperors new clothes - however you spin them.
The title of the thread ought perhaps to have put you off reading further, though your point generally is reasonable of course.
H
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