Reply With QuoteThey are a charitable foundation.
People often talk on forums how watches and Rolex in particular have gone away from being about the watch itself. It's now all luxury, brand awareness, marketing, massive demand, limited supply, AD's etc etc. Has it though?
My son is reading a book called 'What they Don't Teach You at Harvard Business School' by Mark McCormack. He wrote this is the early 1980's and died nearly 18 years ago. For anyone that doesn't know him, he owned IMG managing all the big sports stars and celebrities. When he died his shares were worth $750 million. He read this out to me . . . . .
Marketability
Many years ago, I was having dinner with Andre Heiniger, the Chairman of Rolex, when a friend of his stopped by the table to say hello. 'How's the watch business?' the friend asked.
'I have no idea,' Heiniger replied.
His friend laughed. Here was the head of the world's most prestigious watchmaker saying he didn't know what was going on in his own industry.
But Heiniger was deadly serious. 'Rolex is not in the watch business' he continued. 'We are in the luxury business'.
They are a charitable foundation.
This is the same as the comment by the Chairman of Gucci. ‘We don’t sell handbags, we sell dreams.’
There is a Rolex Charitable Foundation.
If the System is the same as that in the UK then Rolex SA convenants it's profits to the the Rolex Foundation.
Surely it is both? With a charitable ethos underpinning it?
They are controlled by a charitable foundation...Originally Posted by MrSmith
I wrote something about this a few years ago:
https://www.intlwatchleague.com/show...nd-its-profits
I've always found it odd that this isn't more widely known or that Rolex don't add it to their advertising... Perhaps because it looks just a little like robbing the rich to give to the poor.
Last edited by M4tt; 20th January 2021 at 13:32.
I think its possible to be both.
There is an interesting story in that book about a sport’s agent taking on a client that had a bad reputation but proved to be a more sincere authentic honest than the usual people he represented. It’s an interesting story I’ve recommended to a few colleagues about authenticity.
On TZ-UK, it seems it is an obsession:-)
Oh great. I predict lots of productive conversation incoming...
A few years ago it was a watch business but since restricting supply and stopping discounts it is slowly becoming a luxury business. However they still have a long way to go but they are getting there.
It is a luxury watch business.
The critical thing I think about the ownership model is that they a) don't need to make short-term decisions to hit quarterly figures and b) they don't need to see endless growth because of this by knocking out "monday Milgauss" and the like...
I'm not sure they do restrict supply - I think have not increased production which is not quite the same thing...
It’s both of course, luxury watch business ultimately owned by charity foundation, a strange combo definitely but with no shareholders to please or big dividends to pay out, it works in the long term.
Luxury watch business aimed at the upper middle classes, professionals, wealthy and of course the ever growing vein showoff market who dont even know they are mechanical watches until it stops on them and the google why has my Rolex stopped.
Was he Jerry Maguire?
Last edited by Neil.C; 20th January 2021 at 16:01.
Cheers,
Neil.
BTW any firm that sells watches that cost in the thousands are in the luxury business.
Cheers,
Neil.
A watch business that makes good watches, suitable for everyday wear, regardless of activity, that also happens to be rather good at marketing their product.
like Audemars, JLC and Patek (and others) except Rolex does not do ‘Haute Horology’ so does not sit at the top table.
nice well made reliable tool watches though and a great history.
Marketing has played it’s part but a lot of the brand awareness has not been down to their own efforts but other societal conventions placing them on a pedestal, like walking into a bike shop and pointing to the most expensive Pinarello and thinking that’s shiny, expensive so i must have it. while the smart money has gone to small artisans working in 3D printed Ti, Steel or tube to tube joined custom carbon not something popped out of a mould in Taiwan in the 1000’s. (other comparisons are available) everyone down the pub knows what a Rolex is, they have never heard of Lange & Söhne.
Rolex is not a charity, or a “charitable foundation”.
Rolex is a foundation. It has a number of stated purposes, but charity is not its first agenda or priority - only if funds are available after its primary objectives are met will it look to giving to charity; which it does on a regular basis.
It's just a matter of time...
If it gives to charity it is charitable, hence a charitable foundation.
In the loosest sense yes. However there are foundations, and there are charitable foundations whose sole purpose is for charitable causes - there’s a difference. A “charitable foundation” would nearly always be a non-profit.
It's just a matter of time...
In the English language sense!
Very much in the luxury business. Don’t know much about the Swiss tax regime. If it provides support to those in need then it’s a good thing
https://www.rolexmagazine.com/2018/0...sdorf.html?m=1
This should clear things up
Vs. The Swatch Group which tries to buy up all the movement manufacturers, ETA part of it (which itself a conglomerate of historic manufacturers), then looks to restrict supply to other Swiss watch companies...tut tut
Last edited by ac11111; 20th January 2021 at 19:56.
Err.. no.Was he Jerry Maguire?
Both beat me to it!
Started out with nothing. Still have most of it left.
Hugely interesting point.... I think Rolex is absolutely a watch business and that is their product. However... they have arrived at the rarified upper atmosphere whereby their place in the market is such that the watch can be so much more than a watch.
I don’t think they sell luxury as such... I think they sell aspiration, achievement, yes a bit of luxury, they sell status, they sell recognition, image, brand - all that. I think they even still, just about, sell adventure and endeavour. Some of these things people will view positively, some will be seen as less so. But I think the idea of them selling luxury is about marketing and not what they do. If Rolex sold something other than watches, would that work? I don’t know the answer but it would be risky. I think their place in the market, their identity, their brand power is so intrinsically linked to what they sell that they may be a great example of a company who may never really be able to escape their core product.
Interesting thought though.
I knew they are controlled by a charitable foundation, I found that interesting. Their focus is quite varied and quite interesting, well worth reading about.
Just not in a legal taxation sense then?
It's just a matter of time...
Haha! Quite.
The clever part.
.....But Heiniger was deadly serious. 'Rolex is not in the watch business' he continued. 'We are in the luxury commodities business.’
Whether it is luxury or not is open to debate - but no different to other expensive watches so not really it’s USP.
Last edited by MartynJC (UK); 21st January 2021 at 20:49.
Omega have branched out in their jewellery lines, so expanding the brand without sacrificing the core product.
At the minute almost any Rolex accessory sales for multiple times the object price, so they really could over a whole range of associated luxury products, and provided they were of a high quality they would continue to sell very well at high/luxury prices.
It's just a matter of time...
Personally, I think they are really a luxury business. For 99% of their buyers, the product is frankly immaterial - the cache of owning a Rolex is the important thing. Many owners probably only rarely wear it, and then just to show off, and couldn't care less about whats in the case, whether its certified chronometer etc.
A very close parallel is Rolls Royce - once they claimed to be make the 'Worlds best car' but then Mercedes pushed them off that, so now they make very expensive luxury cars for people who want to display their wealth - who couldn't care less about their engineering.
Rolex has got it right in terms of avoiding over supply and lowering brand desirability and residual values. Buying a rolex now is the same as buying a Hermes Birkin. They made it impossible to buy and therefore made people want it more. How many brands can launch an entry level watch like the oyster perpetual, and make it have a crazy long waiting list? They have chosen to avoid saturating the market but still produce a very large number of watches which are part of a cohesive range with no incoherence in their model selection. It's a pretty good approach.
It’s a clever clever answer but ultimately nonsense. If your business manufactures and sells watches you’re in the watch business, full stop. The rest is all marketing flannel amd bs imho. Same goes for any manufacturing company. Porsche might say ‘we sell dreams’ - nope, you sell cars.
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Yes...Rolex do sell real watches, but actually telling the time is far from the main aim of (most of) their customers!
I think that misses the point to an extreme level of naivety - both are selling so much more than a product (yes that’s the point of marketing, but to call it flannel and bs is just childish), and if you think otherwise then that’s cool - but then you are also self proclaimed as no longer the target market, but you were once, and even spent your own money on Rolex.
It's just a matter of time...
Having the market share they have, Rolex are in quite a unique position in that they really can use JIT manufacture and inventory. They know not to over produce a particular model, and maintain a steady supply of popular models in an attempt to meet a pre-determined level of demand/production. Covid hasn’t helped with a drop off in production - but even without that, I’m sure they would much prefer to virtually build to sell, rather than a lot of other brands that build something and hope to god that there is enough demand to buy enough of that model to cover costs and expected/desired profits.
It's just a matter of time...
Most big business give to charity, and most big charities operate like big businesses. There's definitely blurred lines.
But to answer the original question, Rolex is a luxury business. When you buy most luxury products the percentage paid for the manufacture of the actual item isn't that large, compared with the percentage that goes towards; manufacturer profit, sales profit, tax, distribution, packaging, marketing, R&D and everything else involved in running a global brand.
Much like GM, they're in the finance business with cars as a by 'vehicle' to sell finance.
Stolen from Charles Revson of Revlon several decades earlier, “We don’t sell lipsticks. We sell dreams.”
Equally relevant, “In the factory we make cosmetics; in the drugstore we sell hope.”
I’d love to know the cost to manufacture a Sub ...
In what terms? Just converting the raw materials to a single finished product basis, as at today?
Or, including the above and all the R&D costs, designing and making your own robots/machines/techniques, marketing, staffing, transportation, heating/lighting, training, customer services, and servicing centres?
Just work out around 5.2 billion, divided by an average of 12,000 selling price per Watch, and then apply a ratio to the selling price of a Sub, and work out the differences, and you might get an indication of how profitable a single Sub might be, but it’s still a lot of guess work.
Last edited by Omegamanic; 24th January 2021 at 16:00.
It's just a matter of time...
I would guess an incremental cost of £500 tops.
Would agree with that summary. The cost of the converting the individual parts into a complete Watch in isolation of any other factors is probably low, but factor everything else in and spread the cost of the complete infrastructure across every Watch ever assembled and I'm sure the unit cost will be a lot higher.
I heard all in 500 million profit with sales of 5 billion so net margin of 10%. Gross margin obviously a lot higher, but same with all luxury brands.
Whilst I do think Rolex is both a watch business and a luxury business nowadays, I still think what got them to where they are today, apart from great marketing, is that they've been making fantastic quality tool watches for decades now. Some (or most) of the most collectible Rolexes nowadays were affordable tool watches that could be purchased from their stores at the time, often at a discount. (although this is obviously not the case anymore in the 6 digit era)
Now there's an interesting area to study - the price of Rolex vs 'normal' watches! It may depend on how far you go back, but I don't think Rolex have ever been just another choice of watch for the working person - they've always been rather expensive. The first time I became aware of Rolexs and their prices in the early 80s, the price of a 38mm DJ was around £300 (if I recall correctly). Sounds madly cheap now, but in those days, that seemed an incredible price to pay for a watch!
That's true! They have always been the 'luxury' tool watches then - I stand corrected. But I wonder what the relative price of a Rolex watch as compared to the average salary in the UK for example has changed over the years. Although what certainly has changed is the availability of these things:)
I’m sure the 16750 GMT Master was around £850 in 1984. I worked with a guy who bought a Daytona at a discount, with his small share of his house sale following a divorce for just under £600! But readily available, like most of the ranges, maybe with a short wait - but then we didn’t have the speculators diving into the market for a quick return in those days.
It's just a matter of time...
It’s a luxury watch business, unfortunately the average Joe (me included) on the streets will highly likely never be in a position to afford one or qualify (AD quirks) to purchase one from the high street...
Shame really...
But...
If you owned the business you’d be rubbing your hands every second of every day...
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