How And Why Rolex Prices Have Increased Over Time

How And Why Rolex Prices Have Increased Over Time

How And Why Rolex Prices Have Increased Over Time Feature Articles

In this special feature article, we go on a quest to better understand what is behind the unremitting rise of luxury watch prices, and to do so, we will explore how and why Rolex prices have increased over the last 60 years. You see, while the steep increase of high-end watch prices has become evident to every discerning watch buyer on this planet, it remains difficult to point out exactly why and how things have changed so radically... or, if they have changed at all.

This is, without a shadow of a doubt, one of the most pressing issues in the world of watches today, something that has raised countless questions and fueled numerous debates among watch enthusiasts, collectors, and experts alike. It has directed the spotlight on issues such as value proposition, the economic state of both the industry and the luxury consumer, and has made us want to discover the "hidden driving forces behind it all." To answer as many mysteries as we can – and perhaps to ultimately raise new, previously unasked questions – we decided to scrutinize the pricing practices of one of the absolute benchmark brands of the luxury watch industry: Rolex.

About the process

To begin with, we used official retail prices dating back as far as 1957, based on data compiled by Minus4Plus6.com. This magnificent price table contains authorized retailer prices in about 5-year steps for just about all important Rolex references that debuted in or after 1957. We processed the raw data linked to two of the more popular models of the brand, namely the Submariner no-date and the Cosmograph Daytona, and we have also looked at the Submariner in 18k gold to see how this precious material has affected affordability. We dedicated charts to each of these examples. On the charts, we have marked in black the respective retail prices for each year, while in red we indicate how the price of each watch would have changed over the years had Rolex raised prices only to counter the effects of monetary inflation.

Naturally, there are many other factors beyond inflation that can define a fine watch's retail price, such as costs related to base materials, labor, research and development, marketing and brand positioning, as well as long-term investments related to advancements in manufacturing processes. With that said, our primary goal now is not to find a detailed answer for each respective model's appreciation but rather to acquire a comprehensive understanding of how and why luxury watch prices have changed so much in general.

The key steps in the process of "luxurification"

In an ideal world, no brand can go on for decades making the exact same product while gradually raising prices to several times of what it initially sold said product for. Regardless of whether we are talking about a historical model or a new one, we all expect our latest purchase to pack a number of new features or developments, refinements that grant that our latest and greatest piece is truly that, with advancements in terms of design, comfort, reliability or accuracy.

When it comes to wristwatches, there are many ways we could define what sets a luxury item apart from the rest, but for now we will say that a luxury item is one that goes beyond meeting the requirements set strictly by necessities only. Ever since the first wristwatches became commercially available around the early 1900s, there have always been superior – and hence more expensive – as well as cheaper watches, differing in the level of quality that they offered in the aforementioned factors. But despite that 100-year-long history, the dawn of the luxury watch industry as we know it today dates back to the mid-1980s. It was around then that the Swiss finally found their way out of the quartz crisis that almost completely destroyed them.

To understand the evolutionary cornerstones in the development of a fine-watch-turned-luxury-product, we must examine a product with an expansive and continuous history, one that dates back way beyond the '80s. A model we found to be most suiting for those purposes is the Rolex Submariner. Although its history is rather complex, for now we will say that upon its debut in 1954 it was one of the few professional dive watches out there at the time, and as such, it was more of a tool than anything else. By contrast, today's Submariner, the tool-watch of yesteryear, has transformed into an internationally recognized status symbol, consequently becoming one of the most widely imitated watch designs of them all. That is quite some transformation, and upon closer look, we will see how nicely this one model comprises the steps in the transition from a tool to a luxury product.

How And Why Rolex Prices Have Increased Over Time Feature Articles
To The Left Is The First Rolex Submariner From 1953, While Next To It Is Its 60-Year Successor, The No-Date 114060.

As the story tells – and the picture above beautifully illustrates – the Rolex Submariner remained more of a tool watch than anything else during its first few decades of existence. Its initial 100 meter water resistance was quickly doubled by the company and as such its 660 feet / 200 meter depth rating, rotating bezel and durable (for the time, that is) construction made it a perfect device for divers. By contrast, while the more modern iterations of it have been improved in just about every aspect one can imagine, the Submariner has gradually left the depths of the oceans and started a new and successful career in business meetings, spending vastly more time hidden under cuffs than exposed over diving suits.

It went on to incorporate better quality steel, replaced aluminum bezels with more beautiful and resistant ceramics, substituted most stamped components with milled ones, has become more legible, and much more accurate. But why was all that necessary, if only a microscopic percentage of its owners actually harness its enhanced capabilities? Because it has become a luxury item, something that must not only look, but also perform better than its more widely available counterparts – even if its heavy-duty construction will not once be put to test in its lifetime.

When it comes to Rolex and their historical models, we have seen them perform a large number of subtle as well as some major modifications over time. There is a peculiar way of coupling these two kinds of enhancements, meaning that smaller improvements are generally synchronized with the debut of more considerable alterations. In Rolex history, this generally translates into presenting a new, more refined movement which is accompanied by more minor improvements on the watch, such as a more durable and comfortable bracelet, a new bezel or luminescent material, and other tweaks.

That same trend widely applies for the luxury watch industry as a whole. Since the dawn of the new millennium most high-end brands have gone out of their way to emphasize the importance of "in-house" movements as they realized the potential in how this positively separates them from their non-manufacture counterparts. Researching Rolex history reveals that there have been some vital turning points in the lives of their products, gradually making them more refined in every way. But an obvious consequence of "more refined" is "more expensive."

How And Why Rolex Prices Have Increased Over Time Feature Articles

But how much do such advancements actually cost the consumer? On the chart above, you will see in black how prices of the Rolex Submariner No-Date changed from 1957 all the way through May, 2014. In red we marked how the original 1957 price of $150 would have changed had it followed monetary inflation only. The math is simple behind this one. If we adjust the original $150 price from 1957 with inflation to 2014 US Dollars, we end up with a price of $1,265 while the watch actually costs $7,500 today. This means that one could say the no-date Rolex Submariner costs six times more than it "should." Things are not that straight-forward, however.

How And Why Rolex Prices Have Increased Over Time Feature Articles
In 1931, Rolex Invented And Patented A Self-Winding Mechanism With A Free Rotor, Called The Perpetual Rotor – Seen Here Is The First Rolex Perpetual Chronometer Movement

A fine watch has never been cheap

You see, while adjusting for inflation could be indicative of how watches have become more expensive, this must be taken with a (substantial) pinch of salt. What primarily defines the affordability of products is not just the price and how that changes in comparison to monetary inflation over time, but rather, how the price of the product compares to people's average income. As we know, inflation is the rate at which the general level of prices for goods and services is rising and, subsequently, how purchasing power is falling. With that said, the increase of average income should – and in the long term it does – outperform inflation, meaning that if the price of a fine watch followed inflation only, it would actually be getting cheaper as consumers have incomes outperforming the rate of inflation.

After that brief 101 in basic economics, let's bring theory into practice and see how all that translates into watch prices and overall affordability. To show you just that, we created the following chart illustrating how the affordability of the Rolex Submariner no-date, one of the key models of Rolex, has changed in the United States, between 1957 and 2012.

How And Why Rolex Prices Have Increased Over Time Feature Articles

Let me explain what you just saw above. The results you see labeled above every column range from around 6.7 up to 14. This figure indicates the amount of Submariners which the "average yearly income per capita" could purchase in any given year. Since we are talking about a time scale of over 50 years here, for easier understanding and actual comparability, we have transferred all US Dollar prices and wages into 2012 US Dollars. In other words, in 1957 when the average yearly income was $13,591 (Source: US Bureau of Economic Analysis) and the price of the watch was $1,225 (originally it cost $150 which, when calculated into 2012 US Dollars, is $1,225).

Now, in 1957 if the average watch lover spent all his/her hard-earned yearly income on Rolex Submariners, he could have bought 11 of them. By contrast, in 2012 when the average per capita income in the United States was $42,693 and the same model cost $7,500, the average US yearly wage bought you only 5.65 no-date Submariners.

We admit that this might sound like an unreal proposition – because it is, as no one in their right mind would spend all their income on Rolex Submariners! But, let's put that aside for a minute and concentrate on the point that is to be made here: when considering the average US income, the Rolex Submariner has become three times less affordable since the 1970's – and that is tangible, factual proof for a high-end watch gradually becoming a luxury item. In 1970, the average American earner worked 3 weeks to earn the price of a Submariner, while in 2012 the price of one accounts for over two months' worth of his income. This goes to show that although a fine watch has never been particularly cheap, some very evident repositioning has happened over the course of the last few decades.

How And Why Rolex Prices Have Increased Over Time Feature Articles

Outlining a trend

Thus far, we have been looking at the price changes of the Rolex Submariner, so now let's examine other models the brand has repositioned since their debut decades ago. On the chart above, you will see the Rolex Daytona in stainless steel and how its prices have changed. Again, in black, is the actual price of the Rolex Daytona, while in red is the original price adjusted for monetary inflation. If we look at the chart at the 2012 mark we will see that the watch, priced at $11,250 was nearly six times as expensive as it "should have been" based on prices merely adjusted for monetary inflation, which came in at $1,996. So, has the Rolex Daytona in steel become six times as expensive as it once was, in 1973?

How And Why Rolex Prices Have Increased Over Time Feature Articles

Well, in 1973 the average personal income (which was $21,486 in 2012 US Dollars) purchased nearly 11 Rolex Daytona watches in steel, priced at $1,996 each. Meanwhile, nearly forty years later, in 2012 when the average per capita income in the United States was $42,693 and the Rolex Daytona in steel costed $11,250, that figure drops to a mere 3.8 pieces. That means that while the Daytona has received a new in-house movement and has arguably improved in many more subtle ways, practically it has not become six times as expensive as our calculations based on monetary inflation would suggest. In truth, once we compare average personal income in the US, we will find that the 2012 purchasing power of the average yearly wage has dropped to 35% of what it was in 1973 – speaking about the Rolex Daytona, that is.

How And Why Rolex Prices Have Increased Over Time Feature Articles
The Rolex Cosmograph Daytona 116520 In Stainless Steel

One may of course rightfully say that the volatility of base material prices have largely affected the final price of the product, and again, we do not disagree. For the aforementioned examples however, we have made an exception and have not taken that into consideration. So for our third, and last scrutinized model we will actually incorporate historical base material prices in our calculations... so read on to learn about the Rolex Submariner in 18k gold.

How And Why Rolex Prices Have Increased Over Time Feature Articles

On the chart above, you will see the same red columns which you have already become familiar with, as they (and the data labels above them) indicate the number of Rolex Submariner 18k gold watches that the average yearly income in the US could buy in any given year. In yellow, however, we have introduced a readout for the price of gold, indicated by yellow columns and yellow data labels (we must note that there may be some minor differences in gold prices in different online databases, but the point here is to see the trends change and not to track down negligible differences in gold price records).

How And Why Rolex Prices Have Increased Over Time Feature Articles
The Rolex Submariner Reference 116618LN In 18k Yellow Gold With A Black Dial And Black Ceramic Bezel

With that said, the correlation between gold prices and the Rolex Submariner 18k gold watch prices are evident. Let's direct our attention to the noticeable trend between 2006 and 2012. In 2006 the price of an ounce of gold was around $630 US Dollars, and the Rolex Submariner 16618 in 18k yellow gold cost $23,100. In 2012, when gold prices have nearly tripled to a whopping $1,600+, the updated version of the Submariner, i.e. the 116618 in yellow gold retailed for $34,250 – a whopping increase of 48% over the course of just six years! In other words, a 260% increase in the price of gold (and a model update with new ceramic bezel, bracelet design and other minor updates) have cumulatively resulted in a Rolex price increase of 48%.

So, what have we learned here? The price increase of luxury timepieces unquestionably is a complex topic and one that we are definitely going to further elaborate on in the future. As a first step, we hope to have shed light on some of the previously unseen aspects of how prices and also personal income levels have changed over half-a-century. We have seen some of the steps in the long and rather intangible process of how Rolex watches have become a luxury item from a tool, initially tailored for professional use.

  • antjay

    Where I come from this is what we call gouging and it is the reason I will not even consider a new Rolex or its ilk . The value side of the equation is non existent . I realize that Rolex is not alone with their unreal pricing structure and it is the main reason I favour boutique brands or non luxury manufacturers . ( Hi Mark )

  • Ulysses31

    This isn’t unexpected information.  The same would apply to many manufacturers, although it would be interesting if you performed this same analysis on other brands and found out which (if any) didn’t partake in price gouging.  A potential flaw in the analysis is that presumably you used the average income of all Americans, though I would suggest that those Americans with average to low incomes wouldn’t even be considering the purchase of a luxury watch any time soon, and Rolex probably aren’t interested in that demographic.  We are supposed to live in a classless society but we don’t; people working in certain sectors with a particular “rank” are far more likely to be interested in, and capable of purchasing, luxury items.  The almost exponential growth of incomes in the banking sector, for example, would have a large effect on these results.  This is happening while incomes of the average Joe are continuing to fall compared with inflation so while incomes are technically rising buying power has been diminishing for years.  I’m from the UK so cannot speak for the average American.

  • antjay Thanks – and for the record, as a small guy I do not have economies of scale that would allow for an even better value proposition. But my watches start at right where the Submariner “should” cost based on inflation alone. I’m not saying my watches are better or worse than a 1950s Sub, but they are comparable in some aspects. 
    As iconic watches from big brands have become luxury items, the consumer is left paying for all of that marketing expense. I’m sure the Rolex and others are laughing all of the way to the bank, but the real winners must be the media that gets those advertising dollars (which were pretty non-existent 60 years ago). From what I hear, big brands spend more on advertising than they do on materials and labor. So you are buying status/image (whatever) more than a piece of micro-machinery on a dollar spent basis. Perceived value is a very odd animal. Cheers.

  • Ulysses31 I think every society in every country has rich and poor. In the U.S., my suspicion is that the rich are getting richer and the poor are getting poorer. We are seeing an erosion of the middle class and are in danger in the years to come of having a bipolar wealth distribution (while can lead to civil unrest in the extreme).
    So perhaps the higher end of the watch market can cater to the wealthier segment of the population and let cell phones and plastic quartz watches have the lower income segment. So I think the real losers are those still in the middle class to somewhat affluent who would still like to have a nice watch without spending 2 months salary for it.

  • David Bredan

    Ulysses31 There are so many different aspects that I would have been happy to further analyze, including how the target demographic (and its income) has changed. I have spent well over 30 hours of arranging and analyzing data and have at least a dozen different types of charts and many more ideas that I could not elaborate on for the lack of data that spanned 60 years. I’m sure it’s out there somewhere, but I could not get ahold of it.
    As for analyzing the average income, I agree that it makes as much sense as all averages do in general: they show everything and nothing at the same time. What forced me to use it instead of anything else is again the lack of other detailed data as well as the sheer number of different approaches that would necessitate detailed analysis. 
    I still hope that this data and all our work allows for a unique insight and some detailed, albeit not exhaustive answer to the rather unfathomable question of how things have evolved over the course of more than half a century when it comes to the process of tools and everyday (higher-end) devices transforming into luxury products.

  • Ulysses31

    David Bredan Ulysses31 It certainly was useful to see the data represented in “black and white” as it were.  It’s something many people have suspected about the industry but until now haven’t been able to see it represented clearly like you did here.  Ariel has been talking about it a lot recently.  I wonder what made him decide to throw some light on this issue?  It seems to me that the Swiss watch industry suffers from a chronic inertia, a reluctance to do more than maintain the status quo.  It’s quite dangerous though to continue in this fashion when the globalisation of manufacturing and the democratisation of skills and knowledge make it ever more likely that another disruptive event will occur.  Continuously cranking up the prices won’t be enough in the coming years.

  • tomfgoodwin

    Pricing of watches is nothing to do with cost of goods, it’s to do with maintaining a price that is considered luxury.
    You were right to think of the cost against wages, but as income distribution has changed, you made the mistake of comparing it with mean or median wages.

    Let’s say a Submariner Rolex is a product aimed for those not in the top 2% of earning ( it’s too cheap), and not in the lowest 80% of earners ( too expensive), if we compared the price of a mariner for the earnings of those between the 80th and 98th percentile, we’d find it’s most likely tracked perfectly with earning growth.

  • LapYoda

    Very interesting analysis in this first article, but I think we will be able to draw the conclusion after all is exposed that other than to maintain a certain cachet as a luxury brand, there is no economically justifiable reason for Rolex prices to have increased at the rate they have.  The main reason why the prices have skyrocketed can only be boiled down to one word:

    Greed.

    Yes, the product has improved.  Yes, labor prices and raw material prices have also increased significantly.  But as we have seen from a number of brands now, you can still have fantastic pieces with in-house movements, advanced materials, and beautiful finishing for a fraction of what Rolex charges.  Rolex even benefits from having major economies of scale only dreamed about by these other manufactures and vertical integration only comparable to Seiko, Citizen, and Swatch (which all have offerings that are far more affordable), so they should be able to cut production costs significantly or keep them level while offering more technology and value.  Yet Rolex price inflation dwarfs that of economic inflation because they want to position themselves as the pinnacle of mass-market luxury watches, and you can’t do that without charging far more than is reasonable.  Otherwise, how are you going to keep your product out of the filthy hands of the hoi polloi?

    But what about profits to fund research and development?  Yeah, yeah, you have that too.  But the profit margins have got to be huge even taking into account the overhead and the massive spending on advertising.  How else to subsidize the executive salaries, jet-setting lifestyle, and the Bond villain-like headquarters?  That needs a lot of money to maintain, so up go the prices to pad the bottom line.  It’s definitely not all about the product – that’s just a commodity.  Even in the auto industry, where prices have risen to eye-watering levels, the product is vastly superior to those from a decade ago, let alone half a century ago; one can better justify automotive sticker shock than horologic sticker shock.  I think it’s likely intellectually dishonest to try to rationalize Rolex’s pricing based on anything other than their desire to squeeze more money from the consumer in order to justify their luxury market position.

  • LapYoda I agree – if Rolex was advancing the state of the art they way they did decades ago, one could make the case for R&D costs. But these days they seem to just be milking the cash cow.

  • gadgety

    LapYoda I agree this is a very nice read. The just one word I had in mind was

    Marketing

    Rolex, and in fact the Swiss watch industry has been extremely successful in marketing their products. They have also understood that Veblen goods, which they would like to be, is better the more expensive it is, and the world economy in the past few decades has been moving in a direction of either very rich or mass market , with the in between diminishing. That said, Rolex apparently is losing customers in the younger segment and still have some work to do. 

    On a tangent, having personally been to Baselworld I came away from there with one thought: I won’t buy any of the watches from manufacturers who place non running watches in the display windows of their huge and lavish “booths.” It’s just industrial goods supplanted by marketing budgets and, sorry to say this, ignorant sales clerks. 
    I came away in awe of the small independents, though. Every single one of these independents’ watches were running and they had made them, by hand for the most part. In addition they were approachable. Thomas Prescher took out his triple axis tourbillon and showed me. A marvel. I had a chat with Voutilainen. These guys are passionate.

    That’s me, though. My wife still wants a Rolex.

  • gadgety

    tomfgoodwin Yes, good point. 
    In fact if we look 20 years into the past, the watch industry has attracted new entrants, who have either started entirely new brands or restarted historical brands because it has been such an attractive proposition, a mature technology, for the most part. Part of that drive is the change in income distribution world wide. Some of these have even been bought up by the luxury conglomerates who believe they have the marketing and distribution clout to take them global.

  • gadgety

    MarkCarson Ulysses31 It’s a world wide trend that the richest get richer and the middle class is diminishing. The poorest poor have different trajectories in different countries, take a look at Hans Rosling’s lectures, eg on Ted.

  • gadgety

    David Bredan Ulysses31 I think it’s commendable even just to write this article. It’s a great  read. Analysis in a sense never ends, there are new ways to look at things, and to segment the market. It sparks an interesting discussion here as well.

  • gadgety

    Ulysses31 David Bredan ” It seems to me that the Swiss watch industry suffers from a chronic
    inertia, a reluctance to do more than maintain the status quo.”
    Well if they can maintain their position, they’ll be all for status quo. On the other hand Swatch is part of the Swiss watch industry and I think it’s fair to say they’ve done their bit to create change. Even post the quartz era. Look at the Sistem51 for a product example.

  • Fraser Petrick

    MarkCarson antjay  While strolling down the Las Vegas strip – my feet were killing me – I decided I wouldn’t be caught dead in a Rolex. It seemed every corner store sold Rolex. It was even advertised on bus-stop benches. Over-marketing, in my mind, has killed the Rolex mystique. (However, if a rich uncle I never knew I had wanted to give me one…)

  • Fraser Petrick

    Wine drinkers have it easy.
    They can do a blind taste test to see if their $100 bottle of plonk is ten times better than their $10 bottle.
    And then, to confirm test results, they can alternately finish both bottles and declare the contest a tie.
    (As a side note to Mr. Bredan’s excellent article: In the mid 60s, when I was young and stupid, I bought some watch called an Omega for $95. Twenty-five years later, when I was older and stupid, I sold it at a garage sale for $10, [I was asking $15 but I was talked down. I did wonder at the time why the garage-sale scavenger was breathing so heavily as he handed me the ten and made a run for it.)

  • Joshua M Hyman

    Great article with insightful research. As a second hand dealer watching this market for the past 20 years I also have been fascinated by the increases in retail prices for luxury Swiss watches over this time period. It is also interesting to note that the resale prices for Rolex have also followed the increase, especially within the Submariner series, unlike other brands such as Cartier, Tag/Heuer, Breitling, etc. whom have also raised retail prices without the second hand market following as quickly. Rolex is unique in the market in that the second hand market is as strong as the retail market they created.

    I believe that at some point in the mid 2000s Rolex must have hired MBAs to help them with pricing. They adopted the strategy of understanding their own market demographics and targeting them with the highest possible retail price they would accept. Then raising that price in accordance to this philosophy. Until the mid 2000s the price increases were more random and seemingly based on the dollar value and technology costs. After 2002 or 2003 the price increases seemed more an attempt to extract the most possible from the marketplace.

    I can’t blame Rolex for doing this. It’s capitalism at its finest. Two justify the price increases they have followed up with advances in design and features. Rolex is absolutely the model for all privately owned product based business to follow.

  • The glaring class in this analysis is that costs to Rolex are in Swiss Francs, not dollars. Therefore, it’s moot to factor the US inflation or the US income. The fact of the matter is that not only US prices have increased as loosely measured by inflation, but each US dollar has had its value diluted to the point that each Swiss Franc now bus 5 times more now than it did half a century ago relative to the US dollar. If the falling exchange rate between the US dollar and the Swiss franc is considered, the Rolex Submariner would cost today about $6000, not $1200. If argue that the technical improvements would account for the extra 15% or so of actual price increase.

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  • Jenik

    If you want to buy
    divers watch in 1950s, you couldn’t find much cheaper product than Rolex
    Submariner. But today you can buy such watch from $500. So from practical point
    of view diver’s watch are much cheaper now.
    Rolex is a luxury and if
    you complain about price, you don’t understand what luxury really is.

  • ILUVAUTOMATICS

    It would be interesting to see the annual production volumes of each particular model analyzed in your article over these time periods.  While the analysis clearly shows that the price of these watches have increased beyond what can be explained using inflation and cost of materials, labor, and overhead, I have one suggestion.  The consumer whether informed of this or not, is willing to pay these prices so what does it really matter.  The consumer wants to spend two months of wages for an expensive watch.  The real question to be answered IMHO is “Why do they want to spend so much money on a watch that in the past cost substantially less?”  When back in the 1950s, a Rolex Submarine was only a fraction of what it is now.  Did they know something back in the ’50s we don’t know now or perhaps we know something more now than they did back in the ’50s.

  • BIGCHRONO

    Another aspect of this concerns financially raping sales taxes added to luxury goods, & most everything else. With taxes on certain top echelon Rolex watches, you could have used that money to buy a lower echelon Rolex model, or
    other marques of excellent quality @ better price levels. Being unemployed, I’m shaken down by exorbitant costs for everything, & not being tax exempt adds punitive salts to my “shortfolio”.

  • David Bredan

    ILUVAUTOMATICS Being able to see and analyze that data would be amazing and – as much as I hate saying this – is pretty much impossible. Rolex has always been extremely secretive and they have every reason for that. Actually, pretty much all other companies (which are closely held) are like that, what directs the spotlight on Rolex’s secrecy is the incredible interest that everyone has… we all wish to be able to take a look inside and that’s why https://www.ablogtowatch.com/10-things-know-rolex-makes-watches/ was such a big deal 🙂

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  • David Bredan

    emenezes I totally agree in that the way CHF / USD rates have changed certainly affected Rolex prices in the US – in the long term. However, to be able to determine that effect I feel I should have had my father and grandfather be a member of the company’s management, as filtering out the CHF / USD ups and downs from the price increases of 60 years is otherwise borderline impossible.
    You made a very good and very valid point above, it is just that it is one of at least half a dozen of those factors which are “in there” somehow, clearly affecting Rolex prices, I just feel it would be overly optimistic to claim we are able to filters these out one by one in a reliable way when using presently available data.

  • David Bredan

    LapYoda You say: “there is no economically justifiable reason for Rolex prices to have increased at the rate they have” other than “Greed”.
    Now I would like to respectfully point out the other side of things as I feel there are only economically justifiable reasons for prices to have increased as they have. In my opinion any and all profit oriented company wants to sell more and do so at higher prices – things don’t get better than that for them. That, of course, can be perceived as greed (because it kind of is!), but this is something permanently present at such companies. And whether or not the world would be a better place without this motivation is a completely different topic.
    Rolex is a success-story, it just happens to span nearly a century. The fact that they can sell a luxury product with matching margin 800,000-1,000,000 times over (plus Tudor…) is an incredible feat. I am not saying this in defense of the company, rather I just aim to respectfully point out that we are not talking here about the greed of one company and not even one industry – it’s present everywhere, regardless we are talking about $10k watches or $50 sneakers – in my opinion, that is.

  • LapYoda

    David Bredan LapYoda While I can accept price increases over time, the fact is that the price increases far outstrip the improvement in product and can only be justified in the desire for more and more profits.  So yes, that is greed.  It’s not necessarily a bad thing if you are a proponent of the Adam Smith theory of the Invisible Hand, but we ought not sugarcoat the fact that we are talking about wristwatches based on a mature technology.  The differences among the 4 references of Submariner in 50 years are, in the grand scheme of things, minor and do not account for 10-15% price inflation per year.  Only in the watch industry can you crank up the price 12% in one year with zero change in the product.  Compare that with 7 generations of the Chevrolet Corvette in the same time period (also arguably a halo product) and you see a massive change from a basic fiberglass-bodied tourer to the high-performance, high-tech sports car of today, which justifies the price increases IMHO.  For all the talk of 904L steel, Parachrom springs, sapphire crystals and ceramic bezels, Rolex has added very little *value* to its products to warrant its asking prices.  They have us consumers pegged for suckers, and considering the market has borne their crazy inflation for minimally changed product, they’re right.

  • somethingnottaken

    One thing that stands out to me is that the vintage Rolex perpetual movement pictured in this article looks much like a modern, more or less undecorated, movement like those used today by brands selling at prices similar to those of the inflation adusted prices for a 50’s/60’s Rolex. In contrast modern Rolex movements are far more heavily decorated. This strongly suggests that much of the price increase can be attributed to Rolex moving upmarket and ceding it’s former market to other brands.

    Also, looking at the fraction of average income a watch cost underestimates the decrease in affordability. Today’s buyer has alot of expenses that are necessary to modern life, yet were unimaginable in the 50’s:  computers, internet access, cable TV, etc..

  • gadgety

    Zzyzx MarkCarson antjay  Taking from memory the Swiss watch industry is 60-80% marketing and distribution channel expenditure driven. Higher for the “haute” market brands. R&D and production cost is a tiny part, although it is not marketed as such, of course. What we have to understand is that not only do they have to sell to the
    consumers, but also to their marketing channels, although different
    watch companies have different strategies. Rolex does a fair amount of advertising. I have heard the CEO of one of Swiss well known watch brands say it’s ALL marketing, and the CEO of IWC Georges Kern has explicitly stated that among all his employees there are two or three that are of particular value: they are the marketing geniuses, because they create imaginary value by crafting emotional stories around their products, linking them to real glamour, and it is this that sells and warrants the high prices. The products incidentally refered to by Kern as “beautiful and useless”, in what I deem to be a risky and brutally honest statement. Fifty to sixty percent of their turnover is decided during one week in the year, not at Baselsworld but at SIHH in Geneva. They spend a couple of million on that one event, with a red carpet event, 900 guest, letting representatives of the distribution network schmooze and have fun with celebrities, and the return on investment is 15x because of all the “free” PR it generates. None of it spend on advertising.  Rolex has been building their brand for 100 years, and I’m sure they are up there at the top in terms of cumulative marketing expenditure. I’ve heard numbers such as 12 million only to launch a new watch line. So, yes, the major cost is marketing and distribution expenditures, by far.

  • GradyPhilpott

    I dislike the term “No-Date Submariner.”  The Submariner has no date.  The Submariner Date has a date as the name implies.

  • somethingnottaken

    emenezes The real cost of raw materials (Steel, Gold, etc.) wouldn’t be affected much by exchanges rates. What has changed are labour rates, in the 50’s Swizterland was considered a cheap labour country, and American watch manufacturers outsourced there like many industries are today outsourced to Asia. Today labour rates in Switserland are higher than in the US.

  • somethingnottaken

    LapYoda Well, prices also have to be increased to pay for those big celebrity endorsements and sporting event sponsorships!

  • gadgety

    LapYoda Part of the brilliance with agressive price increases over time, is the used watches maintain their value. Porsche did the same in the 1980s. It’s like a safe conspicuous consumption, where, if you, as a consumer, want to part with your watch, or if you were to fall in dire straits, you could get some, or even all of the money back. Few brands have that clout.

  • GradyPhilpott

    MarkCarson LapYoda Rolex may not be advancing the state of the art of watchmaking as they did decades ago, but Rolex is refining the art continually.  A Rolex is worth the price, mainly because they hold their value so well, they are extremely robust, and with proper care, they’ll last a few generations.  They also look good.

    For whatever reason you want a watch, whether is something as pedestrian as telling the time, there is a watch out there for you at almost any price.

    However, if you want to play the Rolex game, you have to buy a Rolex.

    I happen to like Rolex and I’m able to put some money aside for as long as it takes to by the next one that strikes my fancy, so the price, while not inconsequential, is not as important as getting the watch I want.

    I do have limits.  I don’t think precious metals are necessary in the field of watchmaking any more and while I don’t hate precious metal watches per se, When it comes to Rolex, 904L will do nicely, as I prefer white metals, anyway.

  • GradyPhilpott

    LapYoda David Bredan That’s a very pessimistic view of Rolex and a very inaccurate one at that.  Rolex hasn’t added any value to their watches to warrant the asking prices?  How about holding their value.  I have acquaintances who buy used, flip, and buy again almost ad infinitum and they swear that they lose very little money in these transactions, plus they get the joy of ownership.

    How many products do you know where this is possible?

  • somethingnottaken

    LapYoda David Bredan It’s not just watches. Jewelry, pens, and other luxury goods all see such large price increases combined with similarly small improvements.
    While there’s an enthusiast community who love watches (and pens, cars, etc.), we’re not the primary market for Rolex and other luxury goods companies – they’re targeting people who buy luxury goods to show off their wealth; therefore, increasing prices can make the product more appealing to it’s target market. However, the enthusiast community may still be valuable to luxury goods marketers – for the most part we’re the “independ experts” who validate or invalidate marketing claims that a product is technically worthy and superior to it’s competition.

    If you’re not familiar with the concept of Veblen Goods, it’s an excellent introduction to understanding the luxury goods market:

    http://en.wikipedia.org/wiki/Veblen_good

  • MisterDeal

    Rolex is considered the #1 luxury brand name, not just in watches, which did not happen by accident. A lot of what one pays for in a contemporary Rolex is beyond the cost of manufacture, development, materials, etc.: it’s actually what Rolex has invested to ensure that its products will maintain their value. After the quartz crisis, much of Rolex’s efforts has been not just to improve their product, but their product’s standing in the eyes of consumers, greatly helping to maintain its value. Many of Rolex’s peers/competitors simply tried to update their products, adding new features, chasing trends, etc.., whereas Rolex went the extra mile beyond the creation of the product itself.

    It’s actually quite an interesting, innovative approach from a business perspective that few have been able to replicate with such success. It takes a significant dedication of resources, and vision, to make such a phenomenon happen.

  • LapYoda

    GradyPhilpott LapYoda David Bredan Not many products, but what comes to mind are Apple products.  They hold their value far better than any other technology, though obviously they depreciate as well, albeit slower.  Yet every generation is better than the one before, and sometimes cheaper to boot.

    My pessimism stems from the artificial nature of increasing the price each year to buoy the resale value of the previous year’s goods.  The only reason is to make Rolex a Veblen good, as somethingnottaken and gadgety have pointed out.  But standing on the merits of the product itself, it simply doesn’t justify the price increases.

  • WillyChu

    Very interesting analysis and attempt to understand luxury watch pricing, but really, there is such thing as a “proper” price for a Rolex. It is purely what the market will bear.

  • David Bredan

    GradyPhilpott That is a good and very valid point, although we would prefer to stick with the “no-date” designation to avoid confusion.

  • MisterDeal

    LapYoda GradyPhilpott David Bredan somethingnottaken gadgety Actually while Apple products might hold their value better than other tech products, they don’t really hold much value at all. I wish I could find the link for this, but I remember reading an interview with a prominent watch collector who bought his first Rolex as a teenager for maybe $1,500, and his first Apple Mac for $3,500. In the ensuing years, the Rolex grew to be worth around $7,000, and that primitive Mac, erm, maybe $100? If?

  • MisterDeal

    LapYoda GradyPhilpott David Bredan somethingnottaken gadgety I found it, actually (the comment re: worth of Apple vs. Rolex). It’s from this post, via noted Rolex collector Jake Ehrlich:

    https://www.ablogtowatch.com/guide-to-buying-your-first-rolex-part-2-what-to-buy/2/
    “In 1983, when I was 16 I bought my first Rolex Submariner, A year
    later when I was 17, I bought my first Apple Mac. I actually pre-paid
    for my first Mac and picked it up the first day it was available to the
    public. I paid $2500 plus tax for the Mac, and also bought the Apple
    dot-matrix printer for $500. So basically, in 1984, a state-of-the-art
    Mac was three times as expensive as a stainless steel Rolex Submariner,
    which was $1000. Fast forward to 2012, and the same Mac retails for
    between $1300 and $4000 depending on how you get it equipped. A
    stainless Rolex Submariner is about $8000 today, which makes it seem
    like it has increased in real dollar price over the years by 2-3 times.
    But, that original Mac computer I purchased 30 years ago is useless and
    worth almost nothing, and the Rolex Submariner I purchased has
    significantly increased in value and is now worth around $5000!
    It has pretty much remained a rule, that with every Rolex I have
    owned over the last 30 years, and I have owned many, that I am always
    able to purchase them, and when it comes time to sell them, I have never
    lost a penny, so I basically got to wear the Rolex watches for free,
    and that speaks volumes.”

    Doesn’t make me want a Rolex more or less, but it is interesting!

  • GradyPhilpott

    LapYoda GradyPhilpott David Bredan somethingnottaken gadgety  Ah, Thorstein Veblen, a brilliant man.
    It should be noted that Rolex hasn’t had a price increase in the US in two years and I would also point out that many of the increases in  recent years have had a lot to do with the improvement of the designs, the strong CHF, and fluctuating currencies, as was the case in the recent price increase in Canada.

    I don’t question that Rolex is making hay while the sun shines on the luxury watch industry, but I think that price increases are not arbitrary by any means and that Rolex, even at today’s prices, represents a significant value.

  • gadgety

    MisterDeal The computer business really abides by entirely different industry logic than watches. It is performance driven, functional performance, utility, and with Moore’s law and all, performance versus cost improvements have been brutal. I wouldn’t be surprised if the so called smartwatches reaching the market in 2014, essentially mini computers on the wrist, have more power than my first portable Compaq back in the early 90s. That’s also why the Swiss upmarket brands will stay away from that segment. Even Seiko and Citizen. It’s different industry logic, different value added and cost structures, differen core competence, different distribution channels etc etc. Luxury goods are almost the opposite to computers, functional or utility value has little to do with the prices being asked. That said, on November 24, 2012, a working Apple I was sold at auction by Auction Team Breker for €400,000 ($671,000 USD), on May 25, 2013, a functioning 1976 Apple model was sold for a record €516,000 (US$668,000) in Germany… Not indicative of these two computers utility value, nor of what you could have gotten for yours, of course today.

  • somethingnottaken Some things are actually much cheaper (adjusted for inflation) now than in the 1950s. TVs and porn are just 2 examples.

  • gadgety As a Richemont brand, you would see IWC at SIHH and not at BaselWorld. But for brands that show at BaselWorld (and not at SIHH), the scenario is the same as  you describe – that is where they fill their order books for the year. And make no mistake about it – SIHH and BaselWorld are marketing. Very directed marketing – towards the buyers rather than the end consumers. Cheers.

  • gadgety

    MarkCarson gadgety Good point. SIHH is carefully positioned as more exclusive, far fewer exhibitors, exhibitors by invitation only, not open to the public, required to show personal invitation, appear on the guest list, have to show ID. Uuuuh, aaaah, the exclusive magic of it all.

  • gadgety

    MarkCarson gadgety Did you ever exhibit at Baselworld?

  • gadgety No I have not exhibited at BaselWorld. I went with Ariel and James Stacey in 2013 and 2014 to help cover the show (and its fun anyway to see so much cool stuff). At my current production levels it would make zero sense to exhibit there (in one of the off-the-beaten-path halls). Besides, then I would be tethered to my booth and could not cruise around and see everything. I know that because I asked people in the big brand booths what they had seen and they replied, nothing – they were stuck working all day.

  • gadgety MarkCarson Ah yes…making it even more exclusive so those attending feel even more special. But realistically, going to BaselWorld as a consumer is sort of worthless. You can look at watches though the windows on the outside of the booths but that’s about it. You have to be a buyer (watch distributors or major retailers) or a member of the press to get a meeting and make it inside the booths where the watches are shown to you hands on. I remember my first day at BW 2013 where I did not hook up with Ariel and James until 5 P.M. I spend the afternoon wandering around looking at showcases from the outside of the booths and thinking to myself, “There is no way I can spend a week doing this.”

  • antjay

    MarkCarson LapYoda I would love to see a comparison between the Rolex R&D budget and their marketing budget . This would give a much clearer picture of where your money was going .

  • GradyPhilpott

    antjay MarkCarson LapYoda  There is no question as to the fact that Rolex spends some significant funds to promote and protect the brand.  That is no small part of the reason that Rolex watches hold their value as well as they do.
    Also, Rolex doesn’t run any sales or clearance specials.  If you get a discount on a Rolex, it’s because an AD needs to move some stock and he’s willing to put his AD status on the line or you go to one of the many gray dealers out there who are scarfing them up out  the AD’s back doors.

    The bottom line is this.  It doesn’t matter what the breakdown of the Rolex budget is.  If you like their watches, you pay up, one way or another, AD, gray dealer, or used.

    If you feel that Rolex isn’t worth the price, you are free to buy any watch your heart desires from Patek and they myriad smaller houses down to a $10 Walmart special.

    I know men who are highly educated, highly skilled, and highly successful who would never spend more than $50 for a watch and many are happy spending much less.

    It’s up to you.

  • GradyPhilpott

    David Bredan LapYoda  What you are talking about is the free market and I really don’t see any problem with you or anyone defending Rolex.

    Rolex may be completely unique in the watch industry, in that they are owned by a charitable trust that Hans Wilsdorf set up after the death of his wife and to which he transferred all of his stock some years later.

    This is part of the reason that we know so little about the internal workings of the company.  They simply don’t have to report the data that publicly owned companies must.  That and the fact that Rolex could teach the CIA, the FBI, and the NSA a few things about secrecy.

    No one seems to know anything about what Rolex is going to do until it’s happened.

    Anyway, those who talk about Rolex greed should think just a little bit about what it means for a company to be owned by a charitable trust and the fact that, since Wilsdorf was an orphan, the majority of the money distributed by this trust goes to children’s issues.

    Also, consider Rolex’s the other philanthropic efforts of the company.

    http://www.rolex.com/magazine/philanthropy.html

    I like their products.  I like their image.  I like their values.

    Nobody does it like Rolex.

  • maxiumburn

    I think this article is missing the point of wealth redistribution. Hence the fact that since the 1970s the income gap has increased between the middle class and the very wealthy. And is precisely the same correlation that you see in the graphs above where the prices of the luxury goods increased exponentially.
    So another words,the rich are getting richer and their luxury items are becoming more expensive because the super rich can afford it. This is not just in luxury watches but also in luxury goods like sports cars and fashion. The makers a Rolex are aware of this and are setting the prices accordingly.
    If you sell one piece that is four times the cost of the last one you make the same money but you don’t have the same overhead. You can get rid of some employees.

  • maxiumburn

    In fact, I would hazard that the makers of these watches have downsize in the last 20 years.

  • DG Cayse

    Nicely done article.

  • DG Cayse

    MarkCarson somethingnottaken And they have both gotten much better in spite of the cost reduction.

  • DG Cayse

    GradyPhilpott LapYoda David Bredan “…they swear that they lose very little money in these transactions,…”
    If they are losing any money at all in these transactions then they are doing it wrong. “Joy of ownership” is certainly a consideration – being a poor business person is unjustifiable.
    They are merely dallying in these transactions with scant regard for value added or not gained.

  • DG Cayse

    somethingnottaken LapYoda The cost of these celebrity endorsements, along with the attendant costs of publicity and promotion do certainly add to the bottom line. However, Rolex does find itself in a much envied position based on its heritage , longevity of public exposure and the events with which it has become associated with.
    These factors greatly contribute value to the Rolex marque.

    Having said this, and admittedly being a long time Rolex owner and fan – I do agree that they have priced themselves into a very rarefied atmosphere.
    Is it of advantage to the marque…well, they seem to be doing rather nicely…at least for now.

  • somethingnottaken

    GradyPhilpott antjay MarkCarson LapYoda In most countries competition laws prohibit Rolex et. al. from setting prices. The AD’s aren’t allowed to advertise discounted prices, but punishing them for privately negotiating a discount with a customer would be illegal. Instead Rolex careful control their production to prevent an excess of supply with drives prices down.

    You’re right about it being a choice.

    Though, I’ve read that there regions and industries where showing off wealth by wearing an expensive watch is a prerequisite to promotion/success; however, I’ve never seen this personally. Many men don’t wear a watch at all anymore, and the watch brand I see most often is Fossil. Plus the odd smartwatch or health wrist worn health/excerise tracker.

  • GradyPhilpott

    DG Cayse GradyPhilpott LapYoda David Bredan 
    You’re really Montgomery Burns, aren’t you?

    My statement is what is called an anecdote.  It was made after years of casual observations.  It was not intended to be substantive, quantitative analysis.

  • GradyPhilpott

    somethingnottaken GradyPhilpott antjay MarkCarson LapYoda  Maybe it’s illegal in some countries to hold AD to the MSRP, but I don’t think that’s the case in the US, as it is my limited experience that most ADs are very cautious for fear of losing their status.  Maybe all that’s anecdotal, but I’m pretty sure that my own AD discussed this with me at one time. 

    That the practice is illegal in some countries might explain why so many gray market Rolex watches come from overseas, or at least that’s the word “on the street.”

    ADs have ways of saving the customer money without officially offering a discount and those kinds of deals are quite common based on my observations.

  • somethingnottaken

    GradyPhilpott somethingnottaken antjay MarkCarson LapYoda Price fixing is prohibited by US anti-trust laws. Of course, suing for damages doesn’t do the AD any good if they’re bankrupt and liquidated before the court case finishes.

    Gray market watches come from other countries because many brands set different prices in different countries/regions. When they do, the US and Western Europe are high (though maybe not the highest) price regions.

  • somethingnottaken

    maxiumburn I’m not sure what you mean, but compared to pre-quartz days, I strongly suspect the high end mechanical watch makers are selling fewer watches but making more profit on each watch sold. The Swiss watch manufactures who survived the quartz crisis (late 70’s and early 80’s) all had huge layoffs and downsizings during that time, but in recent years they’ve been growing.

  • GradyPhilpott  Damn greedy orphans! (I’m kidding of course)

  • GradyPhilpott

    somethingnottaken GradyPhilpott antjay MarkCarson LapYoda 
    Yes, I’ve noticed that right about Basel, new models prices are usually given in CHFs, GBPs, or Euro’s.  I’ve noticed that doing a strict currency conversion always yield a higher price in USDs than the actual MSRP turns out to be.  At least in the last few years, that’s been the case on some models.

  • GradyPhilpott

    MarkCarson GradyPhilpott  Humor is good!

  • GradyPhilpott

    DG Cayse somethingnottaken LapYoda I agree that it seems that Rolex is positioning themselves for a market that they see as the future, which is something quite apart from the market they sought from roughly 1945 to 2000.

    The larger lugs, the maxi-dials, larger cases, and the ceramic bezels signal that without compromising quality, durability, and reliability, Rolex is now a full luxury brand in the spirit of the traditional tool watches, a category they have certainly defined, if they didn’t quite invent it.

    It’s been happening for quite awhile incrementally, but in the new century, they’ve been pouring on the coal, as it were.
    You can point to the gold professional models that have emerged through the years, but I think the best harbinger of where Rolex intends to go is the introduction of the much loved Pepsi GMTII in WG only.
    Legions of Rolex fans have been salivating for years waiting for a ceramic Pepsi bezel that used to be just another bezel choice out of several that could be mixed and matched at will, as long as you could get your hands on the aluminum inserts.

    I’ve discussed this quite a bit with others who have tried to rationalize the likelihood of a steel Pepsi, but observing the way Rolex treats metal and bezels, the odds seem very slim indeed.

    If they had offered it in any other color but white, there might have been a chance and maybe Rolex has something up their sleeves, but I don’t see it now and in the beginning I was one of the hopeful.

    I’d like to hear what others think.

  • gadgety

    MarkCarson gadgety It’s been a while since my visit. At that time I just walked into the booths, but it’s entirely possible that’s also why I came away unimpressed by the staff… for the most part. It was also striking how just about everybody was dressed in black suits. Very formal.

  • Jenik

    Status of
    the Rolex has changed and that can be one reason for higher prices. In 1950s
    Rolex watches was still partly a tool watch. If you wanted high quality
    timepiece, you considered Rolex. But during time Rolex moved higher, today it
    is pure luxury and status symbol.
    I would
    compare it to car companies – in 1950s Rolex was something like Mercedes, but
    today it is Rolls-Royce.

  • gadgety Big brands are like that in their booths – manned by employees who don’t want to lose their jobs. The small brands and the AHCI (independent guys like Voutilainen, Gronefeld Bros, Sarpeneva, etc.) are quite the opposite – direct access to the watchmakers and very casual and relaxed but passionate about their watches. But even Kari does wear a suit, ha ha.

  • Oldexpatbeast

    That’s called ‘dumbing down’.

  • GradyPhilpott

    Oldexpatbeast  LOL!

  • DG Cayse

    Jenik I will agree with your comment if it solely confined to referencing the Submariner.
    However Rolex, as a complete marque has long been considered a “luxury high quality” timepiece.
    I do remember adverts for the ‘President’ series that featured high-profile persons, Presidents, Premiers, business leaders, etc, wearing the Rolex President models. This was during the early 60’s. Several other models also were advertised with this “luxury high-quality” image.
    The Submariner was, as you mention, originally designed as a ‘tool watch’ and fit this quite well. It has also benefited from brand association as a symbol of quality as well.

  • DG Cayse Very good point Mr. Cayse, thanks.

  • maxiumburn

    somethingnottaken maxiumburn       What i mean is that Rolex can afford to charge a price that only a few rich people can buy.  The “rich” who can buy this are considerably more rich now and will pay the exorbitant prices offered just to have a “Rolex”.  In the 80″s the prices were lower because there were far fewer super rich buying the watches.   Supply and Demand.
    In the 70-80’s the people working in the industry were almost double than now 80000 to 550000 now.

    The logic of this pricing is logical only for short term gain as, in the long run there can only be fewer people who can actually afford these watches.   The will be a reckoning eventually!

    Again, if i can make a watch that costs 2 to 3  times the amount of the previous(5 years ago), I can make fewer watches and they become ” more exclusive”   My costs go up with inflation but by increasing the price I can lay off workers and decrease my overhead and improve my profit.   The question is how they can gauge the Rich ability to pay.  They must have a marketing dept that incorporates this function.   I would love to see a graphic on this!

  • maxiumburn

    somethingnottaken maxiumburn David Bredan 
    what do you think of my social economic point?

  • somethingnottaken

    maxiumburn somethingnottaken David Bredan 
    Rolex were once middle and upper middle class brand, today they are a luxury brand selling to the rich (but not quite the super rich). However, looking at the industry as a whole, the picture is more complicated. In the pre-quartz days most watch brands covered a wide range or price points. Today most are specialized.
    Many luxury watch brands are owned by Richemont and LVMH, these are luxury goods companies who specialize in selling to the rich super rich. It is little surprise that the brands they own have been moving steadily upmarket. Patek Philip, Audemars Piguet and a plethora or smaller independant brands compete in this market too.
    As Rolex and many others move upmarket, a wide variety of new or resurected brands are filling the niche they’ve vacated – selling mostly to the upper middle class. They do it by minimizing marketing expenses and often selling direct to the consumer (eliminating distributor and retailler markups). The lower end market has been abonded to Asian companies, largely because high labour costs in Switzerland make it difficult for Swiss companies to profitably compete in this market.
    For Swiss watches, the only exception I can think of is Swatch Group. They own many brands and cover a wide range of markets from cheap (Swatch) to high end haute horologie (Breguet, Blancpain) and equally high end jewelry watches (Harry Winston, Jacquet Droz). In between, Omega are going head to head with Rolex, and Longines with Tudor, while several brands compete with the more affordable micro brands: Tissot, Hamilton, Certina and Mido. Swatch Group are a brilliantly run conglomerate, when one or more Swatch brands have overlapping price ranges, each maintains a distinct style so they avoid directly competing with one another.
    Citizen and Seiko also cover a wide range of markets, though with fewer brands than Swatch.

  • GradyPhilpott

    somethingnottaken maxiumburn David Bredan 
    “Rolex were once an upper middle class brand, today they are a luxury brand selling to the rich (but not quite the super rich).”
    This is nonsense.  Yes, the rich can easily buy a Rolex or whatever they so choose, but the idea that Rolex is not for the middle-class is ludicrous.
    There are so many misconceptions about Rolex on this board that I can’t believe it, especially from our economist/social philosopher.
    I’m barely middle-class, maybe not even middle-class, I’m not really sure, and I have bought four Rolex watches in the last six years.

    How do I do it?  Simple.  I live frugally and I save my money to pay for a few extravagances from time to time.

    If people want to bash Rolex, do so based on something that is at least valid.

    They make great products that represent an excellent value, regardless of who you are or of what economic class you are.

    I see a lot of people who spend enough money on tattoos, drugs and booze to more than pay for a Rolex.

    Let’s get real, folks.

  • somethingnottaken

    GradyPhilpott somethingnottaken maxiumburn David Bredan
    You are not a typical watch buyer (nor for that matter is anyone who
    cares enough about watches to follow and comment on watch blogs).

    Except
    for ultra high end vintage and haute horologies pieces (where there are
    rich collectors paying millions of dollars per year on watches) very
    few buyers put a large fraction fraction of their income into buying
    watches – for the most part a brand’s target market are people who can
    easily afford the brand, but cannot easily afford more expensive brands.
    I’m not bashing
    Rolex. In fact to survive and maintain their reputation as luxury brand
    they have to produce high quality goods – and I don’t see anyone here
    questioning the quality of their watches.

  • DG Cayse

    A very relevant posting by Mr. Adams that might be of help to those reading this article.
    Very good comments also.

    https://www.ablogtowatch.com/the-idiots-allure-of-the-rolex-daytona-watch/

    (and please, enough with this “share the wealth” hogwash this is a watch forum)

  • GradyPhilpott

    somethingnottaken GradyPhilpott maxiumburn David Bredan 
    No, I’m not a typical watch buyer.  I’m quite atypical and probably not even a typical Rolex buyer, as I have more than one and I don’t wear them as symbols of status.  I just wear them because I love them and because all watches fascinate me to some degree.
    I’ve forgotten how many watches I have, but I could go for weeks without wearing the same one twice and I could do this with watches that cost less than $100.

  • GradyPhilpott I might be  able to afford a Rolex tatoo with drug money savings. 
    Rolex as the watch of the middle class? Get real. It is what they perhaps aspire to when they becomes affluent enough (or wish to appear to be more successful than they are).
    Yeah, if I lived in a cardboard box I could mortgage money for a Rolex. But for most of the middle class, Rolex is not a viable option in the usual mix of expenses. But thanks for your perspective, because you are right – with enough sacrifice lots of things are possible.

  • GradyPhilpott

    MarkCarson GradyPhilpott 
    What I’m saying is that the key is not so much sacrifice as it is perseverance to see one’s self through to a goal one wishes to achieve.
    A person shouldn’t be buying Rolex watches if it prevents putting food on the table or putting the kids through college or paying the mortgage.
    We all have priorities.
    Again, what I’m saying is that of your discretionary income, if you really want a Rolex or anything for that matter, the key is to put something away for that purpose as often as possible.

    It may take someone 20 years to put away that much money or that person might just have to wait until there are fewer mouths to feed, or until the mortgage is paid off.

    But, if that person opted to take vacations with that discretionary income or whatever, then the choice has been made that the Rolex the right goal.

    One can buy some very good watches for anywhere from $500-$1500 that would last a lifetime.  One can buy a Seiko 5 for anywhere from $50-$300 that could last a lifetime with proper care.

    The key is wanting one bad enough to either set some priorities or to just be patient.

    There’s no shame in not wanting a Rolex or anything else bad enough to do whatever it takes to buy it.

    Just don’t say that it can’t be done, because I know that it can and I am in contact with very many people on the internet who have literally waited from their youth to their retirement to buy that coveted Rolex.

    Rolex models like the Air King, the Oyster Perpetual, the Date, the Explorer, and some DateJust models are very attainable watches for those who would like to own a Rolex.

    One thing I’d like to point out is that I don’t live frugally because I want to buy Rolex watches.  I live frugally because that is the way that I prefer to live and with my discretionary income, I donate considerable sums to good causes.  I help a young friend stay afloat in her business when she needs it.  I have hobbies, one of which is watches.

    By the way, the cardboard box or the Rolex choice is a false dichotomy.

    Cheers.

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  • iamcalledryan

    I think the point has already been made but… there is a fairly simple conclusion to draw here. Inflation and gold prices have correlations but are not the primary drivers. The things that have changed over time and have a significant influence over the watch are:

    a) production, marketing, and general overhead costs absorbed into a unit (so this includes paying for the bond-villain HQ, brand ambassadors, the very many patents / R&D and IP, the beautiful machines that they use and the talented watchmakers salaries); 

    b) the target market – as proved by the income analysis you have – the Rolexes of today are clearly not aimed at the average earner. Their products have obtained luxury status, in part because of:

    c) The goodwill of the brand has sky-rocketed. Watches that were originally very nice looking are now iconic. The price that you would pay for Rolex over and above it’s market cap is that goodwill and it too accounts for the gap between inflation/gold and todays retail price;

    d) supply and demand, elasticity (the extent to which prices can be increased before demand drops), Rolex has dominion and is proving that it can push its luck where other brands would see sales volumes plummet.

  • maxiumburn

    MarkCarson GradyPhilpott I totally agree,

  • maxiumburn

    GradyPhilpott somethingnottaken maxiumburn David Bredan
    You are fooling yourself.  The middle class can not afford a watch that is 10% of their salary.
    if a family  makes 63  K a year in USD. see this link http://financemymoney.com/wp-content/uploads/2010/05/wheredidthemoneygo.jpg.
    yes, it is possible to shuffle the money around but it  will be more painful than in the 70’s or 80’s.
    By the way painful means going in to debt or waiting years to pay off the costs.. If you have a family it will be really hard to do.

  • GradyPhilpott

    maxiumburn GradyPhilpott somethingnottaken David Bredan 
    I’m not sure why all the Marxist ideology is pertinent to this thread.  You seem to have a lot of data to support you Leftist agenda, but one thing that you don’t seem to have much awareness of and that’s something called delayed gratification.
    My suggestion to you is to never, ever, under any circumstance buy a Rolex watch.  In fact, it would be in your favor to absolve yourself of all false consciousness and to eschew all consumer goods completely by living off the land with handmade tools to til the soil and spears and handmade bows and arrows to take game.  Also, do your timekeeping by the position of the sun in the sky or sticks in the soil.

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  • maxiumburn

    GradyPhilpott maxiumburn somethingnottaken David Bredan
    That is my point. I will have delay for decades now!  I have owned several Rolex’s. However,
    I worry about “wanna be” snobs who will pay anything for a “Rolex” The devil has ways of making examples of fools like that. Look at Archie Luxury.
    Yes data is anathema  to the blind.

  • GradyPhilpott

    maxiumburn GradyPhilpott somethingnottaken David Bredan   “.,..data is anathema  to the blind.”  Especially when it’s completely irrelevant to the subject at hand.

  • maxiumburn

    GradyPhilpott 
    Is your name really Philpott? That is funny man.  I see the problem now.

  • maxiumburn You know, unless you’re somebody like “Sting” or “Bono”, you usually get the name your parents give you. I went to school with a girl named Daye Ann Knight. Think she took some heat about it?

  • maxiumburn

    MarkCarson maxiumburn Well at least you have a proper name. But, some people should change their name, otherwise they will trying to be a snob and won’t have pot to piss in, and trying to buy a Rolex telling everybody else they need to delay their gratification because thats how they do it.

  • maxiumburn

    MarkCarson maxiumburn I bet Ms Day and night was fine as hell so it did not matter to you …

  • maxiumburn I only knew Daye back in elementary school, but yes she was a cute girl at the time. I also knew a Walter Walters and a Robin Robinson. I heard that William P. Lear (of LearJet fame) named his daughter Chanda. And according to the Internet, someone named their kid “Facebook”. Back to Grady, I have run into people with a similar last name – Phillpotts. So it is not as uncommon as you might think.

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  • B2D

    Here’s the real deal…
    There are significantly more people on earth today, as opposed to 50 years ago.
    There are many more people of means (wealth) that gained in numbers due to an I crease in personal income, with the trend advancing over the passage of time.
    If you look at how much the average person had available to spend in 1950 and compared it to how much the average person has today to spend, you will likely observe a more reliable relationship.
    Rolex has done an especially good job at marketing the desirable perception of having achieved wealth. Patek is another such successful player. You won’t likely see Rolex sponsoring a local county fair.

  • maxiumburn

    B2D Nope, look at the articles graphs, The amount of Rolex you can purchase is less not more now!  The amount of money people make is more, but adjusted for inflation, Rolex’s are more expensive to buy now.
    What they and Porsche have done is to cater to the high end( now yes there are significantly richer people compared the general population which is called income inequality gap) so they can make fewer watches but they are more expensive and ” exclusive’.

  • maxiumburn B2D Since Rolex is made in Switzerland and Porsche in Germany, US inflation has nothing to do with the increase in their prices.  Rather, the falling exchange rate between the US dollar and the Swiss Franc and Deutsche Mark/Euro is the main drive behind the increase of imports from countries with strong currencies.

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  • baham

    I bought a Sub 5513. in 1969. It cost $175. That would be a little over $1000 now. The fact that an equivalent Sub now cost $7000 has nothing to do with the number of people on earth, or with Foreign exchange rates. At $1000 the Sub was a very capable Tool Watch. At $7000 the Sub is a rather un-luxurious Luxury Watch. The reason it cost $7000 is that Rolex figured out that there were enough people out there foolish enough to pay $7000 for a Tool Watch. Nothing more than that, aside from the fact that they need to support what I imagine is a considerable advertising budget.

  • You probably used the official CPI, which has turned into a fictional figure since the Reagan years. If you used the CPI as calculated until the Carter years, that would be closer to the current price, as you can infer from http://www.shadowstats.com/inflation_calculator?amount1=175&y1=1969&m1=11&y2=2014&m2=11&calc=Find+Out

  • baham Yep, advertising is probably cost #1 at Rolex (and many other brands). And of course the customer pays for all of it in the end.

    • H MAN

      Too bad they let Omega take away the James Bond connection

  • baham

    emenezes
    I also bought a Triumph Bonneville motorcycle in 1969. It cost $1450. That’s about $10,000 now.  According to your “Shadow Government” calculator that would be about $70,000 now. The price of a 2014 Triumph Bonnevelle i $7,800, not $70,000.

  • maxiumburn

    It is income inequality that is making luxury items explode in price.
    I went to Neiman Marcus a high end clothier in Short Hills Nj. A tie is priced at 250$ which in the U.S. extremely high. The same ties were under 100$ last year. The shirts 500$ and leather boots 1650$.

    • H MAN

      Rich fools blow through their money

  • Luxury items are not supposed to be affordable. If they are, they aren’t luxury. I’m fine with it; I just don’t buy what I can’t afford.

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  • marvin1234

    Who cares about the prices of Rolex always  going up..It is designed to keep the riff raff away.
    That’s the reason I buy them.
    marvin

    • John Thompson

      The typical man buying a Rolex to compensate for his shortcomings. Just like the man buying muscle car or Mercedes to make up for having very “little” in his trousers. LOL.

  • marvin1234 Ah, you are the perfect Rolex customer (a status needy soul who lacks appreciation for their watch as a timepiece).

  • marvin1234

    MarkCarson marvin1234 Yep, if you say so. But if you are down at 100ft or so you do want the best.

  • maxiumburn

    Now with the Swiss Franc increased by 20% the Swiss watch business is going to be put under a lot if pressure.
    I predict there will be layoffs. There is a lesson here. Greed is not good. Rolex will do Ok, but you’ll be payin a lot more, but, hey, you can afford it.

  • marvin1234

    MarkCarson marvin1234 I have only been repairing timepieces since 1973.This is my hobby.
    I certainly do not lack any appreciation for a”timepiece”. I have spent thousands on Rolexes and tools,
    over the years. At last count I own 8 fine Rolexes watches. and still buying.I most  certainly can
    afford them. I  do not respect the opinion of an Idiot like you. Regards,Marvin.

  • marvin1234 Perhaps you should  “donate” your slogan to Rolex to use in their marketing, “It is designed to keep the riff raff away.” I’m glad you are happy with your Rolex watches (which in the end is all that matters), but your initially stated reason still fails to impress me in the least. Carry on…

  • marvin1234

    MarkCarson marvin1234 Not trying to impress you. Who the hell are you?

  • marvin1234 Nobody, probably riff raff by your definition as I have no desire for a Rolex. have a nice life (conversation ends…)

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  • Lkcons

    MarkCarson marvin1234 LOL Man, at least there are two of us – so are we now “riff raffs” or “riffs raff”?

  • brownm048

    I agree with Marvin123, it keeps it exclusive to go getter or very fortunate people who get the willed!  High horology really is a status symbol for me and many others.  I also don’t really care  what people think or I wouldn’t wear them!  Im probably not the best person in the world!

  • smoothsweeper

    marvin1234 The price goes up simply because it can – because the marvin1234’s of the world are willing to pay whatever Rolex asks them to. That’s the only “design” they really have.

  • GreatestCollectibles

    This price guide updates prices off eBay completed sales every month. http://www.greatestcollectibles.com/rolex-watch-prices/ hope this helps.

    Antonio

  • Teateatea

    Just a grammar point. Above the graphs you print ‘amount of Rolex…’. It should be ‘Number of Rolex….’ A Watch can be counted and so is a countable noun and not an ‘amount’,

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  • Nutty

    Rolex. The definitive tool watch for tools..

    Yes. Sadly, I was also suckered into owning a few Rolexes over the years..

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  • Paul Eyres

    OK. My take. I own and can afford five of the most coveted watches in the world. I am a collector who loves perfect Horology. I keep them in a Safe and wear them about 15 times a year. I have had Rolexes, and Cartiers. My everyday watch is a Classic Tank that is 30 years old an says as much about me as I need to say. My Daytona ($6000 in ’88) I don’t wear much.- Two reasons, – the same plebs that resent my Aston Martin and Porsche T. and scratch and “boost”them when their slimy little minds realize they will never own one. Out of the same “business model” spite these same (our) status watches attract low life too. I got smart after my first Daytona was stolen from my hotel in Paris.
    What most chimpanzees who sport a $40,000 watch that is a work of art, is that these same thieves also know it costs $6500 to make but will fetch them $25K in an alley in the Arab / N African, Parisian Quarter on Sunday Morning. I know, because thats where I bought my Diamond/Gold Pasha!! for 9K cash.
    Moral, you don’t have to be upper class to own or appreciate a pristine watch. but you must be a fool to flaunt it as a status symbol in todays world.
    Footnote. I just Bought a Seiko GPS Top line 41(i believe) time zone beauty that makes me feel like I did when I bought my first Rolex Datejust bi-metal with diamond face, after watching Miami vice in 1986!
    Not too soon Economics and cost of manufacture (Switzerland will go Bankrupt!- Those who care can research why) Rolex will hit what the market can bear ceiling. Switzerland will be a place where they produce fine anachronisms, and Asia and Google / Apple / Samsung spinoffs will find some “class” and technology (all in one really cool looking package!!) and make Superlative perfect time keeping package (forget the Apple MK 1) for the wrist (that will also look good doing it)…. and the leading edge models will be sought out by the same gotta have its who drove up the prices of rolexes and so forth and so forth.
    I will still be wearing my modest Cartier tank that says more than any money can about character or Status.
    Just my view……as a VC.

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  • Rob Crenshaw

    I love how the final paragraph describes the rise in cost as a “complex topic” when it’s not complex at all. After all the interesting analysis, which really just quantifies what we all already know, that the rise in luxury goods pricing has changed from reasonably linear to absurdly logarithmic sometime in the past ~20 years, what remains is simple and timeless—Rolex et al will charge as much as they possibly can and support that pricing with brand exposure and created desire marketing.

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  • iqueglobal

    This was an excellent excellent excellent article!

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  • TrevorXM

    It’s actually the rapid increase in the value of the Swiss Franc which has resulted in most of the increase in the price of a Rolex (or any Swiss watch). The Swiss Franc is on par with the US dollar now. Since 2006, the Swiss Franc has gone up about 30% in value. To state the obvious: Rolex watches are made in Switzerland from Swiss materials by Swiss workers. Which pretty much makes a Rolex watch 30% more expensive as it used to be 1.4 Francs == 1 US dollar. Add inflation and the mystery of the charts in the story pretty much all go away. This also explains why Swiss watches were so “cheap” way back in the day — when it was 4 or even 5 Swiss Francs to a dollar.

    Put this chart next to the one above showing the increase of the price of Rolexes and you will see the relationship very clearly. The lower the US dollar goes in relation to the Swiss Franc, the higher the price of a Rolex goes.

    • Berndt Norten

      What you say is accurate but it only explains a small part of the story. I don’t think it’s a coincidence that the price take-off point was in the mid 1980s, precisely when the fortunes of those in the top 10% or so in North America, the UK and parts of Western Europe, started to soar due to changes in the economy and due to tax policies. Also, the increased demand from Asia, which really began in the 1990s, factors in. The rising cost of a Rolex mirrors the grand shift in the distribution of wealth in Western economies.

  • Joe0000

    “…namely the Submariner no-date”. Et tu, Brute?

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  • Garrett Hu

    Thanks David, this is an interesting read and complex topic indeed and you have done an excellent job in trying to explain this. The Submariner have definitely become less affordable to the average american and your statistics demonstrate this well, in fact in real world scenarios there are other competing factors such as the rising cost of living that make it even harder for the average wage earner at $42693/Yr. But the truth of the matter is the guy making $13590 in 1957 is not any more likely to buy a Sub for $1225 then the guy making $42693 at $7550. Let’s face it the average American does not spend $1225 on a watch today let alone $7550.