how much "profit" do you figure this non-profit makes on each watch they sell after covering fixed cost / expenses? 90%, 95%...99% margins lol

 

No idea, certainly not 90%.
The question is: if they achieved such margins, would it be a problem, a negative ?
I can't figure out why it bugs some people out so much...

 

Maybe someone would just like to know, as it gives an advantage when purchasing off an AD, knowing how much can be barted for.

 

Perhaps a more illuminating figure will be the percentage of a watches sale price that the company spends on marketing.

The margin on an established watch will be enormous as the R&D expenses will have been eliminated.

 

I feel like there is not much to barter, as I assume they sell pretty easily at retail (for steel sports at least).
You can give a look at a listed watch brand or a conglomerate that owns watch brands (Richemont etc.) - in their financials you'll be able to find these details.
You can assume that Rolex is in the same ballpark / max twice the margin ?
I can take a look tomorrow from the office at Richemont's info / their competitors

 

From the richemont website for their 2017 Interim report

Gross Margin for Company as a whole: 64.5%
Operating Margin for Company as a whole: 20.8%

They don't outright say what the Gross Margin is for the watch making group, but the operating margin is similar (19.7%) so let's call it around 60% gross margin.

Now does this mean you have room to negotiate at the boutique? Likely not. I feel that price bands and negotiability are driven by demand more than anything else. You could probably get some concessions on items that are more common or have sat around inventory for awhile, but I still remember an associate at one Rolex AD saying I'd need to buy $150k in order to qualify to purchase a ceramic Daytona.

Needless to say, I do not frequent AD much anymore.

 

Rolex is owned by a charitable trust, but the company that makes/sells watches is certainly a for profit company.

 

I had my heart set on buying a brand new Rolex 114060 next year until I spoke to a sales rep at a Rolex boutique. She kept talking about how they weren't getting any more watches in for the rest of the year and prices were going up next year so I should buy now. They didn't even have the Sub in, but they were trying to get me to buy the Sub date (114060LN). When I said no, I'd rather have the no date version, the rep basically said "What's the difference?" She was also trying to sell me on the new Air King, which I still believe is one of the ugliest watches I've ever seen. I'll take my used and gray market watches, thanks...

By the way, does anyone know if there's any truth to Rolex prices increasing in 2018? According to them prices are going up by ~10% across the board, which seems ridiculous to me if true. $7500 is already pretty steep for a ceramic submariner.

 

I wouldn't be surprised at the price hike. However, I would strongly suggest you consider a wide variety of non-AD sources when purchasing a Rolex. There are plenty of well known dealers on the forum (both OF as well as RF and others) who can get you a brand new, box & papers rolex for much less than an AD. I personally do not see the need to pay the premium.

 

Rolex SA has revenues that exceed expenses, and so it makes a "profit." Since it is wholly owned by the Wilsdorf charitable foundation, however, it is exempt from corporate income tax, and is thus legally a non-profit corporation.

 

I was listening to the ontime podcast the other day and they had a recent episode that they interviewed a several decades industry sales veteran who had worked for both major ADs and directly for brands themselves. He said typically a watch that costs 10k at an OB would have usually been purchased by them for 5k (he said half the price it typical so a 6k RRP would have cost the AD 3k and so on). What I found interesting is some ADs purchase from large distributors who would have bought from the manufacturer for $2500 (on a 10k watch) who then marks it up to 5k and sells to the AD. So assuming these numbers are accurate (60% margins) then a watch that retails for 10k and sells to a distributor for $2500 has a cost of about $1500 to make. After hearing this grey market prices make a whole lot more sense now as it's likely distributors selling inventory to GM dealers with some ADs sprinkled in. So a 10k watch bought for $2500 is sold to the GM for say 4K to move it and the GM dealers sells it for 6k. Everyone on the way up makes a decent margin and you get a 40% discount off RRP. What a crazy business.

 

There is more than one way to make a margin on sales. High volume, low margin. Low turnover, high profit. Or somewhere in between. Anybody concerned about the profit Rolex earns will perhaps consider that in his lifetime, the baker will make more profit than Rolex does. And, if someone doesn’t own a Rolex, why should he be concerned about such things?

 

Well considering cost to build vs Omega has to be a wash. R&D has to be less at Rolex and marketing has to be broadly the same. I’d say Rolex is doing well.

 

For sure, and that's the route I am most likely going to take if/when I end up acquiring one. I guess I sort of wanted to have my name on the papers for my first Rolex... that's a silly thing to spend thousands of $$$ on though.

 

Rolex dealers are hit or miss for me in terms of experience. I've visited maybe four times, I always check out the milgauss. I asked once if they planned on improving the antimagnetic properties to compete with omegas newest wave of technology. She replied that Rolex did not care what omega was doing. Never forgot the experience, I saved my money and bought a new tech Omega the following year.

 

Over on the Rolex forum in the AP section it was mentioned that AP increased their margins to AD’s. It used to cost dealers 50% of RRP to get most AP watches but now it costs 65% of RRP. Increased AD costs means less discounts (at least in the USA where discounts were available for most models) to customers. One good thing AP did with the increased gross margin is up the warranty for all watches purchased in 2017 from 2 years standard to 5 years.

 

That's pretty solid. Plus, I'd guess that Rolex's margins are quite a bit higher, being that they're only watch manufacturer (alongside Seiko) to produce everything in house, gold included...

 

Tax dodges aside, the company is run as a for profit company. They are only a Swiss company in the first place as a way of minimizing taxes - that's why they moved from the UK.

People tend to equate them with a charity that exists solely to "do good" where the trust was set-up only to ensure that the company continues to exist, which requires making profits. Of course they don't release any financial data, so the extent of whatever giving they might do can't be verified.

 

Out of curiosity, does anyone know what Rolex supports with its “profits”? Are their requirements in order to avoid the corporate tax?