Why is it that when it comes to the big British Gun Makers, Rigby are the only brand that offers "affordable" models?

[Alistair]

Reminds me of the path Rolex took compared to say patek phillipe.

Among watch aficionados Rolex is seen as a mid market brand.

However, among the public as a whole (99.9%) of people, they are seen as a top end luxury product.

In doing so, Rolex has turned into a behemoth. They dwarf the premium makers by 100 fold.

It is a tight rope to walk, but it can be done.

I'd argue Rolex are going more the luxury route in terms of business strategy.

They're not 'ultra premium' really, but they do a lot of marketing to people who aren't watch people, and will never buy a Rolex to convince the general public that they are.

Beyond that, they control production levels, limit availability, raise prices each year. They certainly don't offer an 'entry level' option, or at least, when they do it's under the Tudor brand.

I think that if they did do a model at say $1000-$2000, which anyone could buy and didn't have a waitlist, their brand equity would take a big hit.

We shall see if the entry level Rigby strategy does the same thing I guess.

 

[WAB]

]][emoji6]" data-quote="Daisy" data-source="post: 0" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch">

Sure you do

No, I really don’t, but then I also really don’t care.

 

[Altitude sickness]

did you just buy that mauser from MNR ?

Yes I bought that Danzig sporter from MNR. Matt was great to deal with for the paltry commission he received from the seller.

 

[Daisy]

I'd argue Rolex are going more the luxury route in terms of business strategy.

They're not 'ultra premium' really, but they do a lot of marketing to people who aren't watch people, and will never buy a Rolex to convince the general public that they are.

Beyond that, they control production levels, limit availability, raise prices each year. They certainly don't offer an 'entry level' option, or at least, when they do it's under the Tudor brand.

I think that if they did do a model at say $1000-$2000, which anyone could buy and didn't have a waitlist, their brand equity would take a big hit.

We shall see if the entry level Rigby strategy does the same thing I guess.

In the watch world a submariner is exactly like a rigby highland stalker. They are actually priced almost identical. You can buy a watch for 500 just like you can buy a savage.

Limit production? They make over 1 million watches a year. They have created huge demand with strategic marketing and brand awareness. But again in watch world a Rolex isn’t considered in the upper luxury tier. To most people it is.

In the gun world a rigby highland stalker isn’t considered in the upper luxury tier. To most people it is.

 

[Daisy]

No, I really don’t, but then I also really don’t care.

Ha. Ok.

 

[Alistair]

In the watch world a submariner is exactly like a rigby highland stalker. They are actually priced almost identical. You can buy a watch for 500 just like you can buy a savage.

Limit production? They make over 1 million watches a year. They have created huge demand with strategic marketing and brand awareness. But again in watch world a Rolex isn’t considered in the upper luxury tier. To most people it is.

In the gun world a rigby highland stalker isn’t considered in the upper luxury tier. To most people it is.

Price point, yes. Positioning... maybe.

But strategy? No.

Limited production doesn't depend solely on units, it's the ratio of units the market demands / units available. Try buying any Rolex without wait listing...

As it happens, I did a marketing report on Rolex during my MBA.

It's kind of long, but if you're interested I'll post up the summary on price strategy here:

Price

A Rolex Submariner is an expensive piece to manufacture. Firstly, a mechanical watch of any type is a highly complicated piece of precision engineering comprising, in the case of the Rolex Submariner, of 256 parts (Wrist Porn, 2023). Secondly, the piece contains a number of inherently costly materials including proprietary steel alloys and ceramics, gold, lab grown sapphires and anti-magnetic hairsprings (Rolex 3, n.d.). Rolex is also committed to both vertical integration of much of their supply chain, independent certification of the accuracy of each of their movements, and to manufacturing the pieces in Switzerland, a country with some of the highest average wages on the planet (Mc Bride, 2024). As such, it is unsurprising that a Submariner is an expensive watch.

However, Rolex certainly does not use a mark-up pricing model, and the cost of manufacture is far from the key driver of pricing. Instead, Rolex prices based on an objective of quality leadership, using it as a key strategic lever to derive brand equity and maintain the prestige and popularity of their products. They utilize Economic Value to Consumer pricing to achieve this, as explored below.

Rolex watches are Veblen goods (Fig. 7), a specific type of luxury good that does not conform to the normal price / demand curve. In fact, for Veblen goods, increasing the price of an item increases the level of demand for it. This is because the appeal of these goods lies in exclusivity. High pricing ensures that many people want a Rolex, but only some can afford one, thereby making the good desirable and exclusive. High pricing also signals quality, another intrinsic characteristic of Rolexes’ brand image.

Figure 7 – The price/demand relationship for normal goods and Veblen goods (Robbins, 2022).


Rolex is hyper-aware of this relationship, and works very hard to manage their pricing and distribution models to enable it. They exert a great deal of control on pricing within their approved dealer network on compliance to MSRP for this reason, and for Rolex, this is perhaps the biggest single benefit of their exclusive distribution strategy.

Rolex ensures that the MSRP to consumers always goes up, irrespective of market conditions. In fact, Role prices typically increase in price at a rate that exceeds both inflation rates and individual income growth (Fig. 8).

Figure 8 - Pricing of the base model Rolex Submariner 1957-2014 both in inflation adjusted dollars and non-inflation adjusted dollars (Bredan, 2014).

This is a surprising strategy considering the turbulent nature of the luxury goods market and the swings in demand due to factors such as recessions. However, Rolex manages this in their forecasting and production numbers, strategically reducing production and distribution of pieces to their approved dealers during times of market softness to ensure that demand always outstrips supply (Altieri, n.d.).

One example of this is seen in 2022 and 2023, where second hand prices crashed by approximately 40% due to rising recession concerns and weakening demand (Friesen, 2024). Despite this trend, Rolex still posted MSRP price increases of approximately 4% across the range (Goulard, 2024). However, this was coupled with a significant reduction in revenue, which might suggest that whilst they generated more income on each piece, they shipped rather less of them, presumably because they anticipated that actual market demand was also likely to be reduced (Ch, 2023). As a result, waitlists were still in place for basically all Rolex models even in that weak market (Neita, 2024).

There is one other consideration behind Rolexes pricing model. Wherever possible, they try to ensure that the price of second hand models remains higher than MSRP (Fig. 9). This is achieved primarily through the gatekeeping around purchase; a customer has the option to pay MSRP at some unspecified time in the future when their order becomes available, or they can choose to pay above MSRP to have the piece now. Rolexes’ decision to always raise prices every year supports this activity, leading potential purchasers and current owners to believe that their piece is likely to appreciate in value over time.

Figure 9 – Submariner MSRP vs second hand prices by SKU (Powerfunk, 2024).


However, this does mean that Rolex actively chooses to keep MSRP below the level that a Economic Value to Consumer model might suggest is optimal. Customers are quite willing to pay significantly more for the pieces that Rolex charges, even when buying them second hand. Therefore, it stands to reason that Rolex could choose to increase the MSRP that they charge and consumers would still consider the new price ‘good value’. This intentional underpricing of Submariner watches is another strategic choice on Rolexes part to trade short-term profit in exchange for enhanced brand equity in the long term.

Overall, Rolexes pricing strategy has the benefit of driving a perception of ‘exclusivity’, ‘quality’ and ‘value’ for potential customers, whilst also supporting a secondary speculative market of watch ‘investors’ who buy Rolex models at MSRP to sell on for a profit. This second outcome is actually a virtuous cycle for Rolex; simultaneously generating them a second customer pool, whilst also supporting their goal of exclusivity by further increasing waitlists for ‘genuine’ buyers, which in turn ‘justifies’ the price increases on MSRP each year.

Rolex publicly opposes these ‘flippers’ and have made statements in the past about such individuals being excluded from future purchases, but there is significant evidence that Rolex is actually quite welcoming of this activity, especially in times of reduced ‘genuine’ demand where they often relax pressure on authorized dealers to screen for this type of activity (Corder, 2022). From the perspective of Rolex as a ‘for-profit enterprise’, the authors can’t help but feel that this situation is at the very least a happy accident for the brand, if not an outcome that Rolex desires and is actively working to enable.

This trend of high pricing being important to the Rolex brand is also demonstrated in their strategy for price discrimination and pricing tools such as discounts, clearance and bundling. Put simply, they don’t do any of those things.

Rolex is of course aware that selling their pieces at a discount would drive additional short term sales and likely increase short term profits, but they are also acutely aware that doing such things would damage consumer confidence in the brand, hurting their brand equity and making it more difficult for them to maintain margins in the future. They do not participate in price discrimination for the same reason, and also because they effectively only have one customer segment, product format and channel; the affluent purchaser, buying a single piece, in an approved dealer. In a luxury segment, this also allows them to achieve consistent pricing across geographies, with pricing including sales taxes being virtually identical across nations. Submariner models specifically only vary by $800 across Europe, North America, and Japan, with the main point of disparity being currency fluctuations in the Swiss Franc versus the local currency. Rolex takes steps to minimize these disparities where possible (Rivoira, 2023).

Rolex also intentionally chooses not to offer any ‘manufacturer sponsored or advertised’ financing mechanisms for their goods. This is done both to maintain the carefully curated dealership experience, and also to intentionally make it hard to purchase the product, further enhancing the perception of ‘exclusivity’ at the point of sale.

All together, these strategies allow Rolex to not only charge a high price for their models compared to ‘commodity’ brands, but also in comparison to ‘peer’ brands such as Omega. A Rolex Submariner retails for approximately twice the price of an equivalent specification Omega Seamaster, a disparity driven almost exclusively by the strength of their brand, the carefully managed artificial scarcity of the pieces, and the expectation for value retention that Rolex offers as a result (Andrioli, 2021).