AD Margins

[ppierce]

Does anyone know what margins AD's are working with for Rolex? For example Sub No Date is $9100 ish. What are they getting that watch for?

[MRBolton]

It's around a 40% profit margin historically.

[jimcameron]

Why don't you go ask them?

[worldofoyster]

42%

[BroncoOne]

Remember, the wholesale cost is a gross margin, not the net margin that they pocket before income and other taxes.

They have rent, some ADs have much higher than others, some own their buildings etc. sales commissions, salaries, building maintenance, that fines crotch in the back room etc etc

[brandrea]

Not enough to offer you a discount, if that’s where you’re headed

[ArtNouveau]

I think in the US, the ADs now pay 62% of the MSRP for wholesale, might be 63%.

[SLWoodster]

Chinese replica factories is making 95% of the same watch for $350, with margin.

All the YouTubers posted about amazing fakes for years for the clout.

With an extra couple days of QC, polishing, testing, can probably make the same thing for less than $1000. Remember Rolexes are majority machined.

You can also look at Tudor, if they can make pelagos titanium with margin for $4k, they can make your submariner for less than half, that’s with margin.

The rest of it is “heritage,” branding, marketing, sales, etc etc. Once you get to a certain level of product that’s mostly what it is anyway. It’s about the way it makes you feel + extra QC, not the actual assembly of materials you are buying

Originally Posted by ppierce

Does anyone know what margins AD's are working with for Rolex? For example Sub No Date is $9100 ish. What are they getting that watch for?

[Kevin of Larchmont]

The percentage that has floated around this place in recent years is 38%.

[Halifax Daytona UK]

40% on Rolex and about 75% on other watches and jewellery

[bluestreak]

Originally Posted by SLWoodster

Chinese replica factories is making 95% of the same watch for $350, with margin.

All the YouTubers posted about amazing fakes for years for the clout.

With an extra couple days of QC, polishing, testing, can probably make the same thing for less than $1000. Remember Rolexes are majority machined.

You can also look at Tudor, if they can make pelagos titanium with margin for $4k, they can make your submariner for less than half, that’s with margin.

The rest of it is “heritage,” branding, marketing, sales, etc etc. Once you get to a certain level of product that’s mostly what it is anyway. It’s about the way it makes you feel + extra QC, not the actual assembly of materials you are buying

But this applies to the margin that Rolex makes, not the ADs, who are Rolex’s actual customers.

[996marty]

Originally Posted by brandrea

Not enough to offer you a discount, if that’s where you’re headed

Fabulous answer

[kkqd1337]

Originally Posted by Halifax Daytona UK

40% on Rolex and about 75% on other watches and jewellery

What I don’t understand is with such fantastic margins - ie 75%, why aren’t ADs gobbling up preorder deposits for watches like the new Omegas, Tudor’s, Cartier’s?

They still give the same ‘store enquiries only’ and ‘waitlist’ run around and essentially just say come back in a few months. Which leaves me free to shop around.

Ultimately there will be no supply issue with these watches. So in my ‘business’ mind - I would want to be grabbing deposits off every single enquiry so I have secured that business when the watches come in.

What am I missing?

[2000-NJDEVILS]

Does it really matter how much the crown, the AD and maybe the grey dealer make?

[DVR4]

Originally Posted by kkqd1337

What I don’t understand is with such fantastic margins - ie 75%, why aren’t ADs gobbling up preorder deposits for watches like the new Omegas, Tudor’s, Cartier’s?

They still give the same ‘store enquiries only’ and ‘waitlist’ run around and essentially just say come back in a few months. Which leaves me free to shop around.

Ultimately there will be no supply issue with these watches. So in my ‘business’ mind - I would want to be grabbing deposits off every single enquiry so I have secured that business when the watches come in.

What am I missing?

Because it's an accounting nightmare.

[Kevin of Larchmont]

Originally Posted by kkqd1337

What I don’t understand is with such fantastic margins - ie 75%, why aren’t ADs gobbling up preorder deposits for watches like the new Omegas, Tudor’s, Cartier’s?

They still give the same ‘store enquiries only’ and ‘waitlist’ run around and essentially just say come back in a few months. Which leaves me free to shop around.

Ultimately there will be no supply issue with these watches. So in my ‘business’ mind - I would want to be grabbing deposits off every single enquiry so I have secured that business when the watches come in.

What am I missing?

The whole point of having Rolex is to drive traffic to the store. If they take your deposit you don’t have to go back until they call with your watch. If they don’t take a deposit then a buyer’s only strategy is to keep returning to the store and try to ingratiate themselves, often through other purchases. When a body steps through the doors there’s a chance they’ll buy other things. When sitting at home waiting for “the call” in response to their deposit there is zero chance they’ll see something else they might want.

[Singslinger]

Originally Posted by 2000-NJDEVILS

Does it really matter how much the crown, the AD and maybe the grey dealer make?

I agree. I've been buying watches for more than 30 years now and this question has never entered my mind.

[Halifax Daytona UK]

Originally Posted by kkqd1337

What I don’t understand is with such fantastic margins - ie 75%, why aren’t ADs gobbling up preorder deposits for watches like the new Omegas, Tudor’s, Cartier’s?

They still give the same ‘store enquiries only’ and ‘waitlist’ run around and essentially just say come back in a few months. Which leaves me free to shop around.

Ultimately there will be no supply issue with these watches. So in my ‘business’ mind - I would want to be grabbing deposits off every single enquiry so I have secured that business when the watches come in.

What am I missing?

The reasons are …

The other brands are not in demand as much
Having Rolex helps them sell/bundle other highly profitable jewellery and watches.

[77T]

The thing about valuing Rolex margins inside an AD is that you would need to know their sales mix. I don't - so let's talk industry averages in US. Bear with me as it's a multi-step process.

Rolex sales are a rather small part of the AD's overall jewelry sales. All high-end watch lines contribute as little as 10% to 20% of all jewelry sales. In US, Rolex volume is gated by RUSA. Tag and other brands not as gated.

Average GPM on all jewelry sales volume before the pandemic hovered around 45% at high-end shops. Then plummeted at the outset 2020-2021, and has recovered nicely. But not north of 50%.

So if you factor the small slice Rolex provides, and its capped GPM around 40-ish%, losing an official AD status isn't all that bad financially. What it does do is lower the jeweler's profile in the WIS community.

Now consider the Tara case being discussed...and the prices some have noted for pre-owned on their website. The volume of Rolex sales is unleashed - they now control how many Rolex models they sell. The advantages (+) and tradeoffs (-) below:
- RUSA can't gate inventory (+)
- Secondary Market inventory (+)
- Cost does rise 2x (-)
- Margin is squeezed (-)

We'll see how it plays out - my guess is their raw volume rises and their GPM dips a bit.

But if they click into the online sales channel (which Rolex forbade when they were an AD) and get their prices into line with the market, they are in better shape overall as a jeweler because RUSA no longer demands shop renovations.


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[physicist]

Originally Posted by BroncoOne

Remember, the wholesale cost is a gross margin, not the net margin that they pocket before income and other taxes.

They have rent, some ADs have much higher than others, some own their buildings etc. sales commissions, salaries, building maintenance, that fines crotch in the back room etc etc

That fines crotch in the back room?

[BroncoOne]

Originally Posted by physicist

That fines crotch in the back room?

Sorry, fine scotches LOL

[TickTockChuck]

Originally Posted by physicist

That fines crotch in the back room?

I was wondering too. Thought it referred to some illicit activity to help with sales...ha!

[Rollieo]

Originally Posted by kkqd1337

What I don’t understand is with such fantastic margins - ie 75%, why aren’t ADs gobbling up preorder deposits for watches like the new Omegas, Tudor’s, Cartier’s?

They still give the same ‘store enquiries only’ and ‘waitlist’ run around and essentially just say come back in a few months. Which leaves me free to shop around.

Ultimately there will be no supply issue with these watches. So in my ‘business’ mind - I would want to be grabbing deposits off every single enquiry so I have secured that business when the watches come in.

What am I missing?

It simply comes down to allocation timing. I’d say nearly all Omega Tudor Cartier they will be able to get in a reasonable timeframe. But new watches are a crapshoot for them, they don’t know if they’ll get 1 or 10 in the first 6 months. If you’re an AD, how do you feel about holding onto someone’s money not knowing if you deliver the watch within a year or so? If you feel fine then that’s a bit shady, but even if you did it’s a pain in the ass. Your customers would be hounding you for the watch, and demand their deposit back after not getting the piece for a long time. Who wants to deal with that overhead.

[Henrimontgomery]

Originally Posted by TickTockChuck

I was wondering too. Thought it referred to some illicit activity to help with sales...ha!

Some SAs have very fine crotches, however.

[Calatrava r]

I think it is now about 37%.