What does a watch cost to make?
Discussion
There are many definitions of “cost” ranging from the raw material cost, through to the full direct variable conversion cost, through to the fully absorbed production cost (including amortisation of plant and machinery and allocation of under-capacity etc), all the way to a fully absorbed cost that apportions non variable overhead, r&d and advertising/sales/promotion.
If you means the variable factory cost of production including raw materials and direct labour / machine time, utilities etc (the most commonly used definition), then you won’t be a million miles off if you divide the retail price by 10. Same for most consumer products.
If you means the variable factory cost of production including raw materials and direct labour / machine time, utilities etc (the most commonly used definition), then you won’t be a million miles off if you divide the retail price by 10. Same for most consumer products.
A quick google suggests this:
"That type of information is conveniently kept confidential, but by gathering publicly available prices for similar products, we can estimate that the production cost of an average stainless steel Rolex watch retailing at USD 5,000 is less than USD 1,000. Maybe even less than USD 750."
And I honestly wouldn't be surprised if its even lower. Think of all the margin that is needed to be made in between manufacture and fina l retail. Heck, the cost of those fancy retail stores in high-end locations means they need to make a healthy margin right at the point of sale, let alone back in the supply chain.
Then... think how much Rolex has to pay for all that advertising (Ads, sponsorship of events, brand ambassadors etc...) Margins will be very healthy across the board.
My estimate for an average sub would be as follows:
$1000 cost to Rolex to make (Materials, staff, factories, advertising etc..)
$4500 cost for AD to purchase ($3500 profit per watch for Rolex)
$8000 RRP to us.
"That type of information is conveniently kept confidential, but by gathering publicly available prices for similar products, we can estimate that the production cost of an average stainless steel Rolex watch retailing at USD 5,000 is less than USD 1,000. Maybe even less than USD 750."
And I honestly wouldn't be surprised if its even lower. Think of all the margin that is needed to be made in between manufacture and fina l retail. Heck, the cost of those fancy retail stores in high-end locations means they need to make a healthy margin right at the point of sale, let alone back in the supply chain.
Then... think how much Rolex has to pay for all that advertising (Ads, sponsorship of events, brand ambassadors etc...) Margins will be very healthy across the board.
My estimate for an average sub would be as follows:
$1000 cost to Rolex to make (Materials, staff, factories, advertising etc..)
$4500 cost for AD to purchase ($3500 profit per watch for Rolex)
$8000 RRP to us.
ReaperCushions said:
A quick google suggests this:
"That type of information is conveniently kept confidential, but by gathering publicly available prices for similar products, we can estimate that the production cost of an average stainless steel Rolex watch retailing at USD 5,000 is less than USD 1,000. Maybe even less than USD 750."
And I honestly wouldn't be surprised if its even lower. Think of all the margin that is needed to be made in between manufacture and fina l retail. Heck, the cost of those fancy retail stores in high-end locations means they need to make a healthy margin right at the point of sale, let alone back in the supply chain.
Then... think how much Rolex has to pay for all that advertising (Ads, sponsorship of events, brand ambassadors etc...) Margins will be very healthy across the board.
My estimate for an average sub would be as follows:
$1000 cost to Rolex to make (Materials, staff, factories, advertising etc..)
$4500 cost for AD to purchase ($3500 profit per watch for Rolex)
$8000 RRP to us.
I would be rather surprised if even Rolex could achieve nearly 80% Gross margin- for a manufacturing business, even 30% would be considered good. The difference is likely to be lots of absorbed sales and marketing costs...."That type of information is conveniently kept confidential, but by gathering publicly available prices for similar products, we can estimate that the production cost of an average stainless steel Rolex watch retailing at USD 5,000 is less than USD 1,000. Maybe even less than USD 750."
And I honestly wouldn't be surprised if its even lower. Think of all the margin that is needed to be made in between manufacture and fina l retail. Heck, the cost of those fancy retail stores in high-end locations means they need to make a healthy margin right at the point of sale, let alone back in the supply chain.
Then... think how much Rolex has to pay for all that advertising (Ads, sponsorship of events, brand ambassadors etc...) Margins will be very healthy across the board.
My estimate for an average sub would be as follows:
$1000 cost to Rolex to make (Materials, staff, factories, advertising etc..)
$4500 cost for AD to purchase ($3500 profit per watch for Rolex)
$8000 RRP to us.
ReaperCushions said:
A quick google suggests this:
"That type of information is conveniently kept confidential, but by gathering publicly available prices for similar products, we can estimate that the production cost of an average stainless steel Rolex watch retailing at USD 5,000 is less than USD 1,000. Maybe even less than USD 750."
And I honestly wouldn't be surprised if its even lower. Think of all the margin that is needed to be made in between manufacture and fina l retail. Heck, the cost of those fancy retail stores in high-end locations means they need to make a healthy margin right at the point of sale, let alone back in the supply chain.
Then... think how much Rolex has to pay for all that advertising (Ads, sponsorship of events, brand ambassadors etc...) Margins will be very healthy across the board.
My estimate for an average sub would be as follows:
$1000 cost to Rolex to make (Materials, staff, factories, advertising etc..)
$4500 cost for AD to purchase ($3500 profit per watch for Rolex)
$8000 RRP to us.
maintaining the halo via sponsorship and the sales "experience" is a imperative for a brand like Rolex though isn't it, its part of what makes people spend £8000 on a watch and as necessary as the raw materials."That type of information is conveniently kept confidential, but by gathering publicly available prices for similar products, we can estimate that the production cost of an average stainless steel Rolex watch retailing at USD 5,000 is less than USD 1,000. Maybe even less than USD 750."
And I honestly wouldn't be surprised if its even lower. Think of all the margin that is needed to be made in between manufacture and fina l retail. Heck, the cost of those fancy retail stores in high-end locations means they need to make a healthy margin right at the point of sale, let alone back in the supply chain.
Then... think how much Rolex has to pay for all that advertising (Ads, sponsorship of events, brand ambassadors etc...) Margins will be very healthy across the board.
My estimate for an average sub would be as follows:
$1000 cost to Rolex to make (Materials, staff, factories, advertising etc..)
$4500 cost for AD to purchase ($3500 profit per watch for Rolex)
$8000 RRP to us.
It's a bit like people wailing about big pharma charging a huge margin over production costs of medicines but ignoring the billions being spent on research, without which the medicines wouldn't exist.
Like anything there'll be a split due to the manufacturing processes and the amount of tooling and labour involved, but from working on them I'd say that the latter two (if we're talking 3135 and 8500) will be a multiple of either of the first two. How big a multiple I wouldn't want to guess.
All of the above divided by production numbers to help bring the unit cost down.
Something like a Lange will be more expensive again, due to the level of hand finishing and low volumes to recoup the costs.
As with everything, how much of this is "better" in cost/value terms depends on your own values.
- Every surface given a finish= more machine time, more processes.
- Nicer screws= more cost.
- The Omega coaxial escapement is finer than the lever and more sensitive to manufacturing tolerance= more expensive machining,
- silicon escapements, etc= more expensive tooling.
- overcoils on Rolexes= skilled manual labour or some hell of a machine.
All of the above divided by production numbers to help bring the unit cost down.
Something like a Lange will be more expensive again, due to the level of hand finishing and low volumes to recoup the costs.
As with everything, how much of this is "better" in cost/value terms depends on your own values.
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