Is Rolex Charging Enough for Its Watches?

Despite being the world’s single most famous luxury watch manufacturer, Rolex actually doesn’t charge all that much for its timepieces. Now, I’m not saying that Rolex watches are inexpensive; they’re not, and even the least expensive models will set you back more than $5k when purchased at retail. However, when you look at Rolex prices compared to offerings from most of the industry’s other top brands, Rolex’s watches suddenly start to seem surprisingly affordable. 

Entry-level models from companies like Patek Philippe cost almost as much as Rolex’s top of the line watches crafted from solid gold, and certain brands like Richard Mille make a habit of producing timepieces that cost more than the price of a house in many parts of this country. All things considered, when you consider the global recognition of the Rolex brand, the quality of the timepieces it produces, and the overwhelming number of people perpetually waiting in line for a chance to buy one of them, is Rolex actually charging enough for its watches?

Image: The Watch Club 

Are Rolex Watches Underpriced?

The true price of any item is what one party is willing to pay another for it, and when it comes to most Rolex watches, this value is actually far greater than what the brand charges for the same model. Many of Rolex’s most popular watches are entirely sold out at a retail level, and available examples can frequently trade hands on the open market for values that are anywhere between two and three times their official retail prices.

To kick off the new year, Rolex increased its prices for 2022 but even after this recent price hike, there still exists a massive difference between what Rolex charges for a watch at retail and the true price of that same watch on the open market. As a point of reference, the fan-favorite stainless steel Rolex Daytona 116500LN now has an official retail price of $14,550 USD (as of 2022), yet pre-owned examples of that same exact model can be priced at nearly $50k on the secondary market.  

Now, if Rolex suddenly doubled its retail prices from one year to the next, most collectors would undoubtedly be livid. However, even a price hike of this magnitude still wouldn’t be enough to reconcile the differences between Rolex’s retail prices and the actual value of its watches on the open market.

Image: Bob’s Watches

A Relatively Fixed Output

Rolex has already addressed the multi-year waiting lists for its watches and publicly stated that it will not compromise quality in order to meet demand. Each year, the brand produces more watches than the year before, but the total output for the year is relatively fixed. According to Rolex, the company is essentially running at maximum capacity and cannot significantly ramp up production while still maintaining its incredibly high standards. Regardless of whether or not you believe Rolex’s statement, the fact remains that the brand either can’t or won’t produce more watches than its current annual output.

The multi-year waiting lists present for many of Rolex’s top models means that global demand far exceeds supply, and any entry-level economics course will teach you that this is an indicator that the market is not in equilibrium. In order to maximize profits at the current level of demand, Rolex would need to sell significantly more watches. However, since this is not possible and the brand’s output is more-or-less fixed, a higher price would be required in order for the market to achieve equilibrium. Therefore, this would imply that Rolex is currently not charging enough for its watches.

Image: Watch Charts

Rolex Retail Prices Have Almost Become Irrelevant

No one wants to see Rolex watches become more expensive, but I’d argue that Rolex’s retail prices have almost become irrelevant. Sure, a 41mm Oyster Perpetual with a Turquoise Blue dial only costs about $6k at retail, but you simply can’t buy that watch from a retailer, so it hardly matters what Rolex charges for it. If you want that exact watch on your wrist today, it will set you back more than $35,000, so regardless of whether Rolex doubles its retail prices or cuts them in half, you still wouldn’t be able to buy that watch at retail anyway.  

However, one thing that I can’t help but wonder is whether or not a massive increase in Rolex retail prices might deter some of the flippers on the secondary market. So many of the people buying Rolex watches at retail these days are only purchasing them because they know that they can sell them for a quick profit. Personally, I think this ruins the hobby for everyone who genuinely likes these watches, as it makes most of the brand’s models entirely unattainable. However, I fully understand why people do it, given that someone who just picked up a stainless steel Daytona from their authorized dealer stands to make a $30k profit by turning around and selling it that exact same day.

Rolex is easily the most famous luxury watch manufacturer in the world, and the brand wields a level of international recognition that rivals that of some of the most powerful companies of all time. However, when you look at the cost of Rolex watches compared to their competitors, the massive difference between retail and open market prices, and the endless line of people waiting for a chance to buy one, it’s hard not to arrive at the conclusion that Rolex simply isn’t charging enough for its watches.

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