Do you think Rolex would be better off scrapping its dealer network and going in house boutique as an alternative?

Nope nope nope.  Yes, they could create their own stores, but what would be the point? They will never produce enough to fill a store, pay associates, and the real estate would be pointless unless paired with other goods or brands. From a business perspective it’s a lose lose. Right now, the ADs assume all the risk. Which right now is none.

In addition, an online only mechanism for a hot product has never worked; IE try any ticket service or hot online only item. It takes minutes before the bots win.

I have no idea whether getting to keep more of the profit would warrant the extra expense of the overhead. A normal AD gets to keep the lights on via sales of other jewelry and whatnot, right? Would Rolex stores turn into Harley-Davidson dealerships, selling t-shirts and other branded "lifestyle" items that eclipse the previous core product?

We‘ve seen how well that’s worked out for HD, but they have other issues.

The ADs are the scalpers. 

I'd rather play the, "yes, I will buy my wife a pair of earrings game for a GMT" than overpay a grey dealer every day of the week. If I had a business that distributed hot products, I also would make sure my best customers get them. 

I’m a former Rolex, Omega, Tag, Longines, etc. AD when I was in the industry. I was in the game for 20 years. 
 

20 years ago, Rolex controlled every aspect of sales, marketing, and training in my stores.  Didn’t fill out the warranty card correctly, I’d get a nasty call from the area Rep or someone in NY. Didn’t include the green Swiss Army swag, nastygram incoming. If you so much as handled a piece without gloves in front of a “secret shopper”, they would pull your line. 
 

We couldn‘t have a waiting list for Daytonas or green dial Subs. IF…I was given one to sell, I had to clear who I was going to sell it to before I made the transaction. I had to show how many Rolex pieces they had, how long they had them, etc..  Didn’t mater if they spent $100K on other jewelry in my store, it was all about what they spent on Rolex. This is what Ferrari does today to buy one of their new cars. 
 

2009-ish or so Rolex relaxed some of their rules as to what information they collected on sales. They stopped asking for copies of filled out warranty papers. They stopped asking for previous Rolex sales to get certain pieces. People got smart and started to buy all stainless pieces while refusing to hand over any of their personal info. I’d start to see Subs, GMTs, and Explorers show up on gray market sites With these “clean“ papers. 
 

Not long after you started to hear whispers of ADs paying retail for their own inventor and selling them at higher prices on the gray market themselves.  Rolex didn’t care as this created more demand for their items and didn’t hurt their branding. 
 

Lately you are seeing some push back from ethical ADs and former employee calling others out for this practice. Krajisnik v. C.D. Peacock, Inc. (1:21-cv-00775) is one recent example. 
 

The only way to stop gray market and unethical selling is to move everything to in house boutiques. Rolex would have to care about their end customers first though. 

Thank for your insight and it’s not far off from what others experienced. I also agree there are lousy ADs like CD Peacock (a store I‘m sadly too familiar with). There are others who gladly turn a blind eye to clear money launderers, etc. for easy sales and I agree, they are scumbags and hopefully their tactics will catch up to them. However, I’d like to believe there are others who do their best with the circumstances at hand, including mine.

Thank you for your response and sharing your experience.  I feel like you expressed what I was attempting to say, but more eloquently and out of first hand knowledge.  I am truly thankful.

Generally speaking I think conspiracy theories are a waste of time, but I have to tell you....I'm down for any conspiracy theory about Rolex.

"Rolex owns the second most valuable private art collection behind the Vatican." Consider me a believer.

"Rolex is the biggest landlord in Switzerland and one of the biggest in London.". 100%

"Rolex makes more money leasing real estate than they do from watches." What intelligent person wouldn't?

"Rolex spends more research and development money on machines used to sort flawless diamonds than they did on the development of the 3000 series of movements." Sure!

"The Rolex manufacturing facility in Bienne has 7 floors, 4 above ground and 3 below, because like supervillains they wanted the building to be less imposing and decided they needed an underground lair." Oh wait, that one is actually confirmed by journalists?

I guess what I'm saying is...Rolex is about as inscrutable an organization as exists in the world today.  MI6 embraces publicity better than they do.

What you propose might be better for the customer experience (I frankly haven't a clue) but their decision making is so Lovecraftian that whatever you think a direct-to-customer strategy is is probably not what they think a direct-to-customer strategy is.  If Yog-Sothoth says they prioritize the customer experience, does that make you feel real good?  

While that math may seem like a lot, it’s statistically nothing. Don’t forget, most of the grey market is previous year models, not necessary current year flips, which makes it seem like there is a ton of inventory, because there is, just not necessarily 2022. Using Chrono, about 14% (11k watches) of the current inventory is 2022, and more likely well under 10% since many of those aren’t listings for actual watches in hand. Watch any scum/flipper YouTube channel to see how they use those listings to offer previous year models off platform.

Flagship stores located in major metropolitans get more than small cities. Let’s compare two; A NYC Tourneau may get 900 whereas a family AD in Indianapolis or Minnesota may get 200 if they are lucky. Those 900 may be 500 Datejusts of varying specs, 200 OPs, a bunch of Airkings, EXI/II Milgauss, etc and only maybe 50 Subs, 20 GMTs, 20 Daytonas. The ADs in small markets are lucky to get a handful of hot Daytonas a year. Note, no one has any idea about actual store allocation, except those stores, just using the figures for illustration and what I’ve learned from ADs.

There are 56 millionaires in the world (7 million in the US) and countless more wannabe millionaires, as well as those who may not be millionaires but scraped enough together to get a milestone timepiece. That same NYC dealer will have 500+ people a day coming in for those select few watches. A major Chinese market? Maybe double that. Then you have folks who have earned VIP status who have their choice before Stranger No Spend History off the street. There simply isn’t as many to go around.

All that to say; Are their dirty ADs and sales reps? Absolutely. But I’d argue most are upstanding and wouldn’t risk their status for shenanigans. The frustrating part is all of them approach distribution slightly differently, but ultimately they take care of the customers that take care of them, biz 101. 

Q. Is there a fourth choice? D. I don't care what Rolex does

This is something Rolex are already slowly moving to do. They just signed on a 3 story building in central London which will only sell Rolex. 

AP did the same move a few years ago with their "AP Houses" with much success.

Indeed, nothing against Rolex, but there is no scarcity of great watches to buy. It's not like we're talking about an oil cartel. 

Regarding the initial question: I doubt that it would change a thing, and that the current situation is more about what Rolex produces and in what quantity, and how they control their distribution channels. They already have the power to control this. Whether the company chooses to do so is another question.

The problem with this poll is that it assume the problem is shared equally by Rolex and its customers. 

I’m with you.  I refuse to pay the scalpers, and feel that if more watch collectors took this stand the vice grip the scalpers have could be broken.  The only Rolex I’m interested in, and I merely like and not love the piece, is the Datejust with the palm motif dial.  Realistically, at $7200 MSRP, it’s already overpriced compared to an Omega Aqua Terra.  But I would be willing to pay that at an AD.  However, as we all know, buying at an AD is impossible. I could go the waitlist route, but is it even worth my time to bother?  Over the multi year typical wait Rolex will probably discontinue it long before I get a call.  The scalper market has this overpriced $7200 watch at around $15,000.  Um, no, not now not ever.  I just ordered an homage from Pagani, having given up on buying a Rolex original.  I am considering buying a super clone if I’m not completely happy with the homage.  While I’m usually 100% against buying super clones, I feel like it is a justifiable option for a potential Rolex purchase since buying from an AD is impossible.  Why should I be expected to fund some grey market scalpers Ferrari Fund for a watch I merely like?  I know my opinion will be unpopular with some.  However, when a watch cannot be purchased at an AD, and when a person has enough self respect to refuse to get screwed by scalpers, I think super clones become a legitimate consideration.

It is a good question Bob. The foot traffic alone in a major city like NYC is massive. Chicago and LA are similar. On any one given day a city like NYC can get 300K visitors a day. Throw in the number of locals who shop, those stores get massive traffic, granted not all the folks coming in are asking to buy a Rolex. That is also not accounting for the number of calls and emails they get, which is also a large figure. 

Regarding the 8 years ago, yes, for many models one could, but some hot items like Daytonas or Pepsis have been unavailable for 30+ years. 

Apple is a tough comparison since they own their own distribution channel. They also make 217 million phones a year. One may not get one at launch, but within a month, anyone can get one. 

Regarding how long can this go on? It is a new world for their lineup and it is exactly where they want it to be. Ferrari, Porcshe, Hermes, etc have been doing this as long as I have been alive, so I think it has more legs than we realize. Now, if we suffer a massive market correction, that will change, but so will production. 

That is a Watches of Switzerland Store, not Rolex. Like other boutiques, they will likely also sell used models as well. 

https://www.bloomberg.com/news/articles/2022-08-16/top-rolex-dealer-to-move-to-a-huge-new-london-store

Do you mean the one for Watches of Switzerland? That’s not owned/operated by ’Rolex’. Same as goes for the ‘Rolex’ boutique already on Bond Street. WoS Group already do this Omega, Tag Heuer in the UK. AP House(s) is/are owned and operated by Audemars Piguet not by WoS or any other AD. They’re moving away from a dealer network to individual boutiques.

Having a dedicated ‘Rolex boutique’ run by an AD changes nothing for the potential Rolex consumer except for a nicer environment to look at the watches and a dedicated ’shrine’ to the Rolex brand itself 

Makes sense. It is similar state side, if you want a basic Boxter or Cayman, no issue. Occasionally a 911, or a spec 911 a customer ordered and didn’t take delivery, but anything special seems to be all about relationships or paying absurd  markups.

That’s a good point about the pre-owned actually. More and more prevalent in the UK ‘high street’ watch retailers now. 

Having a Rolex ‘approved’/inspected/ pre-owned display of watches would be an extra revenue stream for them and improve confidence in the product. Unless they restrict the supply of these as well, of course - in which case, the Rolex consumer/collector is truly f@cked

I do not think Rolex would mess with that. It is a great opportunity for ADs and for clients to build further goodwill with the AD. 

I would hope they do take the opportunity to re-build the goodwill as you mentioned. It may also highlight where the failings of the previous system were

Shame. I was hoping it was a Rolex store not controlled by AD's.

Shame. I was hoping it was a Rolex store not controlled by AD's.

I think that would be a nice experiment for them to try, just to see if they would be more transparent in their sales techniques. I would imagine there may be a lot of trial and error for the first couple of years as they make the move from manufacturer to retailer

Agree, but sadly, it‘d be a tough experiment. If they opened a store in a major city, the likes of Harrods, Tourneau, Watches of Switzerland, etc would kill their entire contract, losing a ton of distribution in most major cities. It’s one of those things they’d have to pull off overnight in anticipation, and that just doesn’t happen in modern times. The moment they apply for zoning, or pull a permit all hell would break in the watch world and it could be years without distribution while they built stores.

AP reduced their AD network significantly in the last 5 years, whereas Patek have a combination of (self run) boutiques (albeit a very small number) in addition to their largely historical AD network. It has been done. 
I can’t see Rolex, doing the same in the current financial climate however. It would be a massive hit on brand prestige, AD relations and profits if it didn’t work out - it might even mean they’d have to start supplying/selling watches (and nobody wants that 😉)….

I hear you, but those are also much smaller brands comparatively; combined they make about 100k watches a year. In theory it would be easier for them to take over distribution. 

It works perfectly for their business. It’s not hurting its brand image as people still want Rolex. Producing 1m watches/year (and still rising as a new factory is getting ready), they need a whole lot more boutiques to sell their watches. I don’t see them taking this risk.

They can survive by keeping the same business model, and even not releasing new watches.