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Montres Rolex: Brand Profile

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Economic downturns come and go, but Rolex rarely loses any of its sparkle. More than 100 years after its creation, the Swiss company is still arguably the world's best-known manufacturer of luxury timepieces. It was responsible for introducing many of the functions we now take for granted in a watch, including waterproofing, a self-winding mechanism, and even the day and date dial. The brand retains its position as one of the world's most prestigious status symbols, its cachet protected by a price range that starts at around $2,500 and can reach more than $175,000 for the company's most gold and diamond-encrusted models. Although it has been largely unaffected by previous recessions, there were signs that Rolex felt the impact of the 2009 downturn more severely, not least because of an unprecedented slump in its core US market.

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Competitors

Despite its reputation, Rolex is by no means the most expensive watch brand. In fact it is positioned in the second rank of the luxury segment, alongside brands such as Breitling, Cartier, Ebel and Omega. This is below "high-end luxury" brands such as A Lange & Sohne, Breguet, Patek Phillipe and Vacheron Constantin, but above "pseudo luxury" brands such as Baume & Mercier, Raymond Weil and Tag Heuer. Among Rolex' rivals are brands owned by Richemont, LVMH and Swatch. See Clothing & Fashion Accessories for other companies.

Brands & Activities

Virtually alone among Swiss watchmakers, Rolex refused to compromise on either price or quality in the 1970s in order to compete with Japanese imports. As a result, and because of its distinguished heritage of innovation, it remains the most prestigious of watch brands even if it is by no means the biggest by revenues. However, as a private company it has no need to compete on sales and profits, so can afford to specialise on a lucrative niche. Like other luxury goods companies its biggest threat is from pirate manufacturers producing low quality knock-offs.

Rolex makes watches in three main ranges. The traditional chunky Oyster collection accounts for around 80% of sales, and is divided into two groups. Oyster Perpetual is the umbrella for traditional everyday watches, while Oyster Professional houses more specialised timepieces such as the Submariner and Yacht-Master. Arguably the brand's most sought-after product is the limited edition Oyster Professional Daytona Cosmograph. New watches have a one-year waiting list, while previously owned models support an extraordinarily lucrative secondary market. In 2003, a Daytona Cosmograph originally owned by rock star Eric Clapton set a new record at auction, selling for $505,000. Another Clapton-owned watch, a rare "Albino" Daytona set a new record in 2015 with a hammer price of $1.4m.

The traditional range of chunky Oyster watches is accompanied by the slender Cellini range of evening watches. In 2005, the group reintroduced a limited edition of its classic art-deco Rolex Prince, originally launched in 1928 but discontinued in the 1950s. A lower-priced sports range, Tudor, is targeted at less affluent buyers. Though often described as the Rolex Tudor, it doesn't actually carry the Rolex name, although it is manufactured by the company. All mainline Rolex watches are still made entirely by hand, and each one can take up to a year to assemble from start to finish.

Montres Rolex is highly secretive, and releases virtually no financial information. In a very rare interview in 2003, then-chief executive Patrick Heiniger revealed that the company then made around 700,000 watches a year, with sales of approximately $1.5bn, evenly divided between Europe, North America and Asia. In recent years the group has acquired virtually all of its suppliers in order to bring all its components under direct control. Rolex Bienne, the separate company which exclusively produced the company's handmade movements was acquired in 2004. Other include Gay Brothers (watch straps and bracelets), Beyeler (dials), Boninchi (crowns) and Virex (glass cases). By the beginning of 2014, virtually the only components not produced inhouse were the watches' hands and sapphire crystals.

However prestige has a price of its own. The brand is a prime target for counterfeiters, and in recent years Rolex has made periodic visits to the law courts in an attempt to curb the trade in fake goods. In 2001 for example, the group issued a lawsuit against internet auctioneer eBay in Germany to stop it from serving as the conduit for sales of imitation watches. However that case was dismissed, as were subsequent appeals by Rolex against the decision. The brand has also inadvertently lent its name to a new breed of criminal, so-called "Rolex Raiders" who specialize in snatch-and-grab thefts from owners.

Rolex is a leading sponsor of upscale sports, including motor-racing, golf, tennis, yachting and equestrian events. In 2012, it agreed a partnership to become the official timekeeper for Formula 1 motor-racing for at least five years. It also maintains a stable of brand ambassadors, including sportsmen, explorers, actors and other individuals who demonstrate a "pioneering" spirit. In 1997 it signed Tiger Woods to a long-term $7m endorsement deal but the golfer jumped ship in 2002 to join rival Tag Heuer instead. Swiss tennis star Roger Federer is a regular endorsement partner. The company also offers annual prizes of $75,000 to individuals to reward excellence in the arts and science.

Financials

Montres Rolex does not publish its financial results, but sales were estimated by analysts at around CHF 4.6bn ($5.2bn) in 2013. Volumes are thought to be between 800,000 and 1m watches a year.

Background

The Rolex brand's position as a badge for the wealthy is a comparatively recent development, and despite its long-established base in Switzerland, Rolex watches were invented by a German and first manufactured in London. In 1905, Bavarian-born Hans Wilsdorf set up shop in London with backing from wealthy English investor Alfred Davis, who subsequently cemented the partnership by marrying Wilsdorf's sister. At the time, "wristlet" watches were something of a novelty, worn almost exclusively by women while men carried traditional pocket watches. Initially Wilsdorf & Davis simply imported precision engineered watch movements from Switzerland which they sold on to other manufacturers. But they began to create their own designs in 1908 under the name Rolex. (There is no accepted explanation for the choice of name. According to one story, it was derived from a corruption of the term "horlogerie exquise", French for exquisite watches. Another popular explanation is that the term was derived from the brand names Rolls Royce and Timex. Although convenient, this is impossible since Rolex predated the Timex brand by almost 50 years. Another equally unlikely version suggests Wilsdorf thought that "rolex" sounded like the noise of a watch being wound.)

The brand's reputation was strengthened in 1910 when its watches were granted the first ever official chronometer certification for a wristwatch, and Rolex was adopted as the company name in 1914. World War I changed the nature of the watch industry dramatically, as officers discovered the advantages of a wrist watch instead of a pocket watch in the trenches. However, it also led to the imposition of high duties on imported watch movements, so Wilsdorf relocated to Switzerland, although he maintained a London office. At around the same time, Wilsdorf bought out his bother-in-law and instead sold a minority shareholding in the company to the Aegler family of Geneva, who had become his main supplier of precision engineered watch movements.

In 1926 Wilsdorf developed the product which was to set the standard for all watches to follow, when he invented the first truly waterproof watch, named the Rolex Oyster. In a crucial piece of marketing, he offered one to Mercedes Gleitze, on condition that she wear it in her forthcoming attempt to become the first woman to swim the English Channel. She succeeded and the Rolex Oyster was rewarded with acres of free publicity. Five years later, Emil Borer, who had married into the Aegler family, developed the first self-winding mechanism for a wristwatch. This was combined with the waterproof housing to produce the Oyster Perpetual. Later the company was also the first to introduce a mechanism which displayed the date (the DateJust, introduced 1945), and subsequently the day as well (the Day-Date in 1956).

The 1950s were to prove a turning point in the history of Rolex. As a result of its reputation for both precision and durability, the brand became associated with endurance sportsmen, explorers, mountaineers and adventurers. Sherpa Norgay Tenzing wore a Rolex on the famous climb of Everest in 1953, while Ian Fleming's series of hugely popular James Bond novels were very specific about the kind of watch their hero wore: "a Rolex Oyster Perpetual Chronometer on an expanding metal bracelet".

In 1944, following the death of his wife, Wilsdorf gifted his shares in Rolex into a non-profit foundation, now the Fondation Hans Wilsdorf Rolex. After he died in 1960, management control of the business passed to senior manager Andre Heiniger. He oversaw the company's international expansion over the next 30 years. Crucially, it was he who masterminded the elevation of the brand into luxury status during the 1970s. After the introduction of cheap quartz mechanisms by the Japanese in the 1970s, most Swiss watchmakers were panicked into following the lower-priced route. Many went out of business as they attempted to adapt to the new market conditions. Rolex resolutely stuck to its expensive handmade mechanical engineering, ensuring its position as the Rolls-Royce of the industry. Reflecting this elevated status, during the 1980s the company began to change the outer design of its high-end products in order to highlight their value with more lavish jewelling as well as gold cases and straps. Prices rose as well, even for standard stainless steel models. The price of stainless steel DateJust models, for example, jumped from $900 in 1981 to $2,350 in 1991.

In 1992, management of the business passed from Andre Heiniger to his son Patrick. Yet the latter left the company abruptly in 2008, apparently to pursue "personal interests". His departure in the same week that swindler Bernie Madoff was arrested led to widespread rumours, fed by sources close to company, that Heiniger had invested on behalf of Rolex in Madoff's elaborate fraud scheme and lost substantial sums, even as much as $1bn. Those stories were denied by Rolex, but no other reasons were given for the speed of Heiniger's resignation. However, his death in 2013 after what the company described as a "long illness" suggested that this may have been a key factor in his resignation. Bruno Meier, formerly the group's chief financial officer, was appointed as chief executive in place of Heiniger, but he too left the company in 2011 to be replaced for four years by Gian Riccardo Marini. Jean-Frederic Dufour, named in June 2014 as Marini's successor, was the fourth CEO in six years, though he didn't join the company (from LVMH's Zenith watch brand) until a year later.

Last full revision 12th April 2016

* Archive page for historical reference only. This profile is no longer being actively updated. See active page here *


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