What is the Markup on a Rolex Watch? Rolex Profit Margins

Rolex Markup

What is the markup on a Rolex watch?

What is the markup of a Rolex watch?

As all retail products, Rolex watches are sold with profit margins. Different watch brands have different profit margins, both operating margins, and sales profit margins. In the end, the profit margin depends on how you calculate it. Rolex has official retailers to which they sell their watches, and in turn, the official retailers have a markup on the watch when they sell it to an end customer.

But in this equation, it’s important to factor in the operating costs for the Rolex retailer which include employees, taxes, rent, electricity, insurance, and many other costs. With that said, the markup of a Rolex watch is far from pure profit for the retailer.

But not factoring in these things, which markup does the official Rolex retailer have when they buy watches wholesale directly from Rolex SA?

Rolex Sports watches

What is the markup and margin on a Rolex watch?

The Rolex markup differs depending on the country

According to the New York Times, the margin that most Rolex retailers have when they sell a Rolex watch is 40%. Sometimes, the margin is higher, and sometimes it is lower. Note that this is the retail markup. This means that official Rolex retailers buy Rolex watches 40% cheaper than the recommended retail price. But again, have in mind that a number of different factors affect the retailers’ profit margins when they sell a watch. Discounting is yet another such factor, even though it has become less common with discounting in recent years. There is a big difference between gross margin and net margin.

It is also worth noting that for precious metal watches and gem-set watches, the margins are normally higher.

Rolex sports watch collection

It’s important to point out that the Rolex margins vary depending on the country in which they are sold. This primarily has to do with the currency and taxes. In Europe, companies have VAT (Value Added Tax) which is included in the sales price. The VAT can be as high as 25% in some countries. Since the VAT in Europe varies depending on the country, the margins will differ. In countries such as Hong Kong, there is no such thing as VAT or sales tax, so naturally, you can assume that the profit margins are higher in such countries.

The VAT is a percentage that the retailer does not get to keep but has to pay to the government. Furthermore, depending on how weak or strong the local currency is, the purchase price of Rolex watches varies, and thus the profit margins. This is because Rolex is based in Switzerland and thus has the currency CHF (Swiss Franc).

Some people may be surprised by the fact that official Rolex retailers buy Rolex watches for about 40% less than the recommended retail price, but let’s summarize some of the biggest costs that Rolex retailers have:

Rolex markup: Not all profit due to operational costs

  • Rolex license costs
  • Sales taxes (VAT)
  • Discounting
  • Rolex’s requirements regarding decorations and how the boutique 
  • Employees
  • Insurance
  • Rent
  • Electricity
  • Card transaction fees
  • Inventory costs

Rolex official retailers

Rolex works with official retailers rather than owning its own stores. There are both benefits and downsides to operating a business this way. The biggest benefit is that Rolex does not have to handle the risk and costs of owning thousands of stores around the world. By having retailers, you can reduce administration costs and operate your business in an easier way. At the same time, Rolex is giving away its margin by having a middleman (the official retailer).

If Rolex would establish its own stores, it could increase its own profit margins, but obviously, since Rolex has not gone this route, it shows they are not interested in doing this. At least not at the moment, but things can change in the future.

So what is Rolex’s own profit?

According to Forbes, Rolex had $4.7 B in sales in 2016, and its profit margin was about 30%. Again, it depends on how you calculate, because Rolex themselves have a ton of operational costs which includes marketing, materials, employees, watchmakers, offices, and much more.

Rolex and other luxury watch brands always strive to keep their retailers’ markups as secret as possible due to the fact that it decreases the sense of luxury by the market and customers. When customers know that the retailers buy them for considerably less than they themselves have to pay, many people tend to be less willing to pay the big markup that the retailers have. At the same time, if you want a Rolex watch, that’s the price you have to pay. Especially considering the fact that discounting of Rolex watches by retailers has become less and less common as demand for them has increased and the supply of them is rather limited.

How much does it cost to make a Rolex watch?

A common question that people ask is “How much does it cost to make a Rolex watch?”, but the truth is that it’s a really complex question to answer. It really comes down to how you calculate. You cannot simply take Rolex SA’s costs and profit and calculate the manufacturing cost based on how many watches they produce.

The reason is that they have so many other costs that cannot be included in the calculation of manufacturing cost, yet still are important parts of running a business. This includes things like marketing, sponsorships, events, philanthropy (which Rolex does a lot of by the way), and so on.

When asking this question, natural questions about whether you should include research and development into the equation, office costs, etc. arise. The bottom line is that it’s really difficult to calculate how much it cost for Rolex to manufacture a watch because, at the end of the day, it all depends on how you count.

17 thoughts on “What is the Markup on a Rolex Watch? Rolex Profit Margins

  1. It costs $367.60 to manufacture at base metal Rolex ,

    1. Hi,
      It depends on how it is calculated.
      Things like years of innovation and research, new machinery, and much more also need to be included into the equation.

      Kind regards,
      Millenary Watches

    2. Metal ? Rolex never metal, I can assume you don’t know anything about watches so your $367 number was just a made up from your own , stop the bs

  2. Are you saying it’s not possible to calculate it from the outside?

    Cause all manufacturing companies know their rexact cost of production, its called accounting.

    1. Of course. Rolex very well knows but is a very secretive company. Only looking at revenue/profit doesn’t give an accurate picture either since it is a foundation and big parts of the profits goes to charity/marketing etc.

      Kind regards,
      Millenary Watches

  3. The cost of making a Rolex will be minimal and yes they are very overpriced : Omega,Zenith and Grande Seiko make better watches and have more heritage than Rolex for a fraction of the cost of a Rolex and they also have their profit margins…and don’t get me started on actually trying to purchase a Rolex tool watch from an AD it will take years.

    1. Thank you for sharing your thoughts, Steven!

      Kind regards,
      Millenary Watches

  4. When a company is very secretive it is hiding something for a reason. Rolex make watches as cheaply as possible whilst maintaining their desired standard – which is highly waterproof and classic design – they are not high workmanship watches like grand seiko, Patek etc. They are mass produced and very well marketed. Rolex has always recognised the brand and marketing are what really count – not the final finish of their watches.

    Sadly the Rolex AD experience is dreadful – you either get your arse kissed (which person really wants thatA) or you get lied too, humiliated and pushed into buying stuff u don’t want. It’s pretty sad – I think it will destroy Rolex when people catch on what they are really about – but that’s probably a long way off.

    I have Rolex and grand seiko – once you get past the meaningless kudos (who actually cares what watch u wear) you realise a quality grand seiko diver/sports watch is the way to go.

    1. Thank you very much for sharing your thoughts, Robert. Very interesting input!

      Kind regards,
      Millenary Watches

    2. Huh. I guess you had a bad experience. Both of my AD experience went better than yours.

  5. Military Timex standard, Army isue I have two that’s been in action in two wars fighting in the desert where the enemy is sand. They keep purfect time still to the second after many years. I allso have a rolex and only wish I could of tested it the same as the military standard issue Timex. While it’s nice to own a beutiful exspensive watch at the end of the day your only kidding your self it was really worth the cost.

    1. Thanks for sharing your experience and thoughts!

      Kind regards,
      Millenary Watches

  6. Perhaps the cost of manufacturing a submariner can be estimated in the following way:

    1. Price at dealer: assume $9’000 (US)
    2. Dealer keeps (assume 1/2) $4’500
    3. Rolex Keeps 4’500.
    4. Production cost is then some faction of $4’500.
    5. Assume 10% of Rolex cost is the manufacturing case of the submariner, then that is about $450. Likely they have machines making the entire watch. Materials for steal (904L is roughly the same cost as 306L it seems in reality) are not different than other watches, using something like a 904L steal watch with an ETA movement would be a check step. It might be that a 904L steel is 30% more expansive per ton, so the case cost is more, but 30% might equate to $30 per watch perhaps.

  7. Every comment made to this message board has some truth to it. A knowledgeable person in the jewelry / watch trade can say Rolex marketing and advertising are primary functions setting apart Rolex from other watch companies selling watches with similar functionalities comparatively priced. However, the most significant element that forges Rolex’s success time and time again is the Rolex “IT” factor. For the masses, the Rolex watch is “it”, the watch most consumers are driven to purchase by a distinct desire to own. So, the question is why? Perhaps the easiest answer is, just hold a Rolex watch in your hand- feel its weight, the substantial watch body and bracelet, look at the watch’s styling and features, all of which imparts an innate magic to the Rolex Brand.

    1. Hi,
      Thanks for sharing your thoughts!
      Yes, you are absolutely right. Rolex is in most people’s minds THE watch to own. Part of that has to do with the prestige and reputation that comes with Rolex watches – which ultimately has a lot to do with Rolex’s successful marketing.

      Kind regards,
      Millenary Watches

  8. Some of these comments, especially the $367.60, show no knowledge of watches or accounting.

    If 40% of a $10,000 Rolex is markup, the AD is purchasing it from Rolex for $6,000. A normal and reasonable cost of goods sold and gross profit margin for any firm is 50/50, so we could say that this watch costs $3,000 to produce, that’s cost of goods sold, includes materials and production labor, does not include ancillary costs like marketing, selling, and administration. Rolex could include depreciation of their production machines and R&D cost in the cost of goods sold, or they may not.

    Now, if one was to say that a Rolex overpriced and is no different from a quality Omega or other cheaper but well made watch. Let’s assume the same margins, a $7,000 Omega is supplied to AD at $4,200 and the cost of goods is $2,100. One could speculate that the cost to produce an Omega and a Rolex are the same, but Rolex is able to squeeze much higher gross margins.

    I would speculate that a Rolex and a comparable watches from other brands like in the examples would cost somewhere between $1,000 and $2,000 to make. Yes there are high margins but all products you buy have margins and cost a fraction of what you pay to produce.

    If anyone has ever held a Rolex it does not feel cheap, it feels expensive and very well made. If you’ve held a Rolex and a $3,000 watch you can still clearly feel the difference.

    1. Hi Joseph,
      Thank you very much for your elaborate thoughts.
      We would certainly agree with you. And we would also agree that additional costs, in addition, to exclusively the assembly and materials need to be included in the calculation such as machines, and most importantly research and development, marketing, logistics, etc.

      Very interesting insights!

      Kind regards,
      Millenary Watches

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