WHAT IS THE PROFIT MARGIN FOR A ROLEX?
DATOKEEHUACHEE@GMAIL.COM
A Quick ’n Dirty Answer for you by Franz Rivoira
There is no universal ratio, and it is one of the most jealously guarded secrets of the trade. This ratio changes from company to company, and indeed, from product to product.
However, there are some universal laws.
The typical high-end/luxury object sold through a traditional supply chain is usually sold at a 3.5 to 5 X price to the final customer vs its production cost.
This means that an object originally costing 1,000 USD is going to be sold to the customer from 3,500 to 5,000 $. This production cost comprise everything: salaries, materials, manufacruring costs, marcomm costs, and shipping.
Usually, a company does not sell directly to the customers. It sells to a network of independent stores which buy the products at a range around 40–60% vs list price, and they resell it at list price (depending on the accords they have with the manufacturing company, of course. For instance, Rolex watches are mandatorily sold at list price).
This means that for our example watch, the brand would get from 5.000 - 40% = 3.000 $ to 3.500 - 60% = 1.950 $ vs a cost of 1.000 per item sold, so, a mark-up of 2.000 to 950 $. The first case would probably be a very strong brand, while the latter would be an affordable brand with an aggressive marketing trait.
Remember that this is the average: every case is different. I suspect that Rolex has a higher leverage than 5X - more like 7.5X.
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