BUSINESS

WORLD OF ROLEX

The world’s premier watchmaker taps into a new market for luxury

CATHY GULLI October 8 2007
BUSINESS

WORLD OF ROLEX

The world’s premier watchmaker taps into a new market for luxury

CATHY GULLI October 8 2007

WORLD OF ROLEX

BUSINESS

The world’s premier watchmaker taps into a new market for luxury

CATHY GULLI

After decades of selling its diamond-encrusted and oyster-faced watches through high-end retailers, Rolex is bringing its version of luxury directly to the storefront. Last week in Toronto, Rolex opened its latest exclusive branded boutique location—one of just a handful of similar outlets around the world. Now, Canadian shoppers looking to spend anywhere from $4,000 to upwards of $150,000 on just the right timepiece can browse around a shop that is entirely and unmistakably Rolex—a strategy that promises benefits both for the company, and jewellers running the stores.

“The move by Rolex is brilliant,” says Milton Pedraza, chief executive of the Luxury Institute, a New York-based independent market research firm focusing on high-end goods. Now the company can exert more control over the retail setting and the buying experience, he explains. “It’s a way to cultivate loyalty with customers and build a relationship.”

That’s increasingly important as luxury products gain popularity in the mass market. In 2006, jewellery and watch sales hit US$62.2 billion in the United States, up from $58.4 billion a year earlier, according to research by Unity Marketing in Stevens, Pa. Better yet, the biggest sales growth happened in the luxury watches segment, which jumped 39 per cent from 2005(Sales of costume watches, meanwhile, dropped 20 per cent over the year.) “There’s enough critical mass and growth [in sales]” to warrant these distinct shops, concludes Pedraza. In fact, specialty jewellery stores are fast becoming the preferred place to buy fine accessories. Fully half of all jewellery purchases were made at these shops last year rather than at department stores or fashion boutiques.

Capitalizing on these trends, Rolex shops have recently popped up in several of the world’s biggest cities. In Beijing, for example, a 500-sq.-foot “flagship store” opened last

October. Don’t expect to see Rolex opening at local malls, says Victor Royce, chief executive officer of Rolex Canada, but he anticipates that within five years, there could be outlets in Vancouver and Montreal.

Here in Toronto, the Rolex boutique has been a year in the making, says Irit Shay, coowner of Royal De Versailles jewellery store, which hosts the Rolex boutique. Previously, Shay sold Rolex alongside other watch brands, but after meeting with company executives in 2006, they agreed it was time to have a Rolex-only area within the store. Now, Royal de Versailles has a separate entrance into the Rolex shop, where a security officer controls by remote who enters. Green marble floors

THE BRAND HOLDS A FASCINATION FOR PEOPLE. WHEN YOU BECOME A MILLIONAIRE, YOU GET A ROLEX.5

contrast medium-dark wood and glass counters that hold hundreds of shimmering watches made of various metals and gemstones. “We are now the centre of Rolex in Canada,” says Shay, adding that the store has more than doubled its inventory to fill the boutique. “If you want to sell, you have to show.”

And if retailers want to show the watches, they’ll have to pay up because, as Royce explains, while the Rolex boutiques are

approved and overseen by the company, the operating costs are usually incurred by the jewellers. But Shay says that retailers will benefit too. “Customers have more space to wander, there is more product selection, it’s more convenient and luxurious, and it’s a concentrated way to shop,” she explains.

The key challenge for Rolex will be finding a way to break through with younger consumers. While the brand is synonymous with exclusivity and status among anyone over the age of 35, young people appear to be less and less interested in luxury timepieces— roughly half of those aged 18 to 34 don’t even wear a watch, according to a recent report by Unity Marketing. “This category may start to slide as many younger consumers reject watches as a ‘status symbol’ and turn to their cellphones as their essential timekeeping accessory,” the report says. And while the Rolex store should help brand awareness, Unity has found that sales through the Internet, television and mail-order are becoming increasingly common.

The question is whether the company’s exclusive status will set it apart from other mass-market watchmakers. Pedraza, for one, thinks Rolex has nothing to worry about. ‘There aren’t too many pure brands that started with retailers and [have gone] to standalone stores. It’s unique to Rolex,” he says. ;‘It seems to hold a fascination with people, and it’s a rite-of-passage brand: you become a millionaire, you get a Rolex.” M