Rolex Acquires Bucherer: Impact on retailers and consumers

Over the last weeks, there’s been a singular buzz in the luxury watch industry. The news causing the turmoil broke at 6:00pm CET on August 25th, 2023, with a succinct press statement: “Rolex acquires Bucherer.” In a nutshell, the most iconic Swiss watchmaking brand, Rolex, has acquired Bucherer, one of the world’s largest watch retailers. In conjunction with Tourneau, boasts over 100 sales outlets globally and stands as the top retail brand in the US.

 

This is a new approach from the “old” strategy to keep the retail activities separated. While competing brands (i.e. Audemars Piguet) were transitioning towards a direct-to-consumer approach by reducing their network of Trusted Dealers (removing middle men), Rolex seemed to tread a different path...but it is no longer the case.

It seems the strategic move to acquire a 2 Billon (CHF) sales company made sense purely because Jörg G. Bucherer, the owner of the retailer, lacks direct descendentes but undoubtedly there is more.

 

• Reducing risks: Well, Rolex did anticipate the potential hazard of its leading retailer, accountable for 8% of the brand’s total sales, falling into the hands of a rival. Just imagine Richemont acquiring them when roughly 60% of the Bucherer business comes from selling Rolex timepieces. 
• Data is the new oil of Watch Manufacturers too. After this move, Rolex will better understand sales and clients by overseeing the final step in the value chain. In recent years, Rolex has been in the spotlight due to the huge surge in demand. While they have 450 references and configurations, only about 50 are best-sellers, and the remaining 400 serve as alternatives when someone can’t get their first choice. Rolex aims to increase the number of models that consistently sell. Hence, owning 1st and 2nd party retail data is critical to gain new insights on product performance and inventory to accomplish this.
• Firm grip on the rapidly growing Secondary Market. Rolex’s intention is to regulate the current market where devoted customers struggle to purchase the specific top-selling models like the GMT Master II or the Daytona. Such models have attracted buyers more interested in the lucrative investment than in the joy of wearing them. This speculative buying behavior may seem a win for Rolex but can potentially erode the brand’s value by frustrating genuine enthusiasts. Rolex is committed to be vigilant against the Secondary or “Grey Market” dealings (people buying to “flip” for profit). The CPO (Certified Pre-Owned) program announced in December 2022 is a demonstration of this commitment and funnily enough, they chose the Bucherer | Torneau stores in the U.S. for the initial roll-out last May 2023. 

      Rolex will be able to tag used pieces at market price

• The Bucherer retail integration allows Rolex to dominate ADs. Rolex may now increase the inventory available in brand-owned stores and make fewer watches available for AD’s. Bigger stores, with better customer insights, improved product availability, and a more restrictive distribution of hot models to ADs will be advantageous for brand-owned stores that most likely produce better sales numbers. Again, this would make a solid argument to close ADs that under perform compared with Rolex’s own boutiques.
• Simplified distribution network and better market presence with a few powerful retail partners. Luxury brands seem to be shifting the majority of their retail to brand-owned stores but Rolex knows this is rather tough and will probably continue to rely on strong retail partners like Bucherer: one is The Hour Glass, a family-owned company in Southeast Asia, and Watches of Switzerland (WoS), a listed retail network company in the FTSE 250 Index with strong presence in the UK. Again, this helps Rolex better controlling its sales and market presence but it remains uncertain how it will affect their two strongest partners. For instance, the valuation of WoS fell a whopping 20% on the acquisition announcement date. Why? Rolex makes almost two thirds of WoS overall sales and diversifying the sales mix with other leading brands like Vacheron Constantin, Cartier or Omega may be more tough than ever because of two reasons. First, because of the rising popularity of the aforementioned value appreciating Rolex models and secondly, because of the competing brand-owned boutiques that the other leading brands from the WoS line-up.

How may this affect the end consumer?

• Hot pieces: Rolex will now supposedly have a more profound knowledge of their clients, hopefully allowing real enthusiasts land sought after pieces long before the newcomer investors. 
• Market value vs retail price: The CPO program enables Rolex to tag their popular models at “market price” (above the standard retail price) and this is like testing waters to eventually adopt market-based pricing across their range, depending on customer base and AD reactions. There’s a growing possibility of traditional retail prices, or MSRPs, fading away like they have for some luxury items and brands, which could lead to labels like “Price available upon request”. The upside might be that while watches won’t be cheaper, they’ll be more accessible at ADs for those ready to meet the market price. Such a strategy could let ADs and Rolex reap profits currently flowing to Secondary Market dealers and provide a safety net against market downturns, avoiding blatant discounts on their watches.
• Games: With a higher dominance on the high street, Rolex may favour “sister” brands like Tudor. The end-client may be more inclined or pushed to build up a profile buying “less desirable” pieces just for the promise of getting an exclusive model down the line. 
• Knowledge transfer: More and more small family-owned boutiques may begin to lose the Rolex logo and huge amounts of knowledge could be lost. It is widely acknowledged that families with longstanding traditions in the jeweler and horology crafts possess a depth of product knowledge, customer management and know their stuff way better than the average salesperson who hops from working at Gucci one day to Louis Vuitton the next, and then Cartier after that. This may work for less technical products like clothes but closing some “historic” ADs could have a negative effect for the watch enthusiasts that appreciate a good technical chat with their trusted salesperson. 

Conclusion

At the end of the day, The Rolex Group (Tudor and Rolex) is the world’s largest watchmaking company with approximately 31% market share and has most likely considered every possible scenario to remain the industry leader both in terms of sales and craftsmanship. 

However, history taught us that trends and fashion evolve and change rapidly. Wasting the knowledge by removing the smaller family boutiques, the same ones that have witnessed how other brands were not so long ago the previous watchmaking leaders, is something that Rolex should not overlook without carefully assessing how the real enthusiasts will feel about it or perceive it.