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Apple Watch: What Rolex Dealers Really Think

This article is more than 9 years old.

New York City Jeweler, TraxNYC knows how to market expensive watches, really expensive  ones with a lot of bling. This year, the jeweler partnered up with NBC’s America’s Got Talent. Host Nick Cannon wore a $180,000 Diamond Rolex Sky Dweller while movin' and grovin' on stage. The Rolex sparkled brightly during the show’s finale at Radio City Music Hall before throngs and throngs of tourists. Afterwards, the gold Rolex went back to the vault at TraxNYC.

“Nothing speaks more about a man’s style than his watch,” says TraxNYC owner Maksud Agadjani. The store carries a stunning selection of glistening diamond-encrusted watches. Agadjani wears a two-toned Rolex himself.

Agadj plans to stock the Apple Watch when it debuts in 2015. Apple isn't offering any  wholesale discounts, but Agadjani wants it anyway. He may install a diamond bevel for a tidy mark up.

He thinks the case for the more expensive versions of Watch will open up so you can change out the chip. Watch may not be hermetically sealed like the iPhone.

The Watch has a System on a Platform, the powerful integrated circuit that can power a multipurpose computer the size of thumbnail. The Watch’s semiconductor package may be encased in ceramics so users can remove the entire electronics package and replace it when the Apple upgrades its processors to a new generation. Wall Street Semiconductor Analyst Richard Whittington says a replaceable IC package would give the Watch a longer lifespan, critical to buyers of watches over $5,000.

The Apple Watch Product Line

Apple said it plans three levels of watches: Sport is the entry level, Watch is the middle tier and Edition is the high end. Sport could retail for $350 as Apple announced earlier this month. Though Apple has not given prices for the other tiers, retailers believe the Watch could come in at $1000 and the Edition could be ten times more.

“At $350, the Apple Sport could be a huge phenomenon. I can imagine people lining up around the block when it’s released, like they did for the iPhone. People get excited about brand new experiences. They loved the novelty of the iPhone’s magical touch screen, endlessly sliding pictures around. They’ll react the same way to novel functions of the Watch. It taps you for appointments, counts calories and checks glucose levels in your blood,” he said. Maybe someday they’ll get tired of the tapping, tapping, tapping but at first, they’ll think it's great,” he said.

The mid-tier of Apple’s line, also called Watch, could compete with the mid- to high-end mechanical watches like Gucci . Watchmakers for the Italian fashion house buy components wholesale for about $65 then assemble them in gold or stainless steel cases with a sticker price $1,200. Gucci watches leverage the luxury brand’s name. Apple’s mid-range Watch may also compete with Movado, Omega and hundreds of manufacturers sourcing components from Asia.

The top of Apple’s line, the 18 Karat-gold Edition could retail for $5,000 to $10,000 and compete with the two-tone Rolex made of stainless steel and 18 Karat gold that's retails for $9,000 to $13,000. Other brands in the high tier include Cartier, Piaget and Tag Heurer.

No Contest With Rolex

Apple Watch can’t touch the highest tier of Rolex watches. The heavy solid-gold Rolex timepieces carry price tags starting at $35,000. The gold Rolex watch has a higher caliber gold than what's planned for the Edition, so raw materials are more costly. Operating margins for privately-held Rolex may be around 30%, and it's safe to assume margins for the solid gold Rolex are above the company average.

Jony Ive, Senior VP of Design at Apple implied Apple could take on Rolex, but retailers are not convinced it's in the cards. Rolex has precision components and exacting manufacturing processes. The perception of quality and brand is second to none, says Agadjani. Apple is a newcomer in a business where the Swiss have dominated for a century. Even if Apple redefines the watch category, it could be a slug-fest.

As for the rumors that Apple tried to partner with Rolex and the Swiss manufacturer turned them down, Agadjani says, “Of course a joint venture with Rolex would never happen. Rolex partners with Kings, Presidents and dignitaries. Maybe Rolex would do a one-off private label with a sterling celebrity, but not with Apple. Rolex wants to maintain complete control and does not want to dilute the brand with high-volume production. It prefers the realm of the 0.1%, not the mass market, even if it’s the upper crust.”

Watch Customers

Most consumers have one primary watch that’s expensive and they wear everyday. Then, they have above five fashion watches for different occasions. Apple needs to address demand in the mass market at attainable price points. The Watch will probably be a secondary watch for buyers with health apps that are cool and fun.

Apple is going to make a big splash with Watch, welcomed by watch retailers and manufacturers. Maybe Apple can accelerate industry growth, stuck in the single digits. Celebrities with flashing lights create excitement. But is Watch a fad or does it have staying power. Can Apple outlive traditional Swiss watchmakers who have been working their trade for hundreds of years? Probably not, but in the short term everyone will enjoy the novelty.