Rolex flexes its muscles and buys Bucherer

Rolex SA (a watchmaker) buying Bucherer AG (a multi-brand retailer) gives it instantaneous control over more of its network of dealers around the world — but what’s the endgame?

Interestingly, Rolex sells in 1,800+ locations around the world, yet currently only operates a single boutique (in Geneva).

Rolex’s official press release says they plan to keep the existing Bucherer retail team in place, which is clearly how they intend to make such a massive pivot, from one retail location to over a hundred. Once the deal is complete, Rolex will be a bonafide retailer — with 100X the footprint they had prior to the acquisition — whether they say they want to be a retailer or not.

Audemars Piguet (which also owns a stake in Richard Mille) is one of the watch brands that’s successfully eliminated all or most of its individually-owned dealers — in favor of brand-owned boutiques — and that has clearly helped the company generate higher profit and in turn reach the elite Swiss billion dollar watchmaking club (Rolex, Omega, Longines, Audemars Piguet, Richard Mille, Patek Philippe, Cartier).

Rolex purchasing a multi-brand retailer is not quite the same as Audemars Piguet owning its own mono-brand boutiques, though both are ways of vertically integrating — which in any business, is generally done to maximize control and profitability.

Bucherer bought US retailer Tourneau in 2018 and naturally, being that Bucherer was the stronger business and brand name, the Tourneau name will eventually be phased out (multiple stores have already received Bucherer branding). Currently, Rolex is in about half of Bucherer’s 100+ locations, so if approved by the Swiss Competition Commission (comparable to the FTC in the US), Rolex could move into some or all of the remaining stores, so long as those stores are in markets Rolex wants to be in. However, considering they’re not in those locations currently, it could be that the demographics are not strong enough, that the store is a mono-brand store, or that the location needs to be retrofitted to meet Rolex standards.

Not to mention, Rolex’s presence in each of the existing stores will almost certainly be enhanced, even if that simply means giving its sister brand Tudor better placement and more square footage, especially considering Rolex already has preeminent placement in any location in which they exist — which is one of the many stipulations they require of any business that’s given the highly lucrative authorization rights.

Depending on how this new business arrangement progresses (the two businesses have already operated a manufacturer-retailer partnership since the 1920s), Rolex could buy more and more locations, because if you’re going to operate Bucherer, which is effectively Watches of Switzerland’s biggest rival, you would likely want to keep growing sales, which usually means buying more inventory, along with expanding, upgrading, and adding stores.

Rolex launched its certified pre-owned program in December 2022, and Bucherer was the first to offer CPO Rolexes, though the Rolex CPO program was rolled out to other stores, such as Watches of Switzerland, in May of 2023. Considering a deal for Rolex to buy Bucherer has presumably been in the works for months — if not years — it makes you wonder if Bucherer got the program first because of the impending Rolex purchase of the prestigious luxury watch retailer. Or was it because Bucherer had bolstered its pre-owned division in 2017 with the purchase of Watch Gallery LTD? Don’t forget that Watches of Switzerland made a similar move in 2020 by acquiring Analog Shift. Regardless of the rationale, Bucherer getting the Rolex CPO program first, begs the question, will Rolex favor allocations to Bucherer over other retailers?

Beyond the pre-owned advantage, Bucherer may have also made a perfect target because it has watchmakers in the store making for a better after-sales process, it has deep data insights on watch buyers, and reportedly has a very strong ecommerce business. Not to mention the fact that they were openly for sale, and perhaps the price was just too good to turn down.

Another scenario could ultimately be selling Bucherer to a large and well-run retailer such as Watches of Switzerland, or even attempting to buy Watches of Switzerland next if the deal goes smoothly (Rolex already accounts for over 50% of the turnover at Watches of Switzerland).

Rolex has over 1,800 authorized locations worldwide and says they don’t want to be in the retail business, and acquiring Bucherer’s stores does not mean they want to own all its Rolex locations. However, being large stores in cities with the strongest demographics means that each of these Bucherer stores does many times more business than the smaller authorized Rolex dealers. For this reason, the real measure of how much of the network is now in Rolex’s control is realistically based on total revenue, not the number of locations. In that respect, it’s likely that this Rolex acquisition represents more than the store number belies.

When you think about how Rolex makes it hard to acquire authentic parts, which is a way of raising the cost of a Rolex by controlling the market and making it harder for gray market dealers to maintain the watches, you can better understand their thought process. Knowing their modus operandi and how they’re especially litigious against both replica and non-authorized resellers (gray market dealers), one thing that I’m certain of is that Rolex is not happy with the gray market, and that could be one of the biggest reasons motivating them to be more involved in the retail end of the business, beyond the obvious reasons such as securing the Bucherer legacy and increasing the overall profit margin of on Rolexes sold within the Bucherer stores. Not to mention, all the profit they will now make from competing brands that sell within the Bucherer network.

Keep in mind, with these increased margins, come increased costs because although the buyout price has not been disclosed, it’s safe to assume that Rolex is paying ten figures for Bucherer. So that extra margin they’ll gain, will not be free, and it will come with the added risk and complication of a totally new retail division that Rolex itself has little experience managing, even considering the Bucherer team is expected to be left intact.

Rolex could keep running Bucherer as is, which would likely entail a consistent growth strategy (although Rolex is not a publicly traded company, and therefore has no shareholders requiring a specified amount of growth per year), or they could even sell the retailer at a later date, as mentioned above, to a trusted partner like Watches of Switzerland, who is publicly traded on the London Stock Exchange as of 2019.

Whether Rolex plans to conquer retail, or not — one thing’s for sure — Rolex’s actions always speak louder than its words.

References:

Rolex to Buy Bucherer in deal Resetting the Luxury Watch Business (Fortune)

Rolex to Buy Bucherer in Major Retail Move for Swiss Giant (Bloomberg)

Watches of Switzerland: Rolex decision on Bucherer is awkwardly timed (Financial Times)

Rolex to Buy Watch Retailer Bucherer (Wall Street Journal)

Rolex to Buy Bucherer in Major Retail Move for Swiss Giant (Business of Fashion)

Rolex bullish about future (Professional Watches)

Rolex Acquires Bucherer (Professional Watches)

Rolex introduces Certified Pre-Owned (Professional Watches)

Rolex Certified Pre-Owned Program arrives in the US (Professional Watches)

The Unfortunate Truth about Vintage Rolex Repairs (Professional Watches)