Icon and Challenger: Rolex and Panerai
New York Times, April 11, 2007
NEW YORK — Watch executives like to talk of "DNA" to distinguish their brands' attributes from the competition. Extending that metaphor, Rolex and Officine Panerai would seem, at first glance, to be genetic opposites.
One is a global luxury icon, king of the Swiss watch industry with crown trademark to match: the other, an upstart Italian brand that vaulted from obscurity in 1997, when Compagnie Financière Richemont bought the Florence-based watch and instrument manufacturer, a former supplier to the Italian Navy.
Headquartered in Geneva, the privately owned Rolex produces an estimated 650,000 to 800,000 timepieces annually yet remains the epitome of exclusivity. Movements, cases, straps, even gold, are all made in-house or by Rolex-owned contractors, allowing the company rare control over virtually every facet of its supply chain. Not for nothing is it the most counterfeited watch brand.
Panerai has a fraction of Rolex's production - estimates range between 45,000 and 60,000 timepieces per year - and is just ramping up its in-house manufacturing capability. When it served the navy, Panerai relied on Rolex-manufactured movements. Now, it expects to make a quarter of its movements itself within three years, with the remainder coming from other suppliers.
Still, Rolex and Panerai share something important in common. "Neither is able to produce enough watches to meet our customers' demands," says Ruediger Albers, president of Wempe USA, the New York branch of the German watch and jewelry retailer.
That is the understatement of the year when applied to the "never ever available" Rolex Cosmograph Daytona in stainless steel. "Within the hour, someone will come into the store and request one," Albers says. "This has been going on for 15 years."
Clients lusting after the Daytona, a chronograph introduced in 1961, have offered Albers weekends with their Aston Martins or premiums above the watch's $7,900 retail price: to no avail. "We only get a handful," he says. "Well, a little more than a handful but not a whole lot more."
Notorious for shunning press inquiries, Rolex, which declined to be interviewed for this article, does not make production figures available. "It is a mystery how many Daytonas they make per year, but a bigger mystery is that the 18-karat and steel version, on the secondary market, sells for far less than the steel one," said Jeffrey Hess, co-author of "Rolex Wristwatches: An Unauthorized History," referring to gold-and-steel, and all-steel versions of the watch.
"The joke among collectors is that this is probably the first watch ever that will be converted to a more saleable watch by taking off the gold," Hess said.
Clever marketing and ubiquitous branding go only so far in explaining Rolex's reputation. Watch fans are devoted to the brand, says Hess, because they consider it to be the best-made watch in the world.
"Rolex first and foremost considers itself a watch for use," said Aurel Bacs, co-international head of watches for Christie's in Geneva. "In 1953, it came out with what we call the tool watch. Until then, a watch had to be elegant, gold, stylish. Rolex went in the opposite direction."
Going against the Swiss grain came naturally to Hans Wilsdorf, a Bavarian, who founded the company in London in 1905. Twenty-one years later, he patented the Rolex Oyster, the first truly water-resistant watch. Equally important, he orchestrated a brilliant promotion: Wilsdorf had Mercedes Gleitze, the first woman to swim the English Channel, in October 1927, carry the watch on a ribbon tied around her neck during her swim. A front-page advertisement in the London Daily Mail followed, touting "the wonder watch that defies the elements."
The modern wristwatch grew directly out of this and subsequent innovations, chief among them the 1931 Rolex Oyster Perpetual, featuring the first self-winding wristwatch movement; the 1945 Datejust, the first chronometer with an automatic date-changing mechanism; the 1953 Submariner, the first diving watch, water-resistant to 100 meters; and the 1955 GMT Master, the first watch to keep time in two time zones.
Now, even in the midst of the mechanical watchmaking renaissance, with its emphasis on horological one-upsmanship, the company prefers to make timepieces conspicuous for their consistency.
"Rolex is not about change," Joe Thompson, editor-in-chief of WatchTime magazine, says. "They're magnificent at knowing who they are and evolving within their formula."
The proof of that strategy's success is Rolex's strength on the secondary market, where vintage models often appreciate in value.