The watch industry is bracing for a seismic shift in 2024. For years, Apple has reigned supreme as the world’s top watch brand — even though some would argue that we are comparing two different product categories — driven by the meteoric success of the Apple Watch. However, this dominance is now under serious threat. Rolex, the legendary Swiss watchmaker, is poised to overtake Apple in terms of watch sales by value, marking a significant moment in horological history.

The Apple Watch phenomenon

Since its debut in 2015, the Apple Watch has redefined what a watch can be. By blending cutting-edge technology with sleek and recognizable design, Apple turned the humble wristwatch into a multi-functional device capable of monitoring health, receiving notifications, and even making calls. The Apple Watch quickly became the best-selling smartwatch globally, and by 2017, it had surpassed all traditional Swiss watch brands, including Rolex, in terms of units sold with 33m units sold versus only 24.3m.

Apple’s strategy of offering a wide range of models — from the affordable Apple Watch SE to the premium Apple Watch Ultra — allowed it to capture a vast consumer base. But despite its success, the Apple Watch has always existed in a different category than traditional luxury timepieces.

While it dominates in units sold, its average selling price (ASP) is far lower, at CHF 415, than that of Rolex which is estimated at CHF 12,500 per Morgan Stanley x LuxeConsult estimates. And it is functional only in one eco-system, which is Apple’s.

Last but not least it has a programmed technical obsolescence which doesn’t allow you to update the operating system after 4-5 years and which makes it a no-go for a GenZ’ers more conscious of the environmental impact of such consumer goods.

Rolex is the entry point to the luxury watch world

Rolex, founded in 1908, represents the epitome of accessible luxury watchmaking. The brand’s reputation is built on a century of precision engineering, timeless design, and exclusivity or put simply, excellence. Unlike Apple, Rolex has never chased volume; instead, it has focused on maintaining its status as the ultimate symbol of success. Each Rolex watch is a statement piece, often passed down through generations, and their scarcity — even though we speak of ~1.2m sold last year — only adds to their allure.

Unlike Apple, Rolex has never chased volume; instead, it has focused on maintaining its status as the ultimate symbol of success.

In recent years, Rolex has seen unprecedented demand, driven by a renewed interest in trophy watches, especially among younger consumers coming from crypto-money. This demand has been further amplified by the rise of celebrity endorsements and clever investments in sponsorships such as being the official timekeeper of Formula one which have kept the brand at the forefront of hyped luxury brands.

Rolex’s ability to maintain its mystique while also appealing to new generations of buyers has been key to its sustained success. The 1970’s inspired design of Rolex’s most iconic watches such as the Submariner or the Daytona is the coolness factor appealing to the younger Millennials and Gen Z’s. But the most impressive achievement of this brand is that it stays relevant to many demographics since decades.

The Tipping Point: 2024

Several factors are converging to set the stage for Rolex to surpass Apple in watch sales by value in 2024. First, Rolex has been steadily increasing production in recent years to meet soaring demand even though we can expect 2024 to remain flattish or even slightly decreasing. While still limited, this slight uptick in output until 2023, combined with still relatively high premiums on the secondary market compared with official retail prices, suggests that Rolex’s total sales value could eclipse that of Apple due to its pricing power.

Not only because the sales of the two brands are following opposite dynamics, with Rolex still growing in value thanks to its continued increase of the average sales prices through price hikes mainly to adjust to adverse currency exchange rates and increased raw material costs. But Rolex is also en route to elevate the brand by continuously shifting the core range to more precious metals and gem set references which automatically helps to increase the average selling price.

Rolex’s total sales value could eclipse that of Apple due to its pricing power.

Apple on the other hand has already seen a -12% yoy decrease in 2023 and the first quarter of 2024 indicates even a -23% decrease compared with the same period last year. The spectacular drop of the sales is also due to the temporary stop of sales of Apple’s most recent releases of the Series 9 and Ultra 2, both fitted with a blood oxygen device which triggered a patent legal case with another American company, Masimo. And Masimo seems to be winning the case that their patent on their oximeter is protected by the law on IP.

Hence Apple had to remove the technology linked to the blood oxygen measuring. Nevertheless, we can expect the launch of the Apple 10 (or it could be X, as we don’t know yet) to bring a temporary positive momentum on the sales for the last quarter.  

Narrow difference in sales but major shift in growth dynamics

Morgan Stanley x LuxeConsult estimates for Rolex’s sales in 2023 were CHF 15,15B in retail value (CHF 10,1B EXW). We expect Rolex’s volumes to be slightly diminished in 2024, but with a higher average price it will most probably achieve a slight value growth.

Meanwhile Apple achieved USD 18.05B or CHF 16.05B in 2023 and the first quarter of 2024 indicates a strongly negative tendency yoy at -23% which will probably be slightly slowed as new Apple watches will be launched in September. We forecast nevertheless that despite the new product launches and the continuous push into higher price segments with the Ultra product line and its 3rd generation adopting product codes taken from traditional watches with sapphire crystals and titanium cases, the negative trend will remain.

The conclusion is that we will see the King of watchmaking retaking its crown lost in 2017. But that shall not distract us from the fact that Apple has roughly sold 2.2x as many watches (37m units in 2023) as the whole Swiss watch industry has exported last year (16.9m). And if the volume brands of the Swatch Group wouldn’t have performed so well in volume terms in the last 2 years capturing a staggering ~70% of the Swiss watch industry’s volume the situation would be even worse.

Most of the growth was achieved by the phenomenal success of the MoonSwatch which was sold roughly 2m units last year at a retail price of CHF 245. We should add the success of Tissot and its PRX product line and to a lesser extent the steady volume increase of Rolex which helped to slightly increase the volume of mechanical Swiss made watches last year.

The conclusion is that we will see the King of watchmaking retaking its crown lost in 2017.

Who is here to stay for the long term?

But let’s not dismiss the smartwatches as a temporary epiphenomenon, because overall the tech industry sold last year ~194m wearables devices out of which ~77m were smart watches such as Apple or Samsung. Apple being the dominant market leader with ~37m units sold which represents an impressive 48% market share of that market segment. As a reminder Rolex captures a 30% market share at retail value of the Swiss watch industry.

The impending shift in market leadership from Apple to Rolex underscores a broader trend in the watch industry: the enduring value of traditional watches. While smartwatches will undoubtedly remain popular, their appeal is largely functional and interestingly it’s only the entry price range, defined as “basic wearables” such as Fitbit or other activity tracking bands, that is still growing.

For Rolex to overtake Apple in 2024 would be more than just a commercial victory; it would be a symbolic triumph for traditional watchmaking. In an era dominated by technology, the timeless appeal of a Rolex serves as a reminder that some things are irreplaceable, and we hope it will remain this way for another five centuries.

* The figures for Rolex are estimates made by Morgan Stanley & LuxeConsult in their 2024 report “Swiss watches” published Feb 28, 2024 and shall not be republished without prior express authorization by Morgan Stanley & Co.

** The chart is quoting IDC for the sales of smartwatches, Morgan Stanley & LuxeConsult, The Swiss Watch Industry Federation FH and can’t be reproduced without LuxeConsult Sàrl prior express authorization.