Here's why Rolex watches are so expensive and how the brand gained its luxury status

• For much of its history, Rolex was focused on making timepieces that could survive anything.
• Precision and quality are now higher than ever, but that's not why fans pay a premium for the brand.
• Here's how Rolex transformed from a tool watch for professionals into the symbol of luxury.

Rolex reportedly makes close to a million watches per year, and advertisements for the brand are almost everywhere, but actually finding one to buy can prove to be an exercise in futility.

With their precision manufacturing, specially sourced materials, and exceptional craftsmanship, Rolex watches have never come cheap, but neither were they out of financial reach for 1960s working professionals in search of perfect timekeeping and technical innovation.

In other words, a midcentury Rolex was more like an Apple Watch than the highly prized collectible it is today, where even the lowest-priced Datejust would set you back $5,000.

The scarcity and pricing today are a far cry from the 70s and 80s, when distributors had plenty of inventory to sell at more negotiable prices, according to Jeffrey Hess, a Rolex collector and the co-author of "Rolex Wristwatches: An Unauthorized History."

"Back then, anybody could afford a Rolex," Hess told Insider. "I drove around buying [Daytonas] for $3,000. Today, it's a $50,000 item on the secondary market."

As secondary market prices begin to tick back up from a year-long slide, it's worth taking a look back at how the company evolved from a tool watch manufacturer into the icon of luxury it is now. In short, a combination of savvy marketing and collector interest helped propel demand to wildly outstrip the supply of new watches.

Hess said the 1980's marked a turning point in the company's public image, during which the brand went from being an essential precision tool for professionals and adventurers to become the icon of luxury it is today.

"This watch was never meant to be a fashion watch," he said. "It was meant to be a roughneck's watch. It was meant to be a watch for swimmers, submariners, explorers."

Rolex did not respond to Insider's request for comment on this story.

In the early days, the brand emphasized utility, not luxury

Indeed, for much of the 20th century, Rolex, under its founder Hans Wilsdorf, was at the cutting edge of horological innovation. From plunging into the English Channel, to summiting Mount Everest, to setting land speed records, the brand sought to establish itself as the most useful and reliable timekeeper for the world's adventurers.

When Wilsdorf died in 1960, he was succeeded by Rolex's marketing director, André Heiniger, who spearheaded the decades-long effort to make the brand synonymous with luxury.

"Rolex," Heiniger reportedly said, "is not in the watch business. We are in the luxury business."

Product placements in the 1970s help the brand create an air of exclusivity

True to form, the brand boosted its visibility with placements in Hollywood films, sporting event sponsorships, and philanthropic awards. It also instituted a tighter grip on its supply chain and distribution network, enabling it to increase quality controls and maintain an allure of exclusivity.

By the 1970s, these efforts to project an image of reliability and stability put Rolex in prime position to be a safe store of value during economic uncertainty: The US abandoned the gold standard for the dollar in 1971, in 1972 Italy tightened its control of the Lira, and in 1973 an oil crisis sent the market reeling.

Rolexes take off in the Italian market and become collectors' items

The Italians were the first to embrace the vintage Rolex business, Hess said, because watches were a stable and portable alternative to currency during this period.

Dealers would buy luxury watches in Switzerland to carry across the border and sell in Italy. Italians would then wear Rolexes, Audemars Piguets, and Patek Philippes to the US and elsewhere, where they would sell them for many times the amount of cash they could otherwise bring with them. Thus a collectors' market was born.

Heiniger retired in 1997, but the company has stuck to the playbook he perfected, even as more precise, versatile, and affordable alternatives that now keep time with atomic precision have supplanted Rolex's original function.

If anything, the intervening decades have supercharged the growth of the category. As a private (and notoriously secretive) company, Rolex doesn't disclose its financials, but Morgan Stanley estimated the company made 5.2 billion Swiss Francs - about $5.8 billion - in sales for 2019.

Impossibly long waiting lists keep pre-owned prices high

Demand for new Rolexes means that waiting lists to buy certain models at retail stretch across years or even decades. In a rare public statement in 2021, the company said the current scarcity was "not a strategy on our part."

As a result, prices for pre-owned watches can easily exceed the list price — even doubling or tripling in value.

Even after a tumultuous year in 2022 that saw big price declines for leading Swiss brands on the resale market, Rolex still fared better than stocks and real estate, which had their own troubles.

That reputation has helped Rolex crush the competition with a quarter of the luxury watch market — more than double that of runner-up Omega. Plus, Rolex's dominance is self-reinforcing, Hess says.

"It's the watch that all these guys buy when they make it," he said. "They all buy the little wannabe Rolex brands in the beginning and finally, when they achieve success, they buy that Rolex."

In other words, without a Rolex, you really haven't arrived yet. It's not just the emblem of luxury, it's the front door.