Why Rolex suceeded and Gruen failed

As a collector of vintage watches you might ask yourself why one watch company is still successful in the market today while others failed. The question is often not easy to answer and most of the times there is not only one cause but several. Taking the example of Rolex and Gruen, which both have a common history in selling at one time even identical watches I want to shed some light in the dark of watch history:

1. Relevant innovations

Both Rolex and Gruen have a history as an innovator of the watch industry. This was a key success factor in the beginning of both watch brands. Gruen even had a head start over Rolex starting as early as 1874 in applying a revolutionary patent for a safety pinion for pocket watches which marked the start of Gruen’s watch business. In the beginning the Gruen business was a little bit bumpy due to several reasons coming from outside which is described in detail in another chaper of this website (so far only in German). In 1904 Gruen had its next relevant innovation in developing the Gruen Verithin pocket watch, which was much thinner than other pocket watches of its time with still the same or even better accuracy. The Gruen Verithin was a major breakthrough and helped boosting Gruen’s sales and reputation. Following the line of this success Gruen developed even smaller and lighter pocket watches in the years to come followed suit by the competition.

The watch company Wilsdorf & Davis which became later Rolex was incorporated in 1905, which is relatively late compared to other watch companies. In the first two decades they did not even manufacture their own watches but bought watches from other suppliers and sold them from 1920 on increasingly under the own brand name Rolex. In direct comparison Gruen was at the beginning of the 1920’s by far the stronger and more advanced company. Nevertheless the 1920’s were a decade of change in the watch industry since pocket watches were more and more replaced by wristwatches. Some other watch makers like South Bend Watch Co. could not adopt quickly enough to the change and disappered from the market. Rolex and Gruen were early to see the potential of the new wrist watch market and had with the common supplier Aegler from Biel/Switzerland a reliable source for high quality wrist watch movements. Both companies even founded the common subsidiary „Aegler, Société Anonyme, Horologies d’Excellence Fabriques des Montres Rolex & Gruen Guild S.A.“ where both companies pooled their expertise.

Gruen followed its path of making watches even smaller and thinner by developing the Gruen Cartouche for ladies and the Gruen Quadron for men using both a newly developed rectangle form movement which better used the available space of the fashionable rectangular watch cases of this time. Nevertheless watches were already so tiny that customers did not value this innovation as much as desired.

Rolex patented in 1926 the first water and dust proof watch which was emblematically called „Oyster“. Unfortunately this watch had to be opened every day and handwound which was not very practical. Therefore Rolex improved a patent of John Harwood from 1922 for a selfwinding watch and had it himself patented in 1933. This gave Rolex a major adavantage over other watch companies which had to wait to implement this feature until the expiry of patent protection after 15 years in 1948.

Gruen took some more years until 1936 to come up with the next major innovation, which was the Gruen Curvex with a curved movement which would better fit the shape of the wrist. Other companies tried to imitate this innovation by using curved watch cases but only one other company really had curved movements as well. The highlight of this develo0pment was the famous „Driver’s Watch“ which had to be worn on the side of the wrist. The Curvex was produced in many different types up to the early 1950’s. Nevretheless this innovation did not seem to be relevant enough for the consumer to stand the test of time. When Gruen realised this fact, they reintroduced the old concept of the Verithin pocket watch and transferred it to the wrist watch market. In 1938 the first Veri-Thin wrist watch was introduced into the market. But the concept of thin watches was not really relevant to the customer any longer because modern technology  already allowed to produce smaller watches than needed. With the decline in prices the market asked for fashion watches and Gruen served this need mainly with their Veri-Thin watch line. Until 1958, when the original Gruen Watch Co. ceased to exist, several hundred different watch types were sold under the umbrella of the Gruen Very-Thin line, more than every other subbrand of Gruen. In some years more than 50 new Gruen Veri-Thin models were brought to the market.

Rolex introduced in 1945 the „Datejust“ which was the first watch to show a date through a magnifying glass. This was an additional feature which is also used in most watches up to date. The magnifying galss however became an important recognition feature for Rolex.

The Rolex‘ „Submariner“ from 1953 was the first diving watch with a black rotating bezel. Again Rolex invented something really new and relevant to a special segment of users. On top even people who were not divers liked to be seen with such a watch which gave them a more sportive image.

To summarize the above said we can state that Rolex was lucky enough to have enough innovations which were patent protected to prevent others of copying it and which were relevant enough to customers to set milestones in the industry. Gruen however failed to introduce true and relevant innovations after their first success with the Veri-Thin pocket watch.

 

2. Consistent brand management

Since Gruen was lacking true and relevant innovations they had to introduce new watch models several times a year. If we just take the ongoing numbering of styles of Gruen wrist watches which started in 1925 and ended in 1958 we can already identify more than 1200 different Gruen watch models. This does not count the watches produced before and after those dates. Even more many of the styles were produced in different watch case materials, dial colors and even watch movements. This can easily bring the total number of Gruen watch styles ever produced  up to 2.500 to 3.000. Every marketing expert can tell you that this huge variety was not helpful in creating a clear brand image.

Rolex followed a different but much more successful approach. Nearly all watches being sold today have a more than 50 year old predecessor. Although you will always find some minor innovations on the technical side and on the design you can easily track back every model to its origin. Equally to car manufacturers like BMW or Porsche who also use this recognition effect, the easily recognizable familiy appearance creates a higher brand loyalty and better resale value. The higher price for used watches makes it easier in turn to achieve higher prices for new watches.

 

3. Superior advertising

In order to create a clear brand image you do not need only a good product range but also a superior communication. Gruen started as early as 1911 with a very consistent marketing using the craftmanship of the medieval guilds as a main theme. Everything within the company communciation was build aroun this theme. Even the headoffice in Cincinnati called „Time Hill“ and the Precision Factory in Biel/Switzerland were build in a style to resemble medieval guild halls. This communication approach was maintained in advertising until 1930 but still  the name „Gruen Guild“ persisted until1935 when Fred Gruen stepped down as CEO. The following years showed quickly changing marketing themes mostly displaying many new Gruen watch models with their repsective prices. It can be argued if featuring the good old times in advertising is the right approach for a high tech product like watches at that time. At least it did not harm sales and it helped creating a consistant brand image for Gruen up to the mid 1930’s. The frewuent change is communictaion thereafter did more harm than it helped. The reason why Gruen watches were still very popular was the superior image build up before and the ernormous net of dealers across the country.

Rolex followed a different approach to marketing their watches. Rolex watches were always associated with celebrities or superior sportsmen and women or sports events. This made the products desirable to the public who always like to imitate famous people. One of the first was Mercedes Gleitze, a British attempting to swim across the Channel between continental Europe and Great Britain wearing a waterproof Rolex Oyster. In 1953, the not-yet-Sir Edmund Hillary became the first man to summit Mount Everest with a Rolex Oyster Perpetual on his wrist. In the course of the time Rolex featured people with their respective Rolex watches like Red Adair, Eric Clapton, Maurice Chevalier, David Beckham, Roger Federer, just to name a few. Futhermore Rolex is sponsor of major sprts events in motor sports  (formula 1 etc.), tennis (Wimbledon etc.), golf (masters series) and equestrian sports (CHIO etc.). This successfull marketing approach was also later followed by other watch brands like Omega, Breitling and Tag Heuer and was never really changed during the years.

 

4. European origin

It is a fact that after 1970 nearly all American watch brands had disappeared or were of negligible importance to the market. One should not forget to mention that also most European brands had a hard time in the 1970’s because the Japenese were on the ege of winning the Quartz war. But the revival of mechanical watches in the 1980’s and 1990’s did not bring a major watch industry back to the U.S. whereas Swiss and nowadays also German watches have regained their importance they had before. Why is that?

First of all one should notice that even before WW2 four of the seven major U.S. watch companies sourced at least a big part of their watch movements in Switzerland. By that time Switzerland was a low cost producer like nowadays maybe China. Watch making was very labor intensive and labor cost contributed about 80% to the watch cost. Furthermore Swiss watch makers were trained in generations for their job and some villages in Switzerland lived entirely on watch making. From the beginning of the Gruen Watch Co. and their predecessor D. Gruen & Son(s) movement production was outsourced to Europe and with a small exception from 1944-1953 where one specificic movement (cal. 335, 335R and 335SS) was also produced in Cincinnati, all movements came from abroad. Only casing and adjustment was done in the U.S. following very strict tax rules which gave an advantage to the import of not adjusted movements over ready assembled watches.

A production far away from your point of sale always makes you less flexible. On top some of the American watch companies did not have their own production but sourced movement from idenpendent ébauches (movement makers). Giving away such a crucial part of production makes you vulnerable because major company secrets are open to third parties.

What made things worse was the second world war where American watch producers had to convert production to military equipment like fuses and military clocks. In 1944 watch production in the US was only half of the production of 1937 and the entire domestic watch production was only for military use. In the same time watch sales in the U.S., mainly for private use, nearly doubled. Since Switzerland was a neutral country Swiss watch makers could fill the gap by increasing their export to America. Talking in terms of war Switzerland could conquer an empty battlefield in the US during war time. When the war was over and American companies started again producing watches for private use consumers were used to Swiss watches and did not have a signifcant preference for U.S. watches any longer. So, American watches had a hard task gaining back their old market share. As a consequence most comapnies started diversifying in related industries. Waltham produced styroscopes and elctrical tachometers, Bulva radio appartus for household use and elctrical shavers, Hamilton electrical instruments, Elgin miniature electronics and Gruen pens. Diversification also means a loss of focus and especially in the case of Gruen this was a major reason for their failure.