The media is currently reporting multiple news stories about the new crop of so-called “smartwatches,” devices that are basically tiny smartphones that strap to your wrist. Like any trendy new tech goodie, these are sure to be hot with consumers who must have the latest hot toy, but do they pose a threat to the sales of luxury watches? One prominent analyst doesn’t think so.
Apple has a press event coming up in a few days and alongside the highly anticipated iPhone 6, the company is expected to debut the “iWatch,” which will join the Samsung Galaxy Gear, the Nike Fuelband, the Garmin Forerunner, the Sony Smartwatch and the LG G Watch R, plus models from budget watch brands Casio and Timex. While it’s true that many smartphone owners have been using the devices to replace other gadgets including the camera, compass, GPS, flashlight and yes, the watch, there are still many lovers of fine timepieces who will never give them up.
Still, luxury watchmaker Swatch, which produces pricey brands like Omega and Breguet has seen its stock decline 14% over the last year, leading to speculation that the fall could be attributed to the rise in sales of smartwatches. Jon Cox, head of European consumer equities at Kepler Cheuvreux, rejected that notion in an interview with CNBC this week.
Cox stated, “I think there’s been a lot of focus on the whole threat of smartwatches, I think it’s overdone. Owning a Swiss watch has always been much more than telling the time… I don’t think this is (the) existential threat some people assume it is for the Swiss watch industry.”
Cox added that Swatch could be entering the smartwatch field in the future, possibly in partnership with Apple. “To be honest, the only place Apple could go to get those made in Switzerland is probably Swatch Group itself. So in some ways it could be more of an opportunity than a threat for Swatch Group.”
In the past, Swatch CEO Nick Hayek has brushed aside the idea of the smartwatch as a threat, claiming the devices lacked the elegance of a luxury Swiss watch and had displays too small for regular use. Now with stocks falling, Swatch has plans to introduce fitness functions like pulse measurement and training calculators similar to those found on smartwatches to the brand’s Touch line for 2015.
While the makers of luxury watches have been able to dismiss the current collection of smartwatches selling for $50 to $240, the iWatch from Apple cannot be ignored as possible competition in the market for pricey timepieces. Sales estimates for the iWatch start at four million in 2014 and go up to 50 million in its first full year, even though the Apple smartwatch is likely to be the most expensive device in its category.
While the smartwatch is bound to cut into the existing market for sports watches, especially in the lower price ranges, the long term effect on the sales of luxury watches is likely to be minimal. Nothing can replace the elegance and timeless quality of a fine Swiss timepiece, no matter how many fancy bells and whistles may be attached.