Analyst Calls Smartwatch Threat to Luxury Watches “Overdone”

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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.”

Swatch

Swatch

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.

Smartwatch

Smartwatch

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.

12 Comments

  1. I can understand having an impact of the digital sports watch market. I don’t think it should have an impact on the luxury market. People that areinto the luxury side of watches ate buying for quality and status. Smart watch have none if that appeal. I think that these smart watches may even make the younger crowd who don’t wear watches start wearing them and that could lead time into the more luxury side of watches in the future.

    Reply
    • Neal,

      I agree with you 100%. I believe the smart watch craze will definitely pull in the younger, techy, crowds, but fear that it will trap them in the digital watch world. I believe this may be the beginning of a whole new watch game.

      Reply
  2. Apple’s smart watch *may* have an impact on moderately priced watches, but I don’t think it will affect the sales of luxury watches. At this point, it’s all conjecture. Existing smart watches sell poorly and don’t compete with anything; they are mostly ugly and useless. If Apple’s smart watch is truly useful for sports and exercise, it will compete with sport type watches. If, and this is a big if, it looks like a quality, traditional watch, and especially if the face is user-configurable, it could decimate the quartz watch market. I admit that I have been putting off any watch purchases for the last few months, waiting to see what Apple introduces.

    Reply
    • Jon,

      Not going to lie, as an apple fan, I’m amped up to see what they have to offer. I have multiple requests out to see if I can get my hands on one when they first launch to review and share with you all. Smart watches will definitely be a game changer in the digital watch world. Curious to see how it all pans out.

      Reply
  3. I agree that this won’t have much impact on watches priced above, say, a thousand bucks. It’s the lower-priced (affordable) market that might be potentially contested, though. The upside of the smartwatches is that you can choose whatever kind of dial/hands you want to be displayed, so arguably, they have a much higher chance of looking really cool (personal tastes).

    I am really interested to see how brands like Citizen and Seiko will handle smartwatches.

    Reply
    • Smart watches are definitely going to change the game with the younger generations. Having the ability to customize their timepiece is going to draw in a lot of people. While Apple has a good lockdown on their operating systems, making it very difficult to customize, its the windows based companies that are going to have a huge vantage when it comes to customization.

      Reply
  4. This may be popular for a little while, and with digital watch lovers, but they are tacky looking and most people avoid that.

    Reply
    • Dave,

      They may look tacky, but these watches are going to change the digital industry. I don’t think a “while” is an option. These watches are going to be around for quite some time. Look at the phone industry. Every company is going to jump on board with their own watch and I foresee the smart watch craze lasting a very long time.

      Reply
  5. Doubt if a smartwatch will be able to replace a nice dive watch.

    Reply
  6. Yeah, I think this analyst is right on the money. I mean, when smartphones developed further they didn’t replace the need for a wallet. You can pay through your phone, you can transfer money, but nothing is quite like the leather and immediacy of a wallet. A nice money clip or a wallet is about more than just function.

    Men have few accessories as it is. Luxury watches are more of a statement than a simple way to tell time. These pieces of fashion are about more than function. Even lower-priced luxury brands like http://toywatchofficial.com/ will do just fine. I think a good quality chrono will outlast the smartwatch. But, hey, that is just my point of view (and this analyst too).

    Reply
    • Lux,

      I believe you are right, but with the younger generation so tech savvy, do you feel this may bend the curve when it comes to smart watches vs automatics in the future?

      Reply
  7. Nothing can replace a fine luxury watch. The smartphone on a wrist is not as appealing in function or look as some might have hoped judging from many of the commercial parodies and reviews it has been getting. Many people love technology but at the same time their phone has the same or more capabilities than watch and they can use that money to purchase other things, such as a luxury watch and just keep their smart phone.

    Reply

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