Old-school watchmakers get smart to counter Apple
TAG Heuer, Fossil Group push smart features as consumers demand more from their watches
Watchmakers, caught off guard by the success of Apple Inc.’s smartwatch, are now trying to keep pace with changing customer tastes by introducing messaging alerts and other high-tech features to traditional watches.
Brands including TAG Heuer, Swatch and Fossil Group are working with Apple rivals such as Alphabet Inc.’s Google and Intel Corp. to offer their own smartwatches or hybrid versions that offer smart functions while retaining traditional design.
Global shipments of Swiss watches steadily slipped after the first Apple Watch was unveiled in 2015, a dip compounded by a slump in China sales. Despite picking up in the past two years, they were overtaken last holiday season by Apple’s smartwatch for the first time. UBS predicts Apple Watch sales will rise 40% next year to reach 33 million. The tech giant is expected to move 8.8 million shipments in the fourth quarter of this year, said Francisco Jeronimo, a research director at International Data Corporation.
“The global watch market has had a shock and it worries us,” Daeboong Kim, head of South Korea’s Watch & Clock Industry Cooperative, said in an interview at the world’s biggest industry fair in Hong Kong in September. The cooperative is getting advice from Samsung Electronics Co. , the world’s biggest smartphone maker, to help members develop watches with smart functions. Samsung and Apple declined to comment.
Sales of smartwatches overtook mechanical watches in 2016 while hybrid-watch sales rose to 7.5 million world-wide in 2017 from almost nothing in 2015 according to marketresearch firm Euromonitor International. Sales volumes for both watch types are set to double by 2020, it predicts.
The digital divide is growing, however, as the Apple Watch Series 4 released last month added an alert system for when the wearer falls down and a function designed to identify heart irregularities. Analysts say those features target a demographic of faithful watch buyers who are typically more resistant to technology: older customers.
While some traditional watchmakers have tried to move into smartwatches, many have focused on hybrids. Typically, these don’t have touch-screens. Instead, they are synced with smartphones via an app and alert the wearer to messages or calls through vibrations, blinking lights or by moving the watch’s hands. Via Bluetooth connection, users push buttons on the watch to control the phone’s camera and music functions.
TAG Heuer is one of the higher-end brands fighting back, releasing an upgrade of its smartwatch, the Connected Modular 41, earlier this year. The watch is the result of collaboration with Intel and Google. It has fitness tracking, GPS, and contactless payment.
Jean- Claude Biver, TAG Heuer’s chief executive, said its hybrid is having success because “it really looks and feels like a real watch, but with all the information you need.” TAG Heuer is owned by LVMH Moët Hennessy Louis Vuitton SE, which declined to disclose sales figures.
TAG Heuer’s lowest-priced Connected Modular 41 sells from around $1,200. While luxury watchmakers are least affected by Apple’s competition, more luxury Swiss watch brands are researching hybrid watches as a gateway to full smartwatches, IDC’s Mr. Jeronimo said.
Fellow luxury Swiss brand Hublot is focusing on limitededition devices with commercial partners. It released 2,018 pieces of the “Big Bang Referee” smartwatch for the 2018 soccer World Cup that featured in-game alerts and envisages watches connected to luxury sports cars that flag performance data and open doors.
“We must bring something different than what exists. We are not competing with Apple,” said chief executive Ricardo Guadalupe.
Swiss watchmakers that operate in a price category similar to Apple—the Series 4 starts at $399—are feeling the pain of Apple’s competition, with the number of loss-making companies in the low to midrange market rising, according to the Federation of the Swiss Watch Industry.
Richardson, Texas-based watchmaker Fossil Group, which also operates under other brand names, dominates the global hybrid-watch market, selling one in three globally. The group released about 25 new smartwatches this year for brands including Emporio Armani and Diesel. Functions include heart-rate monitoring and Google Pay technology.
Fossil executives thought the watches would appeal to younger buyers, but mature watch buyers are also showing interest, said Greg McKelvey, who heads the group’s digital strategy.
Fossil Group’s Q Modern Pursuit hybrid, which sells for around $155, is one of the more affordable smartwatches.
Swatch Group , one of the biggest publicly listed watchmakers, released its latest watch featuring some smart technology in 2017—the Swatch Bellamy 2 which enabled users to make contactless payments. It said last year it plans to develop its own operating system for watches, dubbed Swatch OS, and launch the first products using it by the end of this year or next.
This isn’t the first time Switzerland’s centuries-old watchmaking industry has faced a threat from technology. The rise of cheaper, more-efficient quartz watches from Japan in the 1970s similarly hit Swiss watchmakers’ sales.
Not all watchmakers plan to compete. Developing hybrid watches isn’t an option in our price range of $170 to $570, said Thomas Swiderski, director at family-run Swiss watchmaker Adriatica. “You can’t fight with Apple or Samsung, because we’d make something similar but not as good. We have no chance.”