Ap­ple helps push US watch sales to big­gest drop in 7 years

The Pak Banker - - COMPANIES/BOSS -

U.S. watch sales fell the most in seven years in June, one of the first signs Ap­ple Inc.' s watch is erod­ing de­mand for tra­di­tional time­pieces.

Re­tail­ers sold $375 mil­lion of watches dur­ing the month, 11 per­cent less than in June 2014, ac­cord­ing to data from NPD Group. The 14 per­cent de­cline in unit sales was the largest since 2008, ac­cord­ing to Fred Levin, head of the mar­ket re­searcher's lux­ury di­vi­sion.

"The Ap­ple Watch is go­ing to gain a sig­nif­i­cant amount of pen­e­tra­tion," he said Thurs­day in a phone in­ter­view. "The first cou­ple of years will be dif­fi­cult for watches in fash­ion cat­e­gories."

The mar­ket for watches that cost less than $1,000 is most at risk, as con­sumers in that price range have in­di­cated they're the most likely to buy an Ap­ple Watch, Levin said. Sales of watches cost­ing be­tween $50 and $999 reg­is­tered drops in June, the big­gest be­ing a 24 per­cent de­cline in time­pieces from $100 to $149.99, ac­cord­ing to NPD's data.

The Ap­ple Watch isn't the only cause of the down­turn. Lower-priced fash­ion brands suf­fered as re­tail­ers and depart­ment stores of­fered more dis­counts due to those prod­ucts' "sat­u­ra­tion" with con­sumers, Levin said. That cat­e­gory in­cludes brands such as Timex, Guess, Burberry and Tis­sot.

"In the short term, brands at ac­ces­si­ble price points are go­ing to have to think very se­ri­ously," he said.

Most U.S. watch sales data is lim­ited to ex­ports of Swiss watches to that mar­ket, which don't mea­sure sales to con­sumers.

Those ship­ments rose ev­ery month ex­cept May in the first half of 2015, ac­cord­ing to ac­cord­ing to Fed­er­a­tion of the Swiss Watch In­dus­try data avail­able on Bloomberg In­tel­li­gence. The first half in­crease was 4.2 per­cent.

Ap­ple Inc.'s re­fusal to say how many smart­watches it has sold has in­vestors and an­a­lysts re­ly­ing on guess­work to es­ti­mate sales. Harder yet is gaug­ing the im­pact on the $50 bil­lion Swiss watch mar­ket. El­mar Mock, one of the in­ven­tors of the Swatch, said in March that Ap­ple may cause an "ice age" for the four-cen­tury-old in­dus­try. The com­puter maker has al­ready shaken up the mu­sic mar­ket with its iTunes soft­ware, while its iPhone sup­planted Nokia Oyj's dom­i­nance.

Ap­ple in­tro­duced three mod­els of its smart­watch in April, with prices rang­ing from $349 for the most ba­sic ver­sion to $17,000 for an 18karat gold model. The com­pany said June 22 rev­enue in the unit con­tain­ing its time­piece rose by about $950 mil­lion in the three months through June com­pared with the first three months of the year.

That would sug­gest the com­pany may have sold at least 1.9 mil­lion watches, as­sum­ing the Ap­ple Watch had an av­er­age selling price of $499. NPD es­ti­mates the tra­di­tional watch in­dus­try sold 927,500 time­pieces in June in the U.S.

Pro­duc­ers such as Swatch Group AG, the maker of Omega, have main­tained that Ap­ple's en­try isn't a threat and will spur sales of tra­di­tional time­pieces in the long term by get­ting young peo­ple in the habit of wear­ing a watch.

NPD's U.S. watch data es­ti­mates sales of about 70 brands from Timex to Harry Win­ston through depart­ment stores, na­tional chains and in­de­pen­dent jewel­ers. It doesn't in­clude bou­tiques owned by watch brands, su­per­mar­ket chains such as Wal-Mart Stores Inc. or online re­tail­ers such as Ama­zon.com Inc. NPD's lux­ury tracker was for­merly known as LGI Net­work.

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