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Can the Swiss watchmakers survive the smartwatch revolution?

  • Overview of the Swiss watch and smartwatch market
  • Analysis of the growing popularity of smartwatches against Swiss watches

 

The excellent craftsmanship of Swiss watch is intangible and make ‘Swiss-made’ watches one of the most valuable watch brands in the world. But the venerable Swiss watchmakers may have a smartwatch challenge. The popularity of the smartwatches has grown dramatically in recent years. On the other hand, the export volumes of Swiss watches are declining for the third consecutive year as of 2017. This decrease in exports was due to weak demand in the key markets such as the United States and Europe, where the shipment slid. The last time Swiss watchmakers had this type of declining shipment YoY was back in the 1930s during the Great Depression.

On the contrary, the wearable market space under which the smartwatch falls commands approximately 57% (as of 2017) of the wearable market category, it has seen a YoY shipment growth of 10.3% between 2016 and 2017. Moreover, as per the estimates from Canalys, Apple is the top player in the smartwatch market alone and shipped 8 million units of smartwatches, which was more than the total Swiss watchmakers’ shipment volume of 6.8 million units in the fourth quarter of 2017, this occurred for the very first time. One of the main reasons for the surge in sales for the fourth quarter was the launch of Apple Watch 3 during the same time. The launch of a new iPhone with its edgy functionality, with both the style and substance during the same time period, created a perfect scenario for up graders, this drove the sales of Apple watches over and above the Swiss watch sales.

Televisory feel that smartwatches are gradually creating a scenario, as is with the smartphones and tablet, by developing a completely new market or indirectly enhancing the scope for the demand of gadgets; the only thing that it is very young to reach to the likes of smartphones and tablet in the near future. The market for smartwatches in the recent past has seen many players entering the industry, but Apple continues to dominate the segment for smartwatches, cornering approximately 57 percent of the global market share in 2017, with 17.7 million units shipped. Further, strong growth is expected over the next few years and with the segment as a whole is seen to increase at a CAGR of ~18%, with watches performing even better at a CAGR of 26.5% during the period of 2017-21. 

While one might say a direct comparison of the rise in smartwatches with the Swiss watchmakers is albeit not correct as most Swiss watches are luxurious timepieces that cost tens of thousands of dollars and make these out of reach for the majority of the people. Nevertheless, that does not mean one can rule out the fact that Apple smartwatches (priced around $500) have taken a bite off the overall watch market including that of the Swiss watchmakers in the past few years. It is because if one look into the statistics of both the watchmakers (since the introduction of the Apple watches), while the smartwatch market has registered a healthy growth over the past years, the Swiss watch market has witnessed a fall in its exports in recent years. A deeper look into the declining number of the Swiss watch exports shows that it is the export of watches in the entry-level pricing segment (priced around $500) that have steadily declined over the past few years.

The smartwatches are not entirely a new category, but companies like Apple are redefining the category itself with its new and improved aesthetics and bringing in the biggest revolution in the watch industry since the introduction of quartz watches. The Swiss watchmakers did manage to survive the ‘quartz revolution’ and sustained by evolving and creating a better mix of designing, craftsmanship and technology as compared to the Japanese quartz.

In conclusion, it is important to note that it is difficult to point out exactly if smartwatches and Swiss-made watches are direct competitors since their target customers are different. The Swiss watch industry aims at high-end customers, who also highly consider the sentimental value associated with the timepiece, while the major segment of the smartwatch customers views the product largely as a utility gadget. Televisory feel all is not lost for the Swiss watchmakers as they are targeting new regions and also adding new and improved features (some even with new digital technology), mainly for the developing economies. Furthermore, approximately 40 percent of the Swiss watch exports are to Asia (as per the Federation of the Swiss Watch Industry). The Swiss watchmakers are focusing on this region as interest in vintage models grew and sales in these regions also bounced back in 2017, with Hong Kong and China leading the way. Most brands did better in 2017, with sales picking up the momentum, especially for the high-end watches as per statistics provided by the Federation of Swiss watch industry. The Swiss watch exports followed a slow recovery in 2017, with the total exports registering an overall growth of 2.7 percent and a steady trend is expected in 2018 according to experts. It can be said that Swiss makers are undergoing a tough phase and might have to look for new strategies in terms of products and functionalities as well as regional sales to continue their impetus.

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