A smartwatch is an automated wristwatch which can run mobile applications and allows one to access several functions such as a calculator, compass, applications to book a cab and order groceries. This can also be used to make or answer phone calls and to send text messages. There is a possibility that the luxury watch industry may lose its customers to the smartwatch industry. The luxury watch has had a high brand value and has been a symbol of prestige, riches, status and classiness. The introduction of the smartwatch by the tech-savvy companies such as Samsung, Motorola, Apple and Google has brought about increased competition in the watch industry.
In the fourth quarter of 2015, the global smartwatch shipments overtook the Swiss watch shipments for the very first time, 8.1 million smartwatches were shipped compared with 7.9 million Swiss watches in the period, as shown in the below graph.
The consumers, who buy luxury watches for style and status symbol might not have an interest in tracking their fitness or getting text message notifications. A luxury mechanical watch is manufactured to last for a longer period of time and is usually passed down to the next generation, these watches do not become obsolete in few years’ time. A smartwatch has multiple features that are lacking in a conventional luxury watch. However, it has its own drawbacks, smartwatches are dependent on the ever-changing technology and thus, may become obsolete within a span of a few years. Additionally, the battery life of a smartwatch is limited, and it has to be frequently charged. There are inevitable technical glitches and complexities associated with a smartwatch. The Apple watch needs to be paired up with an iPhone and it is mostly compatible with newer iPhone models. Therefore, due to these reasons, the luxury watch industry does not face an imminent threat of losing most of its customers to the smartwatch makers in the next decade. However, at the same time, the industry also cannot ignore the risk of losing its customers, who love technology. The desire to display style with status can now be fulfilled through smartwatches made by strong brands like Apple. The luxury watch retailers have witnessed a decline in the revenue in 2015 as compared to 2014, the same is shown through the below graph. The decline in revenue correlates with the increase in units of smartwatches sold, this was more so in the last quarter of 2015.
Source: Televisory’s Research
A decade down the line, the preference of consumers with deep pockets may change as the present generation is growing in the internet age and they will be the future earners.
The luxury watch makers can ally with tech companies to manufacture smartwatches and to prevent the erosion of their revenue in the future. The alliances are the need of the hour as the right products for tomorrow’s customers will be introduced after a series of R&D initiatives over a period of time. TAG Heuer, the luxury watch player of repute has teamed up with Google and Intel for an android smartphone watch and named the watch as 'TAG Heuer Connected'. In November 2015, TAG Heuer released its connected watch powered by Google's Android wear operating system. This 'connected' watch was priced around $1,500.
The technology companies producing smartwatches can also benefit from the partnerships since they will have access to the aesthetics and design of the luxury watch makers. The tech firms will also understand the preference in the luxury segment in a better way through the collaborations. The software which featured in the 18-karat-gold Apple watch edition, the top-of-the-line $17K offering was identical to that of Apple's entry-level $369 sports watch model, which means luxury consumers are paying for gold encasing and the status attached to the metal and the brand.
The smartwatch makers will have to improve their products in order to provide ease of use to their customers. They can accomplish this, through models that can last longer and can be updated, have a relatively long battery life and are less technically challenging for users. The corporate world may witness more collaborations amongst smartwatch and luxury watch makers and this will produce an innovative smartwatch that may satisfy tech and luxury segment watch buyers alike. The alliances can create a win-win situation for both the luxury watch industry and the technology industry. The luxury watch players that are uninterested in such schemes may perish, especially if their competitors form partnerships. Therefore, the industry may see a market for the luxury smartwatch in the near future.
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