Since the launch of the Apple watch in April 2015, outsiders of the watches industry have been expecting smart watches to eventually take over luxury watches. At Woodshores, we look at the luxury and consumer electronics industries from the economic and anthropological perspective, and we try to debunk what we perceive as being a simplistic view of the reality.
Smartphones manufacturers try to compete on utilities: what kind of processor it uses, how much RAM it does with, how many lenses the camera has, how thin it is…
When it comes to watches (luxury, afforable luxury and everything in between), they are much more closer to the field of fashion than instruments. People base their purchase decision on an equation that involves looks, price and brand image. Utilities almost never comes into the picture.
Lack of Consumer Interest in Utilities
As evidence to this, watchmakers have been pushing energy harvesting technology such as solar cells under the dial or dynamo since the 1990’s, but consumers have not been adopting them in droves because they simply don’t care…
ETA Autoquartz: an energy harvesting technology that failed to capture the imagination of consumers and had to be canned after a few decades.
What consumers care about is that the watch looks good, that it comes at a price that they can afford, and if possible that the brand has appeal or recognition.
Talking about brand appeal, it turns out that the name of a lifestyle powerhouse or a carefully engineered lifestyle brand can be as strong as that of an institutional brand.
When a Label Stops Being a Manufacturer
When the author was a teen, 1 brand of eyewear out of 20 was a lifestyle label, such as the Cartier Must Louis shown below. All other eyewear was made and distributed by institutional manufacturers (i.e. companies that had their own production line and that did not subcontract).
1980’s Cartier Must Louis, worn by Elton John in the music video of “I’m Still Standing”. Reproduced under Fair Use.
Nowadays, 19 eyewear brands out of 20 are labels. One really has to search to find institutional manufacturers.
Label eyewear, image credit: We Love Glasses
The same shift from manufacturers to labels happened with watches, especially after businessman Séverin Wundermann paved the way by releasing Gucci watches under license in 1972.
Since then, the lifestyle watch business in Rambourg’s “Affordable Luxury” segment (USD 100 to 300) has been booming:
- The Swatch Group has been enjoying commercial succes with Balmain watches, a license of French fashion designer Pierre Balmain; and until recently with CK watches, a license of American fashion designer Calvin Klein.
- The Fossil Group has built an empire on its eponymous made-up brand Fossil, and has been adding on fashion license after another: Puma, Emporio Armani, Michael Kors, DKNY, Diesel, Kate Spade New York, Tory Burch, Chaps and Armani Exchange.
- The Movado Group MGI, despite the lacklustre performance of their high-end brand, have been meeting success with their fashion licenses: Olivia Burton, Coach, Hugo Boss, Lacoste, Tommy Hilfiger, Rebecca Minkoff and Uri Minkoff.
This business model rests on the fact that regardless of utilities, as long as a lifestyle watch meets the customer’s needs when it comes to looks, price and brand image, there is an opportunity.
From 2007 onwards, young entrepreneurs took a spin on this business model and instead of relying on a famous brand, they pioneered the use of social media to promote a made up brand that would appealed to consumers imagination: Daniel Wellington, MVMT (now part of the Movado Group), Filippo Loreti or Vincero. Interestingly, these brands all use of-the-shelf mecanisms from Citizen/Miyota, and their watches have near identical utilities/specifications: quartz, 316L stainless steel, mineral crystal, water-resistance to 30 or 50m, Italian leather.
Between 2013 and 2018, Swiss exports of watches have dropped from 28 million units to 23 million units. At the same time, Daniel Wellington is reportedly selling 1 million watches per year, and the Fossil Group (which didn’t exist prior to 1983) has been introducing one fashion license after another, and slowly building up sales of 50 million watches per year, which by itself is twice what the Swiss are exporting.