The Smartwatch Crisis Is Officially Here

Apple Watch 5 exacerbates the smartwatch crisis

Hear that? That’s the sound of a dead industry walking. In the last 18 months, Americans bought more smartwatches than traditional watches. The stat sounds the death knell for the traditional watch industry, facing a smartwatch crisis that makes the ’80’s quartz crisis┬áseem like a minor disturbance. According to market researchers NDP [via robbreport.com] . . .

[Smartwatch sales have] risen by over 24 percent in the first half of 2019 compared to the same period last year. The group now estimates that the smartwatch market is now worth $5 billion in the US alone.

The 24-percent jump during the first half of 2019, comes on the heels of a 51-percent increase in dollar sales and a 61-percent increase in unit sales for 2018 as a whole . . .NDP estimated that one in four Americans aged 18 to 34 now owns a smartwatch.

Traditional watches still accounted for 56 percent of the total value of watches sold in America last year, but they were actually outsold by smartwatches in the fourth quarter. During that period, smartwatches made up 55 percent of the total sales of watches in the country.

There’s no stopping smartwatches. How much of a market for traditional watches will remain in five years? I’m thinking it will slip well below twenty-five percent of total watch sales.

Patek Philippe will survive the smartwatch crisis

How long before some of the big boys go belly-up? That depends where they are in the market.

The top end of the traditional watch industry is more than holding its own; NDP ranks Apple, Rolex, Fitbit, Patek Philippe and Samsung as the top five watch brands by revenue. Big ticket, high status traditional makers like Richard Mille are hardly hurting, either. At least not yet.

Down at the bottom, time’s up for Timex and other brands flogging cheap Chinese-made timepieces. Would I want to be a maker in the $500 to $1000 mark? I would not. Spotlight Seiko. The company that sells millions of watches in hundreds of flavors doesn’t have an answer for the smartwatch crisis. It needs one now, and for the rest of its life.

Fossil. Smartwatch crisis? What smartwatch crisis?

Clearly, it’s adapt of die for all traditional watchmakers. At the moment, Fossil shows the way (even though its corporate parent has its tentacles in the traditional watch industry). Fossil’s range of Google Wear OS watches — licensed to Puma, Armani, Kors and others — put the former cheap trad watchmaker well ahead in the race for survival.

Seiko, Omega, IWC, TAG Heuer and others can’t go there. The challenge is nearasdammit insurmountable. Smartwatches are software driven. That shit is seriously expensive. It requires a level of expertise and speed traditional watchmakers simply don’t have. The competition is already beyond fierce, it’s not based in Switzerland and it’s not standing still.

Fossil's answer to the smartwatch crisis

And then there’s branding. How do you brand a new smartwatch Seiko or OMEGA when smartwatches come in three flavors: round, rectangular and wristband?

Accuracy’s a given, and software is either confined to a walled garden (Apple) or the same apps are available on every competitors’ watches. What can a trad watch maker bring to the game? * crickets chirping *

If you collect/wear traditional watches, you’ve never had more choice. Thanks to Internet advertising and direct-to-consumer sales, boutique/microbrand brands are blooming like wildflowers. This while major traditional watchmakers have more SKU’s than a corner drug store.

That’s going to end. What will be left as the smartwatch crisis plays out?

High-end traditional watchmakers selling relatively small quantities of product — although even they will feel the pinch — no one on the bottom end and a very small number of mid-market players. The companies that can contract their business without going out of business.

Bottom line: the traditional watch industry is toast. Enjoy it now, while you can.

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