Jeweller - April 2020

TRENDS IN TIME | Watch Industry Report
The pandemic has led
to the cancellation or
postponement of trade
shows and events.
How are you adapting
your communication
with retailers?
In its heyday: Baselworld was still drawing large crowds in 2016.
The virus may also have another
unintended result – reuniting the
international watch industry.
It has forced not only the cancellation
of both Baselworld and Watches
& Wonders Geneva, but also a
reassessment of priorities.
“Suddenly, the PR and politicking
problems in the international watch
market became insignificant as the ‘real
people’ of the world went out to their
supermarkets to fight over rice, pasta,
hand sanitiser and toilet paper,” explains
Martin Foster, watch industry journalist
and Jeweller contributor.
He believes the Swiss industry should
undertake a “health-check” and
recognise that old rivalries should be
forgotten in favour of more efficient,
unified solutions.
“Baselworld has empty exhibition halls
going begging with dedicated space
available, if only the show formerly
known as SIHH can grasp the enormous
economic and political value of this
opportunity,” he adds.
Looking ahead to 2021, Corder agrees
that a “reboot” is necessary, focusing
on a “luxurious and enjoyable to attend”
show with retailers and members of the
media hosted by the brands.
Crucially, exhibiting at the show should
cost “a fraction of what Baselworld used
to require”.
Time will tell if Loris-Melikoff can
succeed in righting the ship and restoring
the venerable show – and the watch
industry, to its former glory.
Taking a bite of the Apple
It is difficult to overstate the impact of
technology on the design and function
of watches, most notably the introduction
of the Apple Watch in 2015.
It marked something of a tipping point
in the smartwatch category, prompting
a monumental increase in consumer
demand.
In 2014, US-based research firm
International Data Corp (IDC) estimated
global smartwatch sales at 4.2 million,
which increased by more than 400 per
cent the following year, to 19.4 million.
Apple Watches accounted for 11.6
million of those sales, according to IDC’s
analysis. Today, Apple claims to have
overtaken Rolex as the world’s ‘most
valuable’ watch brand in revenue terms.
“Baselworld has empty
exhibition halls going
begging with dedicated space
available, if only the show
formerly known as SIHH
can grasp the enormous
economic and political value
of this opportunity”
–
Despite a mixed-to-dismissive response
from many in the traditional watch
industry, the Apple Watch proved
enduringly popular, with the number of
units shipped increasing each year since
its debut, according to reports by market
research firm Strategy Analytics.
Apple does not publicly declare separate
shipment or revenue data for the Apple
Watch.
The devices retail for $US199–$US499
for a standard model, and up to
$US2,159 for special editions made in
ceramic or titanium – placing them in
direct competition with fashion and
mid-range luxury watches.
“Certainly, the introduction of
smartwatches has had the most
significant impact on the watch industry
in the past five years,” says Phil Edwards,
managing director Duraflex Group
Australia, which distributes Swiss watch
brands Baume & Mercier, Luminox and
Mondaine, among others.
Alongside smartwatch models from
the likes of Samsung, Garmin and
Huawei, the Apple Watch has prompted
extensive changes in the fashion
watch category in particular, through
increased competition.
Simon Garber
Heart & Grace
“We are ensuring that
our stockists know we
are open for business
and here to help. In tough
times it is easy to forget
there are still occasions
for which people will
be buying gifts, such as
Mother’s Day. We also
want to make sure that
people know the key
items needed to make
sales and that we have
those items in stock.”
Phil Edwards
Duraflex Group Australia
“The pandemic forces us
to amend our approach.
We will need to be
strategic but also fluid,
and support retailers
and our brands as best
we can.”
John Rose
West End Collection
“We are supporting
retailers with online tools
that allow them to be as
successful online as they
are in their physical store.
We are seeing consumers
become more inclined to
purchase from the website
of a brick-and-mortar
store that they know and
love, rather than a faceless
marketplace. Consumers
now trust the internet and
in many cases prefer to
purchase online, rather
than in-store due
to the convenience of doing
so – not because
it is cheaper.”
Fossil Group – which includes fashion watch
brands Fossil, Relic, and Skagen Denmark,
and produes licensed watches under the
Puma, Emporio Armani, and Michael Kors
brands, among others – saw its net profits
drop a precipitous 79 per cent between 2014
and 2016.
Reflecting on the results, Fossil CEO Kosta
Kartsotis said, “Prior to that, we were clearly
positioned as the competitively advantaged
leader in a growing category. However, with
the introduction of technology into wrist
devices, traditional watches came under
pressure and we were disadvantaged.
“We didn’t have the technology capabilities
to compete with smartwatches, leading to
a decline in our market.”
Meanwhile, Swatch Group CEO Nicolas
Hayek Jr initially called the Apple Watch
“an interesting toy, but not a revolution”.
Swatch Group’s annual revenue fell 21 per
cent and then 47 per cent consecutively
in 2015 and 2016.
The company has since announced various
forays into the smartwatch category – even
developing the Swiss OS operating system –
though none have materialised to date.
The extent of the threat from smartwatches
was easy to underestimate. Notably,
Microsoft’s smartwatch project, Smart
Personal Object Technology, failed in
2005, leading to a lawsuit from Swatch
Group after it was left with 100,000
unusable smartwatches.
Eight years later, Pebble – a pioneer in
the smartwatch space – collapsed and was
purchased by fitness tracker manufacturer
FitBit. It seemed to confirm industry
suspicions that smartwatches were
struggling to differentiate from health
and medicine-oriented ‘wearables’.
By 2017, the market was valued at $US9.2
billion ($AU14.9 billion); by 2025, analysts
at Allied Market Research predict that
figure will increase to $US50.3 billion.
As a result, fashion watch brands have
adapted to both differentiate themselves
from smartwatches, and – through hybrid
technology – mimic them.
John Rose, managing director West End
Collection, which distributes Paul Hewitt,
32 | April 2020