In the last quarter of 2017, the value of the market for Apple’s range of smartwatches was greater than that of the entire Swiss watch industry. However, the global market for Swiss timepieces grew to US$21.25bn in 2018, an increase of 6.3%, reports trade body, the Federation of the Swiss Watch Industry.
Much of the growth the sector has experienced has been driven by demand from Asia, particularly Hong Kong whose 7.4m citizens purchase more Swiss watches than the 327.2m citizens of the United States.
Competing against Apple
Manufacturers have chosen one of three different responses to the emergence of the smartwatch.
Some continue to manufacture their traditional ranges of mechanical watches although, in answer to the growing market presence of Apple, Fitbit, and Samsung, they have begun to incorporate smartwatch technology into some of their models – so-called “hybrid” watches.
Others have launched smartwatches that incorporate none of the mechanical movement technology for which the brand has become famous and valuable.
Swiss manufacturers which have entered either the hybrid or the smartphone watches include Tag Heuer (in 2015, they launched the Connected range), Montblanc, Frederique Constant, Bulgari, and Ressence.
The remaining manufacturers however have eschewed the smartwatch market altogether in much the same way as they did when they faced competition from Japanese quartz watches in the 1970s.
Swiss watch price points
Despite the increase in worldwide sales in 2018, the number of Swiss timepieces sold actually fell by 570,000 over the previous year. The primary driver behind the decline was the competition posed by smartwatches in the sub-US$1,000 sector, according to Swiss watch executives speaking to Bloomberg.
The presence of smartwatches is not having a significant impact on sales of mechanical timepieces above the US$1,000 price point and virtually no impact on watches sold at US$3,000 or more. Mechanical watches selling for less than US$200 however has suffered a sharp decline with sales down 23.6%.
Higher ticket luxury mechanical watches sales total US$27.5bn per annum according to Elite Advisors with the market for vintage watches valued at US$5.5bn. The value of the market for investible and collectible watches increased 67% over the course of the previous decade.
Swiss companies dominate the luxury watch market, particularly companies with a long and unbroken trading history. Mitrajit Bhattacharya of Ethos Watches has stated that, “you will not buy a US$100,000 watch without being sure that the manufacture will take care of its servicing 100 years down the line. No wonder marquee brands which exist for centuries fetch good prices for their top lines”.
As a result, many of the more notable Swiss manufacturers like Chopard are still successfully selling very limited edition and exclusive timepieces to ultra-high net worth individuals and collectors.
Geneva-based Chopard, founded in 1860, is targeting both the UHNWI and collectors’ market with its L.U.C All-in-One ‘Janus Watch’ priced at US$452,000, recently listed as one of Esquire Magazine’s nine most expensive watches in the world.
For models of luxury timepieces at the US$3,000 price point and higher, manufacturers are also expanding their marketing activities to the growing affluent classes in Africa and by opening retail outlets on cruise ships. Sales of watches and jewellery on cruise ships accounted for 24% of total global retail sales in 2017.
According to the Digital Luxury Group, interest in luxury smartwatches is increasing (4,000 searches a month on Google in 2017 rising to 4,300 in 2018) however their appeal is much more niche than for general smartwatch brands (2.7m searches per month in 2018).