In 2015, Apple intorduced its new smartwatch series, a combination of elegance, usability and practicality wrist products. It soon became trendy, and pulled the smart watch market to new heights. The conventional watch industry either didn’t see this as a potential threat, or knew there was little it could do, so it continued ignoring the elephant in the room. Eight years later, the “elephant” grew significantly, and now the traditional watch industry simply watches its share shrinking year over year…

To make this easier, we divided the (Swiss) watch market into two categories: a) 0-3,000 CHF watch value, and b) 3,000+ CHF watch value. In the first category, smart watches and especially Apple prevail (on avg 30Mn units/year) where as in the second, swiss watches are still the protagonists, as there is no competition (yet) from tech companies. Based on this categorization in the figure below, we see that around 88% (category a) of swiss watches is in eminent danger – direct competition with smartwatches, and 12% (category b) is unaffected by the smartwatch competition.

As younger generations come into play, less and less prefer the traditional watches and go for a smartwatch that is useful, practical and trendy…

Apple pulled another ace out of its sleeve that of the health and exercise monitoring features that especially during covid, boosted even further its smartwatches. People could now monitor their health (for oxygen and heart condition) as well as their exercise levels since they were mostly sitting at home. Once again she managed to complete its ecosystem with an elegant, useful, practical and connected wrist accessory. This is also why despite being the most expensive smartwatch and perhaps not as accurate as a Garmin, Apple leads the smartwatch market with 3 times the sales of its second competitor, Samsung.

The Swiss watch makers may be losing the first category battle (88% of their revenues with entry level watches up to 3,000 CHF) but what about the second category (of the remaining 12%), will the top analog watch niche market stay safe? Apple has made some attempts to penetrate the super luxury watch category as well, and it certainly won’t stop. It offered a $10,000 golden edition, it partnered with Hermes, and this year it launched the ULTRA. A €1,000 titanium digital sport watch packed with features. And we expect to see more expensive (ULTRA) editions next year…

It is true that smartwatches aren’t forever. And one should replace them at least every 5 years if not sooner. It is also true that Swiss craftmanship for complique watches is unmatched, and such analog watch is a piece of art as much as it is a jewellery. Also, a status symbol for those who know and appreciate. But in today’s world, information and processing power tends to be more valuable and useful, and definitely more fascinating. And, apart from watch collectors, who wants to keep a watch forever? Plus, a trendy, hi-tech, expensive Apple watch is a fashion symbol, and if replaced every other year or so, can resemble the status of a successful business man or woman, as part of his/her business Apple ecosystem.

The question is, where will the traditional watch industry be ten years from today? Do they see the potential in this, and will they adapt, or will they keep shrinking till they become extinct? So far they only seem to focus on making more expensive and better crafted analog watches. But is it really a matter of making even better analog watches? Or is it about offering to consumers what they need and want? TAG Heuer created a beautiful smartwatch, the “Connected”, but couldn’t compete with tech-giants. It lacks the experience, the software development expertise and the IT-pace. Traditional watch manufacturers need to partner* with tech and embrace it, while they still have their prestigious brands intact. More than four-fifths of their revenues is directly threatened. And the remaining one-fifth will eventually be attacked too.

*The same thing happened with Car brands, when Apple introduced CarPlay. At first, car makers didn’t care. Next, they started improving their own infotainment & multimedia environment systems experience to compete Apple’s CarPlay. Today, almost all brands (and especially the luxury ones) include and advertise CarPlay compatibility and offer subscription plans with their cars… Apple’s Ecosystem won the battle once again…

Images: Apple Inc., TAG Heuer