Swiss watch sales decline 2-3x faster than predicted for September as Apple Watch expands its reach

Posted:
in Apple Watch edited October 2015
Swiss watch exports suffered their largest quarterly drop since 2009 during Q3, with "plummeting sales" in Hong Kong and China, as well as major declines Singapore, Taiwan, the Emirates and South Korea, all previously "robust Asian markets."


Apple Watch a prime suspect in the case of the missing Swiss watch exports


The Federation of the Swiss Watch Industry, according to a report by Reuters, stated that a "marked decline" in exports for the month of September (falling 9.9 percent) contributed to an overall drop of 8.5 percent for the quarter.

"This negative change has spread to other, hitherto more robust Asian markets, and casts something of a shadow over prospects for the year 2015," the Federation stated.

Swiss watch sales in Asia were down 12.7 percent, leading Reuters to note that "September watch sales abroad significantly undershot analysts' expectations, posting declines that were double to triple what analysts had forecast."

While the report stated that all "all price segments were impacted," the biggest drop occured within the $200-$500 segment, where sales fell by 14.5 percent, "igniting concerns that the Apple Watch could finally be taking a bite out of the Swiss industry's stake."

Although many Swiss watchmakers have gone on the record as dismissing Apple Watch as a threat, Swatch co-inventor Elmar Mock predicted this spring that Apple Watch would "put a lot of pressure on the traditional watch industry and jobs in Switzerland," noting that "anything in the price range of 500 francs to 1,000 francs ($500-$1,000) is really in danger."

During the first calendar quarter of 2015, the Swiss National Bank increased its holding of Apple stock by 60 percent to 8.90 million shares.

In May, we noted in a visit to Switzerland that even prior to its official launch, Apple Watch was already being promoted in the company's heavily trafficked retail stores (below, Zurich), generating significant interest in the country famous for its own watch making industry.

A photo posted by Daniel Eran (@danieleran) on Apr 18, 2015 at 1:35pm PDT



Apple's sales are primarily targeted at the same markets as Swiss watchmakers, in particular China, where third party retailers were similarly promoting Apple Watch this spring even before it went on sale.

Swatch follows the Nokia playbook

Swiss watchmaker Swatch was noted in the report as being "the only Swiss player which also has a strong position in low to mid-end segments," as detailed in a sector report by Bank Vontobel, with a 60-65 percent share of those markets.

Despite Swatch having the most exposure to Apple Watch, the bank's analysts "remained optimistic that, due to the group's technology know-how, it would offer its own smartwach [sic] offerings to compete with the Apple Watch and its likes," Reuters stated.

Swatch recently introduced a watch in China (below) with electronic payment features, a feature comparable to Apple Pay. Apple hasn't yet brokered deals with banks to enable Apple Pay outside of the U.S. and U.K.


Swatch's Bellamy watch launched in China on Wednesday with support for NFC mobile payments. Source: Sina Weibo


Apart from wrist payments and telling time, Swatch CEO Nick Hayek doesn't expect to compete against Apple Watch in more sophisticated phone calling features, or in introducing a software app platform.

"We are not a consumer technology company," Hayek stated. "We don't want to produce a reduced, minimized mobile phone on your wrist."

In August, Hayek dismissed Apple Watch as being "an interesting toy" and implied that Apple collected "blood pressure and blood sugar values" and stored them on its own servers, revealing either a gross ignorance about his competition or a willingness to knowingly spread false information about rivals.


Swatch CEO Nick Hayek


Hayek's status quo defense strategy sounds reminiscent of Nokia's 2007-2010 doubling down on simple phones in competition with Apple's iPhone, which was more of an advanced handheld computer platform than another basic cell phone with PDA features.

Once Nokia realized the need to compete with Apple as a technology company--rather than just making more of the same phones it had been making to maintain its market share prior to iPhone--the window of opportunity had closed.

Outsmarting the Smartphone and smartwatch vendors

Blackberry similarly focused on selling simple JavaME-based phones with keyboards, a strategy that failed alongside Nokia. Google also initially planned for its Android project to release a Java button phone.

However, Google was fastest to drop its own basic phone work to copy Apple's much more sophisticated iPhone design instead, enabling it to stay relevant in the iPhone era, even if its open software giveaway strategy couldn't manage to approach Apple in profitability.

Among watches, Google pushed out multiple Android-based efforts to beat Apple to market, but none of them have achieved any success. That's particularly clear in comparison to Apple Watch, which steamrolled the minor sales of Android Wear right out of the gate and has largely extinguished any remaining interest in the platform.

Samsung, Google's largest licensee, introduced its own Tizen-based smartwatch platform years before Apple Watch, but similarly failed to convince many users to adopt any one of its variety of wrist based devices.

At the corner of Technology and the Liberal Arts

A major aspect of Apple's success with Apple Watch has been its attention to fashion, with a broad selection of watchband types, finishes and colors to make the technology of the device relatable and relevant to a broad selection of users, not just computing enthusiasts.

Outside of Apple, other "smartwatch" vendors have almost entirely focused on selling to budget-minded, spec-salivating tech audiences, while existing watch makers (including Swatch) have primarily targeted fashion alone, without investing in advanced technology capable of integrating wrist-worn devices with smartphones, tablets, desktop computers, Bluetooth peripherals and devices and WiFi networking.

That's the same set of conditions that enabled Apple to beat both larger tech industry competitors such as Microsoft and consumer electronics manufacturers such as Sony in one market after another, from iPods to iPhone to iPad, over the past decade.

This year, Apple has focused on expanding Apple Watch while also introducing a new, more powerful Apple TV into the similarly-aligned market for home entertainment.
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Comments

  • Reply 1 of 46
    nasseraenasserae Posts: 3,152member
    What the heck is Switch! Did you mean Swiss or Swatch?
  • Reply 2 of 46
    How could you write this story without referencing Jony Ive's purported quote from September 2014?

    "Switzerland is fucked".
  • Reply 3 of 46
    dacloodacloo Posts: 890member

    Swass

  • Reply 4 of 46
    netroxnetrox Posts: 563member

    "How could you write this story without referencing Jony Ive's purported quote from September 2014?"

     

    I was thinking the same thing! 

  • Reply 5 of 46
    ecatsecats Posts: 272member

    The fact that any watchmaker is making efforts to rubbish their new competitor speaks volumes. Everyone knows that Apple isn't aiming to take out the ultra high end market, those kinds of buyers can afford both, so Apple might as well have an offering up there, even though it will mostly serve as a price anchor to the brand.

     

    When it comes to the bulk of consumers (and the bulk of money) a device that has many useful functions is a better proposition than one that can only offer brand esteem. Tag et. al. sell a lot of watches to this midrange on esteem alone, these are people who "buy into" the brand but can't justify spending more than $1,000.

     

    It's not surprising that Apple is able to make a dent here, it too has a certain cache of brand esteem, but Apple's device offering is significantly more useful than what the market offers. The result here is that traditional watchmakers are overshadowed, interrupting their funding cycle. There is permanence to this interruption due to a key difference in product: for the traditional watchmakers each model they make (even including newer wireless payment enabled watches) won't be able to offer a significant functional difference from their predecessors. While the apple watch is fully anticipated to evolve function and technology at a rate that not even other electronic manufacturers will be able to keep pace with. It's likely that a satisfied apple watch wearer of today will upgrade to the next apple watch, this simply doesn't happen with traditional watches.

  • Reply 6 of 46
    lkrupplkrupp Posts: 5,890member

    I’m sure we’ll soon be hearing from the usual suspects how this drop in sales is not due to the Apple Watch and that the Apple Watch is a failure, just like Apple Music. 

  • Reply 7 of 46
    levilevi Posts: 343member
    I especially like the part about bank analyst remaining optimistic that Swatch will release a competitive smart watch, citing thier "technical know how". Thier CEO said it himself, they're not a consumer electronics company. I predict they'll either release a commodity Android variant, or a more traditional watch with basic capabilities, like thier Bellemy line (or whatever it's called). Whiche path they chose, I suspect it will be a failure. This is a vastly different product, and one they have no expertise in. Just look at that ridiculous beach volleyball watch Hayek is sporting.
  • Reply 8 of 46
    Quote:
    Originally Posted by lkrupp View Post

     

    I’m sure we’ll soon be hearing from the usual suspects how this drop in sales is not due to the Apple Watch and that the Apple Watch is a failure, just like Apple Music. 


     

    The two aren't contingent on each other; I don't think the drops in sales is because of the Apple Watch and I don't think the Apple watch is a failure. Conventional wristwatch sales have been dropping for years with the death of the industry predicted since before the current smartwatch fad and long before the Apple watch existed, and this is just continuing the trend.

     

    I just don't think people go for conventional watches anymore and I don't think they really would if the smartwatch didn't exist.

  • Reply 9 of 46
    ingelaingela Posts: 217member

    Fine traditional watches will be relegated strictly to jewelry. Cheap traditional watches to novelty. Smart watches to appliances.

     

    In time as smart watches gain functionality they will fully replace all traditional watches, but for the men and women who love to wear and be seen with expensive jewelry when they go out on the town.

  • Reply 10 of 46
    rayzrayz Posts: 814member
    Has anyone else noticed that you never see Nick Hayek and Lady Penelope's chauffeur in the same room at the same time?

    Coincidence? I'm thinking not.
  • Reply 11 of 46
    Quote:

    Originally Posted by ECats View Post

     

    The fact that any watchmaker is making efforts to rubbish their new competitor speaks volumes. Everyone knows that Apple isn't aiming to take out the ultra high end market, those kinds of buyers can afford both, so Apple might as well have an offering up there, even though it will mostly serve as a price anchor to the brand.

     

    When it comes to the bulk of consumers (and the bulk of money) a device that has many useful functions is a better proposition than one that can only offer brand esteem. Tag et. al. sell a lot of watches to this midrange on esteem alone, these are people who "buy into" the brand but can't justify spending more than $1,000.

     

    It's not surprising that Apple is able to make a dent here, it too has a certain cache of brand esteem, but Apple's device offering is significantly more useful than what the market offers. The result here is that traditional watchmakers are overshadowed, interrupting their funding cycle. There is permanence to this interruption due to a key difference in product: for the traditional watchmakers each model they make (even including newer wireless payment enabled watches) won't be able to offer a significant functional difference from their predecessors. While the apple watch is fully anticipated to evolve function and technology at a rate that not even other electronic manufacturers will be able to keep pace with. It's likely that a satisfied apple watch wearer of today will upgrade to the next apple watch, this simply doesn't happen with traditional watches.




    I like your assessment.

     

    I will certainly upgrade to the next watch, which emphatically DOESN'T mean that I don't love my Sport 42 model. I happily wear it every day and benefit from its numerous convenience functions.

  • Reply 12 of 46

    I wish that Apple would just release the Watch sales figures.

     

    That data would certainly help clarify this stuff.

  • Reply 13 of 46
    Quote:

    Originally Posted by TechLover View Post

     

    I wish that Apple would just release the Watch sales figures.

     

    That data would certainly help clarify this stuff.


    It will also help Sog self-ban

  • Reply 14 of 46

    so, china is a market in which swiss watches sell well, but journalists write about the plight of a factory worker than cannot afford an iPhone? i believe that swiss watches are a little more expensive than an iPhone. 

  • Reply 15 of 46
    zimmiezimmie Posts: 138member
    Quote:

     Fine traditional watches will be relegated strictly to jewelry. Cheap traditional watches to novelty. Smart watches to appliances

    I would argue this is already the case and it has been for a long time. The cheapest quartz watch is a better timekeeper than the best mechanical watch, and not just by a little bit. Top-tier mechanical watches meet what is called the COSC Chronometer standard, which allows a drift of up to -4 or +6 seconds per day. There are 86,400 seconds in a day, so that represents a timing error of about 0.006%, which is absolutely stupendous for any mechanical system, especially one that is constantly being moved around on your wrist. Typical quartz watches, however, have a timing error of about 0.0006% (half a second a day), which is an order of magnitude better. Good quartz watches reach 0.00008% error or less (0.07 seconds per day).

     

    Even knowing all of this, I still wear my grandfather's Omega. It's jewelry. Rather than gems or precious metals, it has the beauty of mechanical engineering. Mechanical watches are one of the pinnacles of hand-crafted precision. I also wear another device to show me notifications and remind me of appointments.

  • Reply 16 of 46
    Quote:
    Originally Posted by Rayz View Post



    Has anyone else noticed that you never see Nick Hayek and Lady Penelope's chauffeur in the same room at the same time?



    Coincidence? I'm thinking not.

    Hmmm...

     

     

    Well, the Swiss shot themselves in the foot a while back by deciding not to sell the parts to watchmakers to fix their watches. That means the owner of a $20K Patek now has to send their watch back to Switzerland for service and wait a year or longer. Mr. Hayek started this practice with Swatch.

     

    After these asshats destroyed the American watch making industry in the 50's by exporting thousands of cheap movements, I can only laugh at the payback :D 

  • Reply 17 of 46

     I own 4 lower end mechanical watches. cheapest being around 1800, the most expensive around 3k...

     

    haven't worn any of them since the end of May... 

     

    it's just a pain (now) to go without my apple watch. I wore it for about 2 months straight. 

    took it off deliberately for a week. 

     

    didn't realize how much I use the damn thing.

  • Reply 18 of 46
    Quote:

    Originally Posted by MAJANI View Post

     

     

    The two aren't contingent on each other; I don't think the drops in sales is because of the Apple Watch and I don't think the Apple watch is a failure. Conventional wristwatch sales have been dropping for years with the death of the industry predicted since before the current smartwatch fad and long before the Apple watch existed, and this is just continuing the trend.

     

    I just don't think people go for conventional watches anymore and I don't think they really would if the smartwatch didn't exist.




    you may be right, in that its nothing to do with apple Watch, however the trend is not 'coninuiung' its 2 to 3x lower than expected (from the trend)

    I may be in a minority, bit i have several swiss watches in the $1k to $5k ballpark, and the reason i am not interested in adding to those, is simply the Apple Watch is too convenient to leave at home in favor of a nice piece of jewelry. I would miss its functionality, even when out for a nice evening.

  • Reply 19 of 46
    All the pundits were right and this is further proof that Apple is doomed...doomed I say! /s..
  • Reply 20 of 46
    Quote:

    Originally Posted by MAJANI View Post

     

     

    The two aren't contingent on each other; I don't think the drops in sales is because of the Apple Watch and I don't think the Apple watch is a failure. Conventional wristwatch sales have been dropping for years with the death of the industry predicted since before the current smartwatch fad and long before the Apple watch existed, and this is just continuing the trend.

     

    I just don't think people go for conventional watches anymore and I don't think they really would if the smartwatch didn't exist.




    I was a teenager when Bulova came out with its Accutron battery-powered watch. It contained a tuning fork which had electromagnets exciting the tines of the fork which powered the watch's mechanical movement, presumably to provide more accuracy for the watch.

     

    A decade later, pendulum-driven self-winding watches provided more convenience for mechanical watch wearers. I had my Seiko diver's watch for about seven years.

     

    The high end watches paid due attention to accuracy with jewel movements and ever more sophisticated mechanisms. And they offered the various complications along with craftsmanship and precious materials to enhance appeal.

     

    This first cheap digital watches from Casio and the like were fun and pretty accurate. And I put up with early displays going black in the hot California desert sun.

     

    But I've only ever wanted accurate time. I was first intrigued when Apple started offering it in Macs via the atomic time servers.

     

    With the advent of the Apple iPhone I really didn't need a watch, and I quit wearing one until the advent of the Apple Watch. It has the same ultimate accuracy, but now it's back to being the more personal device that Apple designed: a wearable. Not just a watch, of course, which is why, I think, so many have and will yet gravitate towards it because of the convenience of it being on one's wrist, and for so many more reasons as provided by Apple's and developers' continuing efforts.

     

    The conventional watch is hereby dead-ended.

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