The traditional watch industry, whose heart has to be found in Switzerland, has been synonymous of prestige, high-end service and exquisite sense of luxury for decades. Yet, the digital era has brought along some new challenges for the industry, both in its retail strategy and the technology of its products.
How big are those challenges and how is the industry facing them?
E-commerce and online presence.
E-commerce has been a game-changer for number of industries and companies. Although lots of them have developed new online tools quite fast to tackle this change, the luxury watch industry has been more reluctant and slower to adopt it. Watch brands have even actively discouraged consumers from purchasing online, to keep them from having bad surprises. In fact, due to counterfeiting and grey market dealers, the Internet was historically not perceived as a safe and proper place to buy such prestigious products. Besides, buying a luxury watch is traditionally part of a unique in-store experience delivered through a high-end customer service in luxurious showrooms. This type of service just appeared to be impossible to recreate online. Although a new McKinsey report has shown that, by 2025, 18% of luxury goods will be purchased through online platforms (three times the current figure), most watchmakers are still reluctant to go online. They tend to progressively, yet very carefully, increase their digital presence to seduce new consumers, while putting a strong emphasis on the prestige and feeling of trust they have developed through out the years.
Online strategies are quite different among brands. Some like Cartier or Piaget have developed e-commerce platforms and try to embrace the trend. Yet those platforms are usually quite limited both in their offers and the countries in which they are available. Tag Heuer has just announced a quite aggressive digital strategy, including the launch of a new e-commerce platform aiming at integrating all of the brand’s products in a maximum of countries.
Others, on the contrary, like Rolex or Omega, focus exclusively on the development of their offline presence. Some others finally, not convinced by the relevance of e-commerce in their industry, try to improve their online presence to boost offline sales. For Daniel Riedo, CEO of Jaeger-LeCoultre, e-commerce sales are still marginal and will definitely not be a strategic distribution channel. According to Georges Kern, CEO of IWC Schaffhausen, «Selling online just don’t correspond to IWC, its products or its clients. IWC products need to be touched, felt and seen.” Nevertheless, to get in touch with the online clientele and meet its needs, IWC has developed call centers where a concierge is available for consumers desiring to conduct a purchase. This emphasizes their refusal to give up on a high-quality and personalized service. The brand has also partnered with Net-à-Porter offshoot Mr. Porter, a global online retailer for men’s fashion. At the launch of the new Portofino collection, a customer could go on IWC.com and see how Mr. Porter could complete his ensemble with a fine selection of hats, bags and shoes. The goal was to enhance the experience of the customer and to give him a full view of the IWC universe.
Will watch makers eventually develop their online presence? For now, luxury watches can be found on a series of non official retailer’s websites and watch brands cannot really prevent their products from being displayed like this. Their image is therefore at stake and so is their reputation. Going online could help them gain control over this and provide a more trust-worthy platform on which clients could rely on. Yet, buying a $5000+ watch is worth more than just a quick click on a “purchase” button and a lot of customers value the in-store service. There might anyway be a market for less expensive watches. Yet, seeing the current sales figure of the few brands that are selling online, one question remains: is the market ready yet? Probably not. More here: http://www.ablogtowatch.com/retail-me-not/
“Luxury business is coming either from Paris, or it’s coming from Italy, and watches are coming from Switzerland. They’re not coming from the U.S. Silicon Valley — my God, what they’re wearing and everything! They really don’t have this culture of refinement. We bring something else to the story.” Peter Stas, CEO of Frederique Constant.
The smart watches market is about to explode, and according to a study from Allied Market Research, has the potential to reach $32.9b by 2020. In 2014, the concern about smart watches was shared by 11% of traditional watchmakers. Today it has reached 25%. The fear that history could repeat itself is omnipresent. In the 1970 – 80s, the Swiss mechanical watch industry was devastated by the rise of quartz watches, lead by Seiko Epson Corp, and employment drop from 90K to 28K. The industry only rebounded when the watch became more of a luxury item.
It has been a while since consumers have needed a watch to know what time it is. Indeed, any phone has been able to do that for some time now. However, a smart watch that rings when you have a new mail, can be quite useful and brings something more. Yet, luxury watch makers go beyond the utilitarian value of watches and market their products as deeply symbolic. It “is a piece of eternity in a box” Jean-Claude Biver, CEO of Tag Heuer. For the one who wears it, a watch carries the souvenir of a particular place, a heartwarming memory or even a family legacy.
Although the high-end market (>5000$) seems quite protected from smart watches, the many less-expensive quartz watches don’t seem to be so safe. Here are a few examples of how brands have managed to integrate technology to build connected luxury watches, while respecting their legacy.
Tag Heuer has launched in December 2015 its own smart watch in partnership with Google and Intel. It looks like one of the brand’s most iconic models, but works just like every other Android Wear device.
Frédérique Constant – The Horological Smart watch combines the function of a Fitbit with a traditional Swiss masterpiece. From the outside, it looks just like a traditional watch. Yet, it is full of tiny sensors that count steps and measure sleep cycles. This information is transmitted to a phone via Bluetooth. The phone controls the watch — resetting its hands in different time zones, for example.
Montblanc has developed an electronic watchband, which displays emails, has an activity tracker, can control the music in the user’s phone, and has a selfie-enabling trigger for the user’s phone camera. The e-strap goes for $390 and is for use with its TimeWalker watches, which range $3,700 to $5,800. Convinced by the out-of-time and sentimental value of luxury watches, Montblanc has actually put the technology in the strap, so that the watch itself cannot be outdated after a couple of years, just like any other tech product.
IWC Schaffhausen has announced last year the launch of IWC Connect, a small secondary device that attaches to the watch’s strap and adds such things as fitness tracking and network connectivity on top of the traditional mechanical watch. “Many of our customers are already wearing connected devices alongside their IWC watches,” said IWC in an e-mailed statement. “With IWC Connect, however, there is no need any more to have additional devices on your wrist.”
The biggest challenge is to come up with extremely good technology, usually through high-profile partnerships that can enable them to compete with Apple, Google and Samsung. Technology has to be extremely good to convince tech-savvy consumers. The risk is otherwise to weaken the prestige and the power of the brand. Luxury watchmakers don’t have the in-house know-how to develop such products and therefore stakes are high. Developing tech accessories might be more relevant to this type of brands, who forged their identity on timeless watches.
The rise of the Apple Watch may also bring around a new, and maybe younger, demographic to traditional watches, given time. By spending millions into convincing a generation that grew up with smart phones, Apple is convincing them that having something on one’s wrist is useful and fashionable again. This might come to serve the traditional watch industry. “Men especially have precious few things to indicate who they are. Traditional watches are one of the few and very powerful ways of designating your status.” (Ariel Adams, editor in chief of the horological blog “A blog to watch”).