Swiss Manufacturers Say They’re Not Scared of Smartwatches. They Should Be.

With Baselworld here, various news sources have asked watchmakers their opinions of smartwatches. The answers are mostly the same. Here’s The New York Times, quoting Swatch CEO Nick Hayek:

[Smartwatches] raise several problems compared with traditional mechanical watches. The drawbacks, he said, include their limited battery life and the fact that they are “trackable” by the National Security Agency and other intelligence services. 

“People don’t want these complications,” Mr. Hayek said during a news conference last week. Instead, he said, “watches remain a piece of jewelry.”

Hayek noted that a decade ago, Swatch conceived a “smart” timepeiece with Microsoft, called the Paparazzi. It flopped.

JCK found similar nay-saying when we talked to watchmakers for our March issue. And yet it’s striking how so many people outside the business feel the opposite. 

Wired predicts wearable tech will be “as big as smartphones.” Credit Suisse believes that the wearable market could hit $50 billion by 2017.

If that’s true, watches could play a huge role. When a Jewelry Consumer Opinion Council study asked consumers what wearable tech they were most likely to purchase, watches were far and away most cited, preferred by 55 percent. Bracelets/wristbands came in second, at 27 percent.  

Last week brought news that Fossil is working with Google on developing a watch using its Android platform. This heartened analysts. (One wrote: “We believe we are entering a period of both significant growth and dislocation in the wearable and watch categories.”) Now, the Fossil target customer may not be the same as that for high-end watches. But the market for high-end watches clearly overlaps with that for tech gadgets (i.e. male, educated, affluent). 

So, yes, the Paparazzi—which I’ve never heard of—may have been a flop. But that was before smartphones, iPads, and other kinds of tech invaded our daily life. A better reference point is the Pebble smartwatch. It has sold 400,000 units in about two years. And that’s a product first financed by Kickstarter, without tons of promotion. Products introduced by Apple and Google won’t have those issues. 

The Times story says that Swiss watchmakers are skeptical about smartwatches. Perhaps it’s time to be skeptical about their skepticism. Let’s say a smartwatch takes off. Will consumers wear two timepieces? Yes, they might shell out extra for a Patek Philippe–Apple hybrid; one watchmaker in the Times noted that some consumers own regular cars, while some buy Ferarris. Still, that would assume the traditional manufacturers have the product for that market. Right now they don’t. 

“I haven’t heard one whisper or rumor that any watch brand is even looking at this,” says JCOC president Martin Hurwitz. “Independents and chain retailers would love for them to do it. They know how much consumer appeal it would have.”

And, in fact, his research shows the category does present opportunities for traditional manufacturers, particularly with female consumers.

“Women are interested,” he says. “But we found there is not product for them. They see a lot of techy stuff coming onto the market but not fashionable items. But watches are such a male-dominated industry with primarily male consumers, it’s hard for them to reach out to female consumers.”

Still, he warns, if the traditional watch companies stay on the sidelines, they risk losing the next generation.

“If there is no competing product to the tech companies, they are going to lose certain consumers,” he says. “And they might not ever be able to get them back.”

So watchmakers can say what they want at Basel. I believe pretty soon you’ll see a lot jumping on this train. Or they’ll risk having it pass them by.

JCK News Director