Inside the Smartwatch Phenomenon



The times they are a-changin’! As smartwatches become more widely available, will the nonsmart business get left behind?

The jewelry industry has long acknowledged—sometimes with pride—that beyond being pleasing to the eye, its products have no practical use. But watches always have been the exception because they served one not-to-be-scoffed-at function: They told time.

Then, about a decade ago, the advent of mobile phones made watches all but superfluous. Even so, the business kept on ticking, as ritzy and ever-more-complicated timepieces began to be seen as symbols of style and success, fueling unprecedented growth: At press time, 2013 Swiss watch export figures had yet to be finalized, but they were widely expected to set a record.

Now, however, the standard watch may be morphing into something more: a high-tech gadget that can be used to check Facebook, change channels on your TV, play music, adjust room temperature, give you directions, make phone calls, find the nearest restaurant, monitor your heart rate, and perform a host of other functions that would impress even Dick Tracy. (Needless to say, it would also tell time.) All of which would make watches part of people’s everyday lives in a way they haven’t been in years.

“You would always be in touch,” says Elizabeth Chatelain, president of the Jewelry Consumer Opinion Council. “You’d be carrying your life with you, like your phone, but it would be almost seamless. A phone isn’t seamless. You can lose a phone. It’s hard to lose a watch.”

The Pebble starts at roughly $150 retail.

Yet all the fuss over smartwatches has gotten the industry a little, shall we say, ticked, with some predicting Swiss manufacturers could face their biggest challenge since the quartz crisis of the 1970s.

Smartwatches have the traditional business “pretty worried and they won’t admit it,” says watch blogger Ariel Adams. “It’ll be too desirable to wear a smartwatch rather than a luxury watch, which is good for status purposes but isn’t that useful.”

For now, the business remains in its infancy. The best-known watch of the future is the Pebble, which raised $10 million on Kickstarter in 2012, a crowd-funding record at the time. The $150 plastic gizmo now is sold at chains such as Best Buy and the company recently set up the first smartwatch app store. In September, Samsung unveiled the Galaxy Gear, a $300 wrist-bound extension of its phone line.

The $300 Samsung Galaxy Gear smartwatch

These devices, as well as a dozen or so others, may be just the start; Google, Microsoft, Sony, and a host of others are all said to be readying their own horse for this race. All eyes, of course, are on tech behemoth Apple, whose CEO, Tim Cook, declared last March that he finds the wrist “interesting.”

It’s a testament to Apple’s market power that Cook’s off-the-cuff comment spurred a tidal wave of speculation. Then came reports that the company had enlisted a 100-person team to create what most think will be called the iWatch. And last year, the gadget giant brought on board Burberry CEO Angela Ahrendts, which some saw as a sign it was getting more interested in design and style.

Anything Apple does tends to be high profile, and many think if the Cupertino, Calif.–based company enters the fray, the real earthquake could begin. In a recent Jewelry Consumer Opinion Council survey, nearly two-thirds of watch wearers said they would switch to an Apple timepiece and 58 percent of watch nonwearers also were interested. Research firm Next/Market Insights even predicted that more than 300 million smartwatches will be sold by 2020.

But with Apple still sitting on the sidelines—and with the company characteristically circumspect about its future plans—the smartwatch remains very much a niche item. The Pebble has sold 275,000 units in less than a year, according to TechCrunch. That’s impressive, but by contrast, Apple once sold 9 million iPhones in a single weekend.

Part of the problem is that the technology is not there yet. Apps are scarce, and, in most cases, the watches don’t stand on their own, but act as an adjunct for a smartphone. (For instance, the watch can tell you if a call is coming to your smartphone, but it isn’t a phone in and of itself.) Geek.com called the current models “too expensive to essentially act as nothing more than a notification screen for the other device sitting very close by in your pocket.”

For the time being, smartwatches are unlikely to serve as anything more. While most modern mechanical watches are self-winding, smartwatches, like other tech gadgets, run on a charge. And given that a small object doesn’t have room for a big battery, today’s smartwatches use Bluetooth to connect to another device, rather than eat up power finding signals on their own. (One reported reason why Apple hasn’t brought its device to market is that it hasn’t cracked the battery issue.)

A peek inside the Pebble app store

Of course, that’s not their only challenge: Due to their size, smartwatches have what many consider limited utility. “It’s not necessarily comfortable to be browsing the Web on your wrist,” says Paul Williamson, director of low power wireless for CSR, an English manufacturer of Bluetooth technology. Patek Philippe USA president Larry Pettinelli thinks an iWatch will lead only to eye strain: “Can you imagine trying to watch television on one?”

Yet despite their limited features, smartwatches have their supporters, who say notifications free them from the tyranny of constantly checking their phones, which the average person is said to do 110 times a day. Raved a reviewer at BGR.com: At a recent meeting, “I was the only person of six in the room who did not have to physically break away from the conversation, pull out a phone, and look at a notification. A casual glance at one’s wrist is far less distracting than the act of ogling a smartphone.” (Looking at a watch is no longer considered rude, at least compared with looking at a phone.)

Michael Schechter, digital marketing/PR manager at The Richline Group and the owner of a Pebble, says the wrist devices allow more visual options than conventional watches. “You can get a completely different watch just by downloading an app,” he says. “A couple of times I got bored with my Pebble watch, and I just switched the face up.”

If smartwatches take off, will traditional timepieces become shiny relics, à la travel agents and Yellow Pages? On the record, executives are sanguine, arguing that plastic tech toys are a different market than their rarefied status symbols.

“At our level, people are thinking fine hand craftsmanship,” says Patek Philippe’s Pettinelli. “I just can’t imagine anytime in the near future that [our company] would ever think about chasing that kind of technology.”

Among mechanical watchmaking fans, the big complaint about smartwatches is their likelihood of becoming obsolete. “A quality mechanical watch from any respectable watchmaker will not become disposable anytime soon,” says John Reardon, international co-head of Christie’s watch department.

Jean-Claude Biver, head of LVMH’s watch division, says if the gadget makers are serious about the watch business, they will work with traditional brands. “I would welcome any Swiss brand to do a joint venture with Samsung or ideally with Apple,” he says. “I believe there could be a huge turnover, billions of dollars.”

Steven Kaiser, president of Kaiser Time, even thinks some of the industry’s best and brightest are already cooking up their own creations. “But they are going to let the other guys test them, which is the smart thing to do,” he says. “If it takes off, I’m sure some of our guys will go into it.”

In which case, the watch business, often thought to appeal to fusty old men, could draw a new, hipper clientele. “The smartwatch will train the young generation to wear something on their wrists,” says Biver. “When Swatch came out, we said, ‘Wow, it’ll destroy the luxury market.’ But Swatch was a market opener for us.”

Whether the smartwatch revolution turns out to be the industry’s salvation, damnation, or no revolution at all, Schechter thinks the industry should take it seriously, given how cyber-innovations have turned so many businesses upside down.

“Apple does tend to disrupt things,” he says. “People who make their living off of watches shouldn’t fear this, but they should be thinking about what this might mean. I know that’s something that a lot of people in the music or phone business wish they did.” (Additional reporting by Victoria Gomelsky)