A Year After Apple Watch, Smartwatches Remain a Niche Item

Even with a year of hype over smartwatches, the tech gadgets remain very much a niche item, and it is not clear what effect they are having on the traditional watch industry.

Apple debuted its smartwatch in May 2015 with a flurry of hype, including a high-end 18k gold version. Yet indications are mixed on how well it’s doing; Apple refuses to provide sales figures, but the company has said the watch has beat expectations (without specifying what those expectations were).

It didn’t escape notice in the tech press that shortly after Apple introduced its watch, exports of Swiss watches began what was, at press time, an eight-month decline. But most in the watch industry don’t think smartwatches have anything to do with this, pointing instead to the ongoing economic problems in Asia. Some analysts, on the other hand, say an “Apple effect” cannot be discounted.

“We found there were 930,000 watches sold in June [2015],” says Fred Levin, head of the luxury group for research firm NPD. “By conservative estimates, several hundred thousand Apple Watches were sold that month. If you think about how even 200,000 or 300,000 units compares to 930,000, that is extremely material. It doesn’t take a rocket scientist to realize that some…cannibalization has occurred.”

While long-term forecasts remain bullish—a Grand View Research study predicts the global wearable tech market will hit $196.5 billion by 2022—many say smartwatches have underperformed (Apple’s included).

In January, Jitesh Ubrani, senior research analyst for mobile device trackers at IDC, told The New York Times that the firm changed its predicted date for mainstream smartwatch adoption from 2018 to 2019. Similarly, a poll from Kantar Worldpanel ComTech, which monitors shopper behavior, found that only 3 percent of consumers age 16 and up own a smartwatch or smartband (i.e., fitness tracker)—and most of them are classic early adopters.

“Young people live and die by their phone,” says IDC chief of research Carolina Milanesi. “Smartwatches are still expensive gadgets.” She says that for most consumers, smartwatches are “still a nice-to-have, but not a must-have.… It’s still too hard for the average consumer to understand why to buy them.”

And Apple may be backtracking from its foray into luxury. The Edition, which runs up to $17,000, is now harder to find on its site. As 9to5Mac.com reported, the 18k gold version is no longer featured on the watch’s main product or gallery pages, “rendering the Edition almost invisible unless you specifically go looking for it.” The Edition did not receive recent updates, 9to5Mac said, while low- and mid-range models did. (Apple’s site still prominently features its cobranded watch with Hermès.)

One luxury smartwatch that is doing better than expected: TAG Heuer’s Connected watch, which was released in October in partnership with Google and Intel.

“TAG also had the best February in the history of the brand,” brand head Jean-Claude Biver told Bloomberg. “The Connected watch pushed the whole thing. It gave the brand a new feeling. Suddenly people believe TAG is cool. People believe TAG is avant-garde.” The $1,500 Connected is doing so well that fellow LVMH watch names Hublot and Zenith may add their own “connected” models.

Despite the current mixed results, Cliff Raskind, wearables analyst for Strategy Analytics, says no one should underestimate smartwatches’ future potential.

“Living up to the hype would have been pretty hard,” he says. “The vision of what they can do is real. At some point you will have one device on your wrist that will have strong battery life and strong medical sensors. It could take 15 years.… Whether Apple will do it, or someone else, that is where the category is headed.” 


Top: The Apple Watch Sport with the scuba blue nylon strap, $349