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Are Smartwatches Really Hurting Luxury Watch Sales?

Are Smartwatches Really Hurting Luxury Watch Sales? Featured Articles

Recent sales figures on the matter of declining Swiss watch exports have prompted a number of people to ask: “why is there is a slowdown in Swiss watch sales?” I have been seeing figures on watch sales data for years now, and, to be honest, I take most of it with a grain of salt. Very little of this is actually released by the watch industry itself – which is notoriously discreet about sales figures unless they absolutely need to disclose more. Even publicly traded companies that have a duty to shareholders, such as The Swatch Group and Richemont, do not disclose specific sales figures for brands but, rather, pick and choose to share overall growth and declines in various sectors when producing their annual reports.

Are Smartwatches Really Hurting Luxury Watch Sales? Featured Articles

From the FHS “Swiss Watchmaking in 2015” report

Perhaps the only good semi-third-party source for data on watch sales is the FHS (Federation de l’Industrie Horlogere Suisse) and, even then, that data must be properly deconstructed to understand what it really means. It isn’t that the FHS is trying to be vague or unclear but, rather, that the data they have to offer is arguably limited in its scope. For instance, the above linked-to page with new data from October 2015 on “Swiss watch exports” is only tangentially linked to sales. Rather, the data refers to the literal fact that there has been a 12.3% downturn over the last year in the volume of Swiss-originating watches to have been exported from Switzerland to other countries.

Are Smartwatches Really Hurting Luxury Watch Sales? Featured Articles

It is true that fewer watches shipped generally means that the cause is people and retailers buying fewer watches. With that said, there are a number of caveats to consider before jumping to conclusions. My friend John Biggs on TechCrunch recently posted an editorial on these recent FHS figures, citing the often-held belief that smartwatches are seriously eating into the traditional Swiss watch market.

John’s recommendations for the industry are sound (as is often the case with his advice), but I think he doesn’t explore the premise of the situation as much as is required – and frankly, most don’t. People need to really carefully consider a lot more data on the matter of “Swiss watches vs. smartwatches” before coming to any conclusions about causation versus correlation. What I propose to do here is not offer new data (since I am not a data collector) but rather to propose some very important questions people need to ask before jumping to the conclusion that the smartwatch market is causing a decline in the export of Swiss watch sales.

Are Smartwatches Really Hurting Luxury Watch Sales? Featured Articles

Smartwatch Sales Are Good

Let me first say that I am encouraged by the upward trend in smartwatch sales. When the Apple Watch was debuted, conservative voices from all around the world and the internet immediately decried smartwatches as a futile exercise that would fail and that Apple was stupid for putting so much stock behind them. I do hope those people have learned their lesson, because while the smartwatch industry is still very much in its infancy, sales are good, products are getting better and better, and people are certainly wearing Apple Watches, Android Wear watches, and others which will herald in a new era of what the “watch” means to the mainstream consumer. The question is whether or not smartwatch sales are actually hurting Swiss watch sales. I suggest that the answer is not exactly what it seems, and I caution people when assuming that an increase in smartwatch sales is causing a decline in Swiss watch sales rather than merely being correlated with a mostly unrelated trend.

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Are Smartwatches Really Hurting Luxury Watch Sales? Featured Articles

Smartwatch Wearers Are Typically Not Traditional Luxury Watch Wearers

I propose that smartwatches are finding homes on otherwise naked wrists, for the most part. People who have not been wearing a watch as well as those who have mostly utilitarian timepieces without a lot of value are the ones who are wearing smartwatches. I don’t see a lot of data or circumstantial evidence to suggest that traditional watch lovers who consider themselves to be “horological enthusiasts” are abandoning their expensive mechanical watches in favor of a smartwatch. The resistance to leaving behind a serious investment and hobby is too great in comparison to the still-limited benefits of ditching your mechanical watch in favor of a connected electronic one.

Are Smartwatches Really Hurting Luxury Watch Sales? Featured Articles

That means the people who are typical buyers of luxury Swiss watches probably aren’t choosing to wear a smartwatch yet. In a few years from now, that might change as the smartwatch industry continues to offer more sophisticated options, and people will see the 18k gold Apple Watch Edition as an item that was probably ahead of its time. Rather, if smartwatches are displacing Swiss watches on people’s wrists, they are the lower-cost ones such as those produced by Swatch.

Are Smartwatches Really Hurting Luxury Watch Sales? Featured Articles

Thus, few people are choosing to take off their $10,000 Rolex in favor of a smartwatch, but people with a $100 Swatch might. It takes a lot of passion, education, and culture (not to mention disposable income) to include luxury timepieces in your lifestyle. Just as the journey to discover your favorite luxury watches takes time, so does the opposite situation of deciding you no longer want them. People who start to wear luxury watches tend to stay wearers for a very long time. And if they take off a watch, it isn’t just to replace it with something lower-end. Only the opposite is normally true. With that said, there is the matter of volume to discuss.

Are Smartwatches Really Hurting Luxury Watch Sales? Featured Articles

The Pyramid Of Swiss Watch Sales Volume

Look again at the downward sloping graph of Swiss watch exports and consider that, for every high-end luxury Swiss watch (the type normally discussed on aBlogtoWatch), there are many more inexpensive quartz movement-based Swiss watches that are produced and exported. Think of the Swiss watch industry as a pyramid with inexpensive watches on the bottom with the greatest sales volume, and the most expensive timepiece at the top with the least sales volume, even though they command large prices per unit.

Are Smartwatches Really Hurting Luxury Watch Sales? Featured Articles

As explained below, this FHS graphic only tells part of, but not the whole story.

It is true that the FHS data does take into consideration the breakdown of statistics of watches at various price levels, but this is only what is received by the FHS. Not all data related to the most high-end watches is even given to the FHS, and the sales refer to only export values, not retail prices. Even the organization itself disclaims the data by saying “all figures released by FH refer to exports and not sales to end-consumers. Differences between these two types of data may therefore exist.” The implication of this statement is to understand that this data has nothing to do with consumer “sell-through” but rather to what the perceived demand is. Thus, the FHS figures certainly do not indicate the fuller breadth of sales or even export figures for high-end watches.

Are Smartwatches Really Hurting Luxury Watch Sales? Featured Articles

Thus, the structure of the FHS data as pulling from certain exports and not sales – as well as the fact that lower-end watches, typically in volume, make up much more of the numbers than luxury watches – should help explain what the downward trend means. In short, there is nothing here about watch sales decreasing, but rather the shipment of new models. Moreover – and I think it is important to say this – the data only refers to Swiss watches. Timepieces from Asia and otherwise are not at all included in this data, and it is unknown what their trends are.

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  • Andrew Lindsay

    Absolutely spot on analysis Ariel – again. I got the horolgy bug 3 years ago and my Omega and 2 Panerais were bought either grey market (Omega) or pre-owned, for exactly the reasons you outlined. Ps foolishly bought iwatch but don’t wear it !

  • Chaz

    As usual, another interesting piece to get one thinking. Thanks for this.

    BTW, yesterday I bought a Journe Chronometré Bleu at a pretty decent price in Japan from an AD and noticed that Osaka and Kobe are full of shops like the grey market ones you guys were amazed at in Hong Kong (albeit not as much crazy inventory in one spot), in addition to those ubiquitous second hand luxury handbag shops.

    “Glut” seems to be an understatement!

    • I read “I bought A Journe Chronométre Bleu” and stopped reading and started hating you :0)

      Congrats, what a great watch you have now.

      • Chaz

        Thank you sir! It’s one of the most amazing pieces I own and is truly a unique “novelty”. I doubt seriously I’d ever buy a “smart” watch but then again I only use iPads and computers for surfing, checking emails, some banking and lurking sites like this!

  • in my opinion, there is one more argument: Younger people are not wearing wristwatches at all. They have a time piece in their pockets: A smartphone. They tll me “Why should i carry a second device?” And: “The newest phone is far more a statement of luxury than a watch.”

    Look around and you’ll figure out, that you will not see a lot of younger People from 20 to 35 which are wearing a watch.

  • Rudolf

    25 years ago i bought a seamaster for 1500 euro
    Now the price is 3600 euro.
    But for a Nice omega you pay 5000 til 7000 euro
    25 years ago there was no internet,i could not find the grey market..
    Now it takes 30 seconds to know the price and location.

    • ??????

      Its funny that even few years ago I could think about purchasing Omega I like, but today it became simply cruel… 12,000-15,000 for DSOTM posted couple of days ago – I couldn’t estimate that it would grow so much.

  • IanE

    Presumably the ultra-high-end Indies are largely untouched by any of this and can still sell everything they can produce?

    • iamcalledryan

      Absolutely. These guys, as well as vintage dealers, will be the least effected of any category.

  • word-merchant

    My take: the presence of smart watches has nothing to do with declining sales of Swiss watches. It’s all about the price and awful marketing and brand positioning. I understand that I am a sample of one, but the only reason I’d now buy a new Swiss watch was if I got interest free credit or a very good discount from my AD. Probably both. Otherwise I’d buy second hand: most people look after their watches very well indeed, and the industry isn’t really evolving much.

    Apart from the very high end labour of love watches, there are 5 basic marketing approaches: either take a pride in the constancy and dependency of the range (e.g. Rolex), fiddle constantly with endless limited editions (e.g. Hublot), invent some sort of war-time or sport heritage to distract people from the use of standard movements at inflated prices (Bremont, B&R, some IWC), try to pretend that owning a watch will really make you a better human being (e.g. Patek), or just go for any current celebrity, film, brand and desperately pin a watch (any will do) to the passing fad (Omega, Hublot and more).

    It’s only the first marketing approach that doesn’t leave me completely cold, and that is reflected in the watches I own. But if (say) you know that a Rolex of a few years back is essentially the same as today’s, except for a large price difference, then why would anyone buy new?

  • Boogur T. Wang

    Ah yes, the “glut”…well, this would explain the lowering prices among the Swiss brands….(said very tongue-in-cheek with a nod and a wink)
    These brands have built themselves out of the market. Sales in the watch industry are solid, and even growing, in the mid-lower price ranges. And I include second/third hand and “gre (SP?)y” market areas.
    While there will always be room for those who “wish to make a statement” (either fashion or wealth) with the latest and goldenest HubPatDr.Wizard on their wrist, even this market looks to be shrinking as those who wanted to buy have already done so.
    Ergo, the need for the latest and greatest “brand Ambassadors” (who, quite frankly, are becoming more and more obscure) and sports/auto/what/whoever alliances to pump up the marketing side. And give these tired old farts more face time with trade show models.

    There is a plethora of well-made brands being sold at reasonable prices. This is where the smart watch buyer is making their choices.

    As to the “Smart Watch” fad – it will continue and become a segment of the market. But it will remain just that – a segment. Some interesting technology will emerge, but the ‘traditional’ wrist watch will benefit rather than lose market share over their presence.

    Thus are my End-of-Year crystal ball rumination. Lecture endeth.

  • ??????

    Watches and electronic gadgets touch different parts of my soul. I cannot say that I don’t like electronics, I really do, – I used to interest a lot in mobile phones in the start of their glorious way, you know, all that kinds of sliders, monoblocs, rotators, flips… (now it all became much more boring – all the phones look 96.5% same for me). Consumer electronics can be very cool and all, but it doesn’t last long. They loose their relevance and up-to-dateness very fast, maybe acustical electronic last longer, but visual become obsolent in a year.
    The watches, especially mechanical ones, retain their charm or even grow with years.

  • WImads

    Nice anf well constructed article Ariel! Very logical analysis which I recognize my own buying behaviour in as well. I started my watchcollection 5 years ago with a cheap chinese automatic, and think a lot of people start with mechanical watches this route. Asian watch sales figures would thus indeed be very interesting to compare in this analysis.
    As time passed and my horological education increased, I have bought about 7 additional watches since, all on the gray market and mostly comprising of pre owned/vintage watches and new japanese.
    There is so much endless variation and good value on the pre owned market, that it is hard to justify buying a new swiss watch from an AD. The only time I would consider buying new from an AD is if I eventually could afford to buy a grail; though if a grail pops up at the gray/pre owned market, I could probably afford it sooner. Only if the price difference becomes proportional to the added value and experience of an AD, it would stand a fair chance.

  • Mark Baran

    I think your article makes some very good points Ariel. I do not believe the “smartwatch” (a nice new term for a multi-function quartz watch) has much negative impact on the mid-to-high end Swiss watch market. May in fact be the opposite, if they get someone to put a “watch” on their wrist for the first time. In my experience, people don’t really get serious about watches until their third or fourth purchase. You have touched on a number of reasons why industry sales are trending down at the wholesale level. All valid. But the smartwatch impact is probably minimal.

  • PeacePaxTumb

    Three things. 1. A lot of modern shirts are form fitting, even at the wrist. Not watch friendly at all. 2. I’ve been burned by the quality of some luxury brands past one year of ownership. This makes me tentative. 3. There are more luxury items competing for the same stash of money.

    • Lurch

      Please share which luxury brands burned you on quality.

      • Larry Holmack

        I don’t know about PeacePaxTumb…but I would never own another Rolex. I had one that was mandated by the company I worked for….I’ve posted about that before….and the other one was an Explorer II that was a total piece of junk. By the time I had it for 3 years…I had spent well over the amount I paid for the watch in repair bills…since the movement never seemed to work for more than 3 months before it froze up for some reason or another. ( And yes…I take excellent care of my watches! I still have the first watch I ever owned…given to me when I was 8 by my grandfather, 2 months before he passed, in 1966..an automatic Gruen from the mid to late 1940’s.) I finally got tired of paying for it to be repaired, so I put it back in its box and shoved it into a drawer. As fate would have it…after Hurricane Katrina in ’05….our townhouse was partially destroyed and our property was ransacked by looters. I had to laugh…because the looters would never have gotten anything for it as it was good for nothing except as an expensive paper weight.
        Now days…I just buy what I can afford….as I use money from the sale of my art to fund my watch purchases.

        • Lurch

          Sorry to hear about your misfortune with Rolex, Katrina and looters. Good information on the Rolex. I share your philosophy on watches and only buy what I can afford.

  • TrevorXM

    Doesn’t the rapid growth of German luxury mechanical watch sales factor into the slump of Swiss luxury mechanical watch sales??? That’s the first place I’d look for a reason. Smart watches would be way down below that. But then, that doesn’t make for a sexy headline that all these “news” sources look for (or are paid for).

    • iamcalledryan

      I wouldn’t describe German watch growth as rapid, but I would agree that the impact on Swiss exports would be materially larger than smartwatches at present.

      Interesting to note that the two larger German brands, GO and ALS, are owned by Swiss conglomerates. So even though they are stripped from Swiss exports, the bottom line makes it back to the motherland. Perhaps that is why it causes less hysteria in Swiss protectionism.

      • Concerned1

        I also feel the the Japanese market is getting more respect because of all the Kickstarter projects that use Miyota and Seiko movements. ETA is constraining supply, and it’s making people realize that the Japanese movements are just as good and much cheaper.

  • Concerned1

    I think what is affecting sales more than anything is the “educated consumer.” Pricing is probably the biggest problem. The “Swiss is better” marketing has run out of steam and people know that full retail includes a lot of marketing hype. There are many other channels in which to acquire these watches for much lower prices.

    It’s anecdotal, but I have also observed a shift in thinking about what constitutes value. Kickstarter and direct-to-market companies are starting the have a real effect in that regard. Case in point. I purchased a Christopher Ward Trident Pro 600 for about $700 on sale. A friend purchased Rolex GMT Master for about $7,500. I can tell you, when you hold both watches side by side, the quality can be difficult to distiguish between the two. I will say the Rolex has refinements that edge it out past the Christopher Ward. However, it’s blaringly clear that those differnces are NOT worth anywhere close to $6,800 more.

    That said, I’m not opposed to paying up for a nice watch. My recently acquired Grand Seiko Snowflake is proof of that. However, I paid a near pre-owned price for it from an authorized dealer. And, when you hold that next to a Rolex, it’s game over, the GS wins.

    Of course resale value Is a good argument, and Rolex is in a league of its own. But when you consider most of the other mid-tier luxury brands, people just don’t want to pay those prices anymore. Bottom line, prices have to come down.

    As far as smartwatches are concerned, they are not a threat yet. However, when the time comes that they are not as tethered to a phone and have a battery life a week long, the low end of the luxury market should be very nervous.

  • BNABOD

    no idea if the smart watch movement is gaining speed or taking room for “real” time pieces or just taking the wrist spot of folks that would not even consider a mechanical in the 1st place. I have spotted less than 10 in the past year in various locations so it does not seem too prevalent to me. I am not interested in them but I also do not want a fitbit measuring by blood oxymetry so I can stress some more. I see smart watches as just a small segment of the broader tech craze. folks may then move from buried in their phone to buried in their smart watch, either way look up once in a while and talk to your neighbor…sad really

  • Beaucousin-Jamelin Vincent

    It’s a joke ! Smartwatch (average price 400$) sales hurting sales of Panerai, Tag Carrera or Omega Speedmaster ? No, swiss brands have had a very expensive life last years and never stop to increase their prices for what ? Not a new technological level … I have a Eterna watch, a Seiko watch, a Muhle Glashutte watch which give me a good quality for the good price. If you’re looking for a good watch, you have to take a look in deutschland. Why to pay a ETA movement at 3 or 3,5 or 4 000 $/€ ? If many swiss brands make a come back about prices, i’d would consider to buy a new swiss watch. Not complicated… stop marketing, party, sponsoring stars who don’t care anything about a Longines watch, just thinking customers 😀

  • iamcalledryan

    I agree with this article. Sales are down, but smartwatches are more likely to bring long-term mechanical sales back up in the future as new entrants start paying more attention to their wrists. Fashion watches need to brace themselves, smaller mechanical brands need to consolidate like crazy, and the big names can’t get a step wrong. I expect that in 2020 there will be half as many mechanical watch brands as today, five times as many smartwatch manufacturers, and mech sales will be at least par with today.

  • Lurch

    I agree that sales are more robust on the grey and used market as people are looking for lower pricing on their favorite watches they want to own but aren’t willing to pay high, ever-increasing prices for those watches from the manufacturers and ADs. However, I think there are people who are looking for a watch that has more useful functions than the time, date or day of the week as most mechanical watches offer. They are looking to smartwatches because they can get more out of the watch than what a mechanical watch can do. I also see a lot of people wearing fitbits and a watch together on their wrist. I can see these people replacing both with a smartwatch as there is more useful functionality that meets their needs.

    • iamcalledryan

      It’s an interesting point, but the current trend is bigger screens and higher quality cameras so that they can take hi-res selfies and plaster them all over instagram! I am not sure that anytime soon the technology required to be both independent from a phone and app relevant is going to be physically possible.

      One day it will happen though, but the same things that make mechanical watch lovers love them, will still apply.

      • Lurch

        I think the smart phone watch makers will come up with technology to do more on a smaller screen. I wouldn’t be surprised if Google Glass is used to achieve certain functions either. But the bottom line is if they figure out the screen issue (with Google Glass, Holographic or Head ups Displays etc), the screens will go in the direction of smaller and not larger.

        • sasnak;1

          The Dick Tracy watch is coming.

  • Marius

    I also don`t believe that smart watches affect the sale of mechanical watches. The reason for the decline in sales is simple: the Swiss are constantly increasing the prices, but in the same time, the production as well. You cannot, over the long term, expect to produce over 1 million watches per year, like Omega, and also convince your buyers that a steel three-hander is worth $7k, or like Rolex, sell a Submariner for $8k.
    Even high-end brands such as Patek, AP, or JLC suffer from this. Patek makes around 50,000 watches every year, so even if you pay $26k for a steel Nautilus, chances are you will see others wearing the very same watch.

    • commentator bob

      Adjusted for inflation (i.e. in present dollars) a steel Rolex Sub or Daytona was just over $1,000, with most steel Omegas under $1,000, in the 1960s. And that was before quartz, when those watches had no substitute. With the biggest improvements being sapphire crystals, ceramic bezels and solid, screw connected bracelets the prices are now 5 to 10 times that. Despite DRASTIC improvements in manufacturing technology.

      There is a clear Veblen effect going on, which is very difficult for a company to sustain. Eventually, as in “The Emperor’s New Clothes”, a story every watch fan should read, someone will tell the “emperor” that they are, despite what they have been sold, in fact naked.

      • Gary Cai

        I have to disagree with you there. There will always be demand for new Rolex watches, regardless of the price. There’s basically a price hike annually, but the demands for certain models can still mean a queue of months. There is a demand purely because there is a demand.

    • Dinkee, H. O.

      An increase in prices is precisely what they should be doing! It is important to squeeze out the Common Man (or blogger) who somehow believes himself worthy of the level of lifestyle that I enjoy. And, indeed, the secret to overcoming this numbers thing is in investing only in very rare references! That way you can always be one up over others in the Instagram watch wars. If you’re going to buy Patek, then only buy the finest references. You critique the Nautilus — well, if you wear a common modern reference 5711/1A then of course you’ll feel more of a commoner. Instead, I wear a 3700/1A. And compliment it with a Reference 3940 perpetual calendar, rather than the lesser, newer, Reference 5140. So even in a room full of Pateks, I KNOW that I have superior taste on my wrist and am a notch above them!

      And as for Rolexes, well don’t get me started on my Paul Newman collection!

      • commentator bob

        Even a 3700/1A is not *that* special. At one event I had a servant smash one of my 3700/1As with a hammer in front of a crowd in awe of the display of wealth. Not only did I increase the exclusivity of my remaining 3700/1As, but I also advanced the art of horology by creating a multi-year restoration project.

      • JimBob

        I hope you’re taking good care of those for the next generation

    • Mike Brown

      This high price is of course done on purpose. To keep the rift raft out….the only people who can have a rolex are people who are deep into their craft like diving, People who do well for themselves or getting it passed down to you! If you are spotted with a lux watch you are thought to be something serious on the financial front or a serious diver….thus a tool watch head! If you don’t have it, don’t spend it!

  • Shinytoys

    Apples and oranges…They both will thrive.

    • DanW94

      Succinctly put! I agree 100% with you. Swiss luxury watches and smartwatches exist in vastly different universes. Entirely different demographics. High end luxury watches will continue to find wrists as long as there are people with large amounts of disposable income and a desire to showcase that wealth.

      I don’t even think that the advent of the smartwatch is the death knell of the entry to mid-level priced mechanical watch as people predict. This market appears to be healthy what with the increase of kickstarter projects and independents churning out reasonably priced mechanicals featuring Miyota and Chinese movements. The weaker companies will eventually peel off, leaving the existing ones better positioned to thrive. And their first time customers ultimately move upstream to a higher end mechanical. (Which more often than not is Swiss)

      • Shinytoys

        Totally agree!

  • kpjimmy

    I am not a high end watch collector by any means than the most here. I am the lower to middle of the range guy that buys the Seiko Orange Monsters and other similar mechanicals as well as quartz type watches. Personally, I see that luxury watch sales have been suffering not because of the smartwatch market, but because of the average consumer that normally buys them are no longer with us. Meaning the market has grown older and the generation that normally buys the lux brands do not own watches. I cannot tell you how many times I have seen on various types of boards regarding watches/smartwatches/tech that a lot of people say that they do not wear watches period.

    I think Tag has made a good step in one direction to get the market who normally do not wear watches to begin with, to begin looking at watches. With the Tag, much like the Apple watch the brand is there and people recognize. You get them to try out the watch and with that gets them into the reason why we all like watches here. Because it looks cool. lol.

    But this is one laymen’s opinion here. 🙂 carry on.

    • JimBob

      I think TAG has discovered that they are not very competitive in their current price segments.

      • Gary Cai

        Whenever I visit dealers that have Tag, I have a feeling that Tag really needs to revise their line-up. Some of the designs are stuck back in the 90’s or 00’s. I don’t really see any immediately ‘wow’ factor in their watches. Longines, who I think are their direct competitor in the Swatch camp, have some great models that suck me in, and from there allow me to look at their entire lineup.

  • commentator bob

    Apple hit a very good price point, with the $500 – $700 range for the steel/sapphire version. This is a price range that from a status perspective that shows that the owner is likely successful/educated, but not a money wasting spendthrift. During the 50’s and 60’s, the glory days of the Swiss sport watches, that is the inflation adjusted price range where many of the Swiss sport watches sold.

    • JimBob

      I question the wisdom of spending the extra cash for the sapphire window for a watch that will be dead or obsolete in 3 years. The nice one with DLC bracelet is $1500 here in the great white north.
      The pricing is a dead heat with Japanese competitors’ dumb watches.

      • Gary Cai

        I don’t think the current version of the iWatch will even stand 1 year, let alone 3. As with anything based on electronics, the pace of development and improvements immediately make the previous generation lose significant value. The next iWatch is stated for release next year and I wouldn’t be surprised if current iWatches drop to 50% their original value.

        At least with in demand luxury mechanical watches, they are basically immune to technological advances, so they hold their value relatively well.

  • I_G

    The new era will truly begin when Skeletor drops his cherished $50 Seiko for a smartwatch.

  • IVA the LT

    This article pretty much explains why I have never bought a watch at an AD. It feels like a scam and a bunch of double speak. They want me to spend $10,000 on a watch due to it’s amazing construction and engineering…then the only answer to why they charge $10,000 when I can buy the same watch online for $6,000 is that the online won’t have a two-year(?!) factory warranty. As if that justifies my forking over $4,000 in pure profit to this dealer? A two-warranty? I’m not an iSheep or into high fashion; there is no value to me in giving a company twice what their product costs to manufacture.

    I would hope that any watch I own, under normal operation, should be problem free for 2-years. In fact of the 20 or I have purchased over the last 5-years, my total repair bill has been $150. I estimate I have saved almost $11,000 on watches that “retail” for nearly $22,500.

    Basically I treat the AD the same way as I used to treat Best Buy before they price matched: I’ll shop there in person to check things out, but it’s almost a certainty they will not be getting my purchase.

    • John Lipp

      Totally agree!

  • George Hook

    For me,

  • Concerned1

    Another good point I have seen raised is that the younger generations don’t even see the need for a watch. I work in an industry where there are tons of Rolex, Omega, Panerai, etc. However, they are typically worn buy older generations. Some of the young guys will get one as a statement, but most don’t even feel the need for that. However, more and more of them are considering a smartwatch IF they can be convinced of the need for it. We clearly aren’t there yet.

  • Lawrence

    I dont know but Regular watches are getting cheaper online. AD can’t compete. No Discount and sale tax kills deals. on the Rolex Sub no date, you save 20% buying New online (12% disc + almost -10% tax)

    • Gary Cai

      Not to mention the ability to avoid being judged and snobbed upon by the service staff. You don’t have the pressure and can just browse all you like.

  • First of all while exports have declined (because of the Far East for the most part), if you read Richemont’s and Swatch’s reports they have actually grown in sales despite the challenging economical situation; that talks about their strength in the market, Keep in mind that in 2014 1,200 million watches were sold around the world and only 29.9 million were Swiss, but they meant 57.5% of the total value of sales, which is amazing.

    And while no discussion can make for the lack of date I agree with Ariel. From the Swiss Federation report on 2014 we know that 77% of Swiss watches sold were mechanical and 23% quartz. Noone will say “I was going to spend €6,000 on a Rolex but instead I’m going to buy an Apple watch because it costs only €700”. Makes no sense. Incidentally the Apple watch will never be considered luxurious particularly because Apple is happy selling it to Beyoncee, Jay Z, Niki Minaj, the Kardarshians and people like that (sorry because I’m sure I mispelled their Klingon names). Not exactly the kind of people identified with luxury. With money, not with luxury.

    But losing 23% of the market -or at any rate a substantial part of the quartz market which I’m sure will happen- should worry Swiss companies much more than they seem to be at the moment. To be honest the only one that has understood the problem so far is Mr. Hayek and that’s why he’s come up with the Swatch Bellamy. Why? Because same as the most sold phones around the world are the simple ones (like the Nokia 105 and such) the watches that are most sold by far are the cheap ones -the Swatch type. Also, youngsters have no use for a smart watch: their social media life is far too demanding to make it happen through a smart watch, they absolutely need their big ass phones in their lives. But there is one thing they do, massively: buy. So if you give them an affordable fashion watch that makes easier what they do the most (pay), they could fall for it like they did -and do- for Swatch watches now. As I say, clever move on Hayek.
    And from that €80 watch they should move up to try and fight the smart watch battle where it will really take place: in the €200 – €700 ground. The TAG connected would be a great idea, but €500 less expensive. I mean they should just licence their dials to be downloaded, it would be a great business without the costs of entering the market like TAG has.

    The smart watches have their own enemies too I think: they are mostly bought because of their physical data collection and their alerts (certainly not because of the watch function, nobody buys them because of the watch dials). I think sport bands will get better and nicer and they could start biting on smart watches by their feets, at least in that segment of the market that doesn’t usually wear watches but likes the sporty life, like Chic and their Good Times.

    But hey, what do I know. We will have to wait a couple of years to see who was right (which will be me of course).

    • commentator bob

      High-end Swiss automatic watches, e.g. Rolex, AP, are very popular with rappers with “Klingon” names. The Apple watch, on the other hand, is popular, in my experience, with heavily upper-middle class people in the professional services industry.

      The big question is what a modern day McQueen or Newman would wear. Probably a Hamilton or Seiko. Maybe something Android Wear based to connect to a Bluetooth OBD II diagnostics tool.

      • TrevorXM

        McQueen and Newman never wore Hamiltons or Seikos — where in the world would you get the idea that a modern day version of them would go down market? They wore top Swiss brands that reflected their interests in motor racing. A modern day version of them would do the same.

        • commentator bob

          When they wore Rolex watches they were rugged sports/tool watches that cost about $1,000, adjusted for inflation. Not $10,000 Veblen goods. That is exactly where Hamilton and higher end Seiko watches are now for automatic dive and chronograph watches. Unlike the old Rolex watches, with acrylic crystals and folded link bracelets, the Hamilton or higher end Seiko will have a sapphire crystal and solid bracelet. These aren’t guys that had to rely on their watches for image, just something well made to tell time.

          • Gary Cai

            That’s a good point. At that time, the Rolex and Heuer watches were like the Seiko/Citizen/Hamilton of today.

          • TrevorXM

            McQueen and Newman were rich movie stars who didn’t give a damn what their watches or their Ferraris cost. Their watches had acrylic crystals because the only alternative was brittle mineral glass at that time — and quality watches didn’t use that. And to assume that they didn’t care about the watch/image thing is absurd. Of course they cared about their image — they were movie stars trying to be taken seriously as race car drivers. The right watch was important. And that’s not a point to belittle them, it’s a fact. You need to think these posts through a little more.

      • Mike Brown

        Believe me, rappers are not the only people to wear Rolex or AP and thus becoming the sole people responsible for their popularity…..Very ignorant statement. Unless you want to give rappers credit for many distinguished gentlemen, Senators, Presidents and other alpha males making there horological decisions! Which is it?

        • commentator bob

          Obama wears a gifted Jorg Gray with a Japanese quartz movement. Bush and Clinton wore Timex. Steel datejust used to be popular before Rolex went upmarket. Vulcain Cricket alarm watches were popular. Romney wears a Nixon. “Alpha male” is an insecure term very few people that would actually fit the description use. Banana republic and Russian leaders tend to have very expensive watches, I’ll give you that.

          • Gary Cai

            I don’t think you can use democratic politicians as an argument against luxury watches. I’m quite certain they have personal collections of expensive watches. However, they wear ‘cheaper’ watches to appear to be closer to the masses who voted them into office.

          • TrevorXM

            Actually, you can use the type of watch that a president wears as an indication of how fake and image conscious they are trying to be. The cheaper the watch, the faker the president trying to present an image of being something he’s not. Obviously you haven’t kept track of what kind of watches Bush and Clinton wear these days, have you?

  • Younger generations don’t wear watches, period.
    The people that used to buy lux watches are getting older and has stopped buying watches, period.
    Smartwatches are a joke right now: you’re giving away money for something that will be obsolete in a year. They will get incredibly better. Long lasting batteries will get incredibly better.

    I like lux watches, but never managed to justify getting one like a Speedmaster (the far I’ve gotten is an Oris mech and a quartz TAGHeuer, both related to Formula One), because really, you have to have some issues to spend thousands of dollars on something that tells you the time and has a stop-watch.

    I really love what Casio is doing with the G-Steel, cheap, everlasting, not so ugly (all G-Shocks are ugly, I love them and I have two that I wear while bicycling, running, etc.)…

    Just imagine -in the meantime to when smartwatches are really something- that G-Steel with bluetooth simple notifications (mail from Stephen, whastapp from Beth). I’d happily replace ALL my watches for something like that! Actually, I’m planning to get that G-Steel!

    Just give them time and remember, the only similarities between lux and smart are that both go on your wrist and bot tell you the time. We need to understand they are really entirely different products.

    • TrevorXM

      Wow, are you ever on the wrong blog. Why are you here?

      • We’re talking watches here, no?

    • Mike Brown

      Something’s wrong with you (issues)……for buying that quartz Tag! if you had the dough (assuming you don’t haver the disposable income) you would purchase things you thought you would never, trust me. However Oris is a great tool watch inspire of what I think of you. I suppose that’s you dress watch….lol

      • commentator bob

        Nothing wrong with a tool watch as a dress watch. If that is the case it puts him in good company. A quartz Tag not an optimal purchase in my view, for that money a nice Hamilton, Tissot or Certina automatic mechanical chronograph could be had.

        • Yes, I know that now, but I got the TAG in 2008, didn’t know almost nothing about horology (except that Rolex, Omega, Patek and similar brands were surely excelent watches… ha!) and got it because I follow F1 and McLaren and it was their Formula 1 line.

          I had a mechanical Tissot, sold it. A mechanical Mido, sold it. The Oris (and a skeleton Swatch! are my only mechs and I really feel they’re not up to an active lifestyle. I can take the TAG bicycling or to the sea knowing it’s up to it. Not as much as my G-Shocks, obviously, but I’d never dream of taking the Oris even trekking.

          I’m using now a Seiko Speedmaster (7a28) from 1982 that I got at a flea market for less than 20usd. That’s a vintage, sports AND dress watch for me. So much more interesting than any real Speedy (Omega)!

      • *in spite.

  • ??????

    What I do when I’m seeking for a watch I need:
    1) Go to AD to take a look at the watch whether it is as good as in photos and marketing renders (95% chance that it isn’t). If you still find the watch good and attractive – proceed to #2.
    2) Go to forums like WUS, Timezone, read reviews and gather all information I can on the watch. Reliability, accuracy issues, etc. Passed? Proceed to #3.
    3) Go to local forum’s salescorner and try to find good deal there (5% chance usually).
    4) Go to Lionseek, WatchRecon and gather offers by popular forums (5-15%% that you get a good deal there for mint condition for around ~60% MSRP). If it didn’t work – proceed to #5.
    5) Go to Ashford, Jomashop, Rakuten, Ebay, Amazon, etc and try to find good deal there (5-10% that you get good deal there for ~70% MSRP). If it didn’t help – well, proceed to #6.
    6) If you still feel that you need that watch so much – you have to wait 1-2 years when around 2 newer collections would be presented and the watch you want will be sold at ~75% by AD. During that time, still keep an eye on sources #4 and #5, because it is still possible that you find much better deal there.

    • commentator bob

      My personal preference is to put step 5 before steps 3 and 4, but generally I agree. For brands ofher than Rolex >40% discounts on the grey sites are common.

    • John Lipp

      I’d add Gemnation to #5. I recently got an Alpina there at a fabulous price, and they have regular sales on other brands. And others mentioned prices at Touch of Modern were even better. These sites, in my case, increased sales of Swiss watches as I only have one other Swiss watch > $1,000.

  • hatster

    Great article and not just because the basic premise of different markets for smart vs lux watches is one I have been making for some time. Smart watches will quickly become a disposable item for many users, as Apple and co upgrade the next version. For those of us who love watches, we treat them and buy them for a different set of reasons. The data correlation that has been made between the sales in both markets has always been flawed.

  • JP. Coqueran

    I would say that smarter consumers are doing more to the market decline than smart watches are.

  • WmOrt

    >. decried smartwatches as a futile exercise that would fail and that Apple was stupid for putting so much stock behind them. I do hope those people have learned their lesson <<
    Did I miss something? Apple has never released actual sales numbers for Apple Watch. Business observers seem to assume this is because the numbers are so disappointing.

    How is it possible to discuss lower luxury watch sales without specifying regional differences? Just how much of the decline is driven by China?

  • Dartagnan

    Enjoyable article Ariel. I have a slightly different take. Firstly, there was no mention (unless I missed it) of the Chinese Communist party’s clampdown on corruption and conspicuous consumption. Chinese consumption of luxury Swiss watches has tanked (by as much as 40% of ALL SWISS watch exports) mainly because of this singular reason. Yes, there is a slow-down in the overall Chinese economy, but if not for the anti-corruption squeeze, sales would still be stellar.

    Secondly, the big watch groups (LVMH, Richemont and Swatch) have massive inventory valuations on their balance sheets. Take a look yourself, and you will find that they all have around 2 years worth of sales-in-inventory on their books. You can only move around so much inventory (the groups transfer inventory from one geographical location to another and book this as a sale, when in reality, it isn’t really), before things get scary. Next year, 2016, will be a real humdinger for the industry; nowhere else to shift goods, too much on the books – an implosion is coming.

    Thirdly, the smartwatch only needs to sit on a person’s wrist to be relevant. Unless you’re a Hayek, you’re not wearing two watches at the same time. Once the wrist is taken by a smartwatch, and a wearer enjoys seeing his pulse and step count on a daily basis, it’s game over. This consumer is not going to now don a luxury watch or otherwise. His wrist real estate is closed for business. Now the current smattering of smartwatches is laughable in terms of actual productive usefulness; they are presently just extensions to your cellphone, NOT replacements. But that day is coming. And it’s less than five years away.

  • Tony NW

    In my industry, I’ve seen a strong move from the $500-$10K watches (I know, not “luxury”) to smart watches. My Pebble is probably my most often worn unit, although I only wore it twice in the last week. (My CW C5, 1963 Bulova and Swatch Sistem 51 in green took the other five days.) The trouble is that people who can afford nice watches now have some additional functionality and bling options.

    Off topic, but I cringe when I read the word “arguably”.