The Great Recession, digitally marketed watches and a generational shift might have done more harm than smartwatches.
At Trends·Watch, our research points to three factors that suggest no direct causality between the introduction of smart watches and a drop in sales of “traditional” watches: the Great Recession, digitally marketed watches and a generational shift.
THE GREAT RECESSION
The Longines Watch Company is the 6th best selling brand in volume, after Seiko, Citizen, Swatch, Tissot and Ice-watch. Right before the Subprime Crisis unfolded, they celebrated a growth in sales from 500,000 watches per year to 750,000 watches per year.
I started to work at their headquarters the same year (September 2007), and for the next six years I saw them sail through the crisis like an icebreaker through Arctic frost. By the time I left in 2013, Longines was selling 1 million watches per year. From what I could gather, the bulk of that “new” half-million watches was being sold to consumers of the greater China.
Hundred of thousands of Chinese nationals became millionaires in the first decade of the 21st century, and they ended up with more money than ideas on how to spend it. Fittingly, the Chinese government passed new regulations around 2006-2007 that made it much easier for luxury companies to sell goods to Chinese nationals.
In essence, while the Great Recession shrunk sales of luxury goods worldwide, a “virgin” Chinese market opening up its doors allowed luxury brands to mitigate the damage and even to meet double digit growth there. Around 2013 the Chinese government decided to revert their policy, meaning that it would soon be time for luxury brands to face the music. It is no surprise for industry observers like myself that exports of Swiss watches have been anaemic since 2013.
When it comes to Longines, they reported that 2018 has been a record year in their history, 11 years within the Great Recession. Clearly they have not been impacted by the introduction of smart watches, they manage to grow sales in other markets than China and they are holding on to their ranking in volumes.
DIGITALLY MARKETED WATCHES
Longines yearly sales of more than a million watches puts them on the top 6 in volume, right before Rolex. I mentioned Ice-Watch in rank 5, which was launched right before the Subprime Crisis, but do you know who comes at number 8?
The brand Daniel Wellington was created during the Great Recession (in 2011) and still rose to the 8th rank when it comes to volume. Another digitally marketed brand also created during the Great Recession (in 2013) is MVMT, which sold a reported 1,5 million watches in 5 years.
If you also take Ice-watch into consideration with their estimated 3 million watches per year, this speaks volumes (pun intended) about the fact that “traditional” watches are alive and kicking.
As a Generation X, I grew up seeing stamps an coins highly sought by collectors. Their decline in interest is explained by the fact that those collectors have grown old and have started to kick the bucket, with the new generation lacking interest in picking up the baton.
The same seems to be happening with high end watches, as Millenials no longer have expensive wrist watches at the top of their list. A lack of any watch whatsoever on the wrist is a challenge for both “traditional” and smart watches, but the success of brands such as Ice-Watch, Daniel Wellington and MVMT shows that there is still interest in watches as a fashion accessory, which most smart watches seem to be failing at so far.
Of course I could be suspected of having a bias, since I have been working for more than a decade with luxury goods and less than four years with consumer electronics. But when someone from the other side of the spectrum, such as the co-founder of Basecamp Jason Fried shares the same skepticism and writes “My watch gives me the time. My phone takes my time…” it potentially makes my opinion objective.
It is a well documented fact that the “big four” (Google, Apple, Facebook and Amazon) seek ubiquitousness to collect as much information on us as they can. The smart watch is another opportunity to stretch their ecosystem to your wrist. So the real question is: between the traditional and the smart watch, which one has something to take?
If the drop in sales is indeed due to the global economy, the Information Revolution and a generational shift as I am suggesting, watch brands can face these challenges head on: by improving the perception of value for money, by pioneering new promotion and distribution channels, and by building brand loyalty on new values.
Value For Money
A lot of crowdfunded watch brands appeal to a growing consumer sentiment of institutional brands being overpriced, and inadequacy of purchasing power. Several young watch brands have shown that a compelling design or a pricing structure that appears to make sense can weigh as much in the consumer’s mind as “traditional” brand equity, which is usually based on history, prestige or notoriety.
Watch brands should revise the design/features/price equation and come up with new formulas that give consumers a perception of better value for money.
There is also what I call the “Dictionnary” mentality: the main purpose of a dictionnary is to provide a snapshot of vernacular languages, to bear witness to how a living language is evolving. After the Subprime Crisis, established watch brands fell back on simple and “safer” designs, and they have adopted a “Dictionnary” mentality: wait for small and micro brands to suggest new trends, and if they become broadly adopt, then include them in your work. Established brands should be taking risks and positioning themselves at the front row.
The Influencer bubble seems to have burst so instead of jumping on the bandwagond, luxury marketeers need to find the next big thing. If I knew what it was, I would be too busy making money to find the time to write here.
When it comes to distribution, the traditional model seems to have done it time. Companies like Tesla and B8ta have been working on a hybrid model that takes advantage of the economies of scale of online sales with a few physical showrooms where consumers can have first hand experience of physical products before making a purchase online.
Studies show that the younger generations put more value on the experience than on material goods. Marketeers should look into way of extending the brand experience before and after the purchase. The most successfuly crowd funding watch campaigns outline that the waiting period and a two way communication add a lot to the experience.The dialogue has to change from transactional (“I sell this to you”) to participative (“Thanks for being a part of this!”).