TRENDS IN TIME | Watch Industry Report The pandemic has led to the cancellation or postponement of trade shows and events. How are you adapting your communication with retailers? In its heyday: Baselworld was still drawing large crowds in 2016. The virus may also have another unintended result – reuniting the international watch industry. It has forced not only the cancellation of both Baselworld and Watches & Wonders Geneva, but also a reassessment of priorities. “Suddenly, the PR and politicking problems in the international watch market became insignificant as the ‘real people’ of the world went out to their supermarkets to fight over rice, pasta, hand sanitiser and toilet paper,” explains Martin Foster, watch industry journalist and <strong>Jeweller</strong> contributor. He believes the Swiss industry should undertake a “health-check” and recognise that old rivalries should be forgotten in favour of more efficient, unified solutions. “Baselworld has empty exhibition halls going begging with dedicated space available, if only the show formerly known as SIHH can grasp the enormous economic and political value of this opportunity,” he adds. Looking ahead to 2021, Corder agrees that a “reboot” is necessary, focusing on a “luxurious and enjoyable to attend” show with retailers and members of the media hosted by the brands. Crucially, exhibiting at the show should cost “a fraction of what Baselworld used to require”. Time will tell if Loris-Melikoff can succeed in righting the ship and restoring the venerable show – and the watch industry, to its former glory. Taking a bite of the Apple It is difficult to overstate the impact of technology on the design and function of watches, most notably the introduction of the Apple Watch in 2015. It marked something of a tipping point in the smartwatch category, prompting a monumental increase in consumer demand. In 2014, US-based research firm International Data Corp (IDC) estimated global smartwatch sales at 4.2 million, which increased by more than 400 per cent the following year, to 19.4 million. Apple Watches accounted for 11.6 million of those sales, according to IDC’s analysis. Today, Apple claims to have overtaken Rolex as the world’s ‘most valuable’ watch brand in revenue terms. “Baselworld has empty exhibition halls going begging with dedicated space available, if only the show formerly known as SIHH can grasp the enormous economic and political value of this opportunity” – Despite a mixed-to-dismissive response from many in the traditional watch industry, the Apple Watch proved enduringly popular, with the number of units shipped increasing each year since its debut, according to reports by market research firm Strategy Analytics. Apple does not publicly declare separate shipment or revenue data for the Apple Watch. The devices retail for $US199–$US499 for a standard model, and up to $US2,159 for special editions made in ceramic or titanium – placing them in direct competition with fashion and mid-range luxury watches. “Certainly, the introduction of smartwatches has had the most significant impact on the watch industry in the past five years,” says Phil Edwards, managing director Duraflex Group Australia, which distributes Swiss watch brands Baume & Mercier, Luminox and Mondaine, among others. Alongside smartwatch models from the likes of Samsung, Garmin and Huawei, the Apple Watch has prompted extensive changes in the fashion watch category in particular, through increased competition. Simon Garber Heart & Grace “We are ensuring that our stockists know we are open for business and here to help. In tough times it is easy to forget there are still occasions for which people will be buying gifts, such as Mother’s Day. We also want to make sure that people know the key items needed to make sales and that we have those items in stock.” Phil Edwards Duraflex Group Australia “The pandemic forces us to amend our approach. We will need to be strategic but also fluid, and support retailers and our brands as best we can.” John Rose West End Collection “We are supporting retailers with online tools that allow them to be as successful online as they are in their physical store. We are seeing consumers become more inclined to purchase from the website of a brick-and-mortar store that they know and love, rather than a faceless marketplace. Consumers now trust the internet and in many cases prefer to purchase online, rather than in-store due to the convenience of doing so – not because it is cheaper.” Fossil Group – which includes fashion watch brands Fossil, Relic, and Skagen Denmark, and produes licensed watches under the Puma, Emporio Armani, and Michael Kors brands, among others – saw its net profits drop a precipitous 79 per cent between 2014 and 2016. Reflecting on the results, Fossil CEO Kosta Kartsotis said, “Prior to that, we were clearly positioned as the competitively advantaged leader in a growing category. However, with the introduction of technology into wrist devices, traditional watches came under pressure and we were disadvantaged. “We didn’t have the technology capabilities to compete with smartwatches, leading to a decline in our market.” Meanwhile, Swatch Group CEO Nicolas Hayek Jr initially called the Apple Watch “an interesting toy, but not a revolution”. Swatch Group’s annual revenue fell 21 per cent and then 47 per cent consecutively in 2015 and 2016. The company has since announced various forays into the smartwatch category – even developing the Swiss OS operating system – though none have materialised to date. The extent of the threat from smartwatches was easy to underestimate. Notably, Microsoft’s smartwatch project, Smart Personal Object Technology, failed in 2005, leading to a lawsuit from Swatch Group after it was left with 100,000 unusable smartwatches. Eight years later, Pebble – a pioneer in the smartwatch space – collapsed and was purchased by fitness tracker manufacturer FitBit. It seemed to confirm industry suspicions that smartwatches were struggling to differentiate from health and medicine-oriented ‘wearables’. By 2017, the market was valued at $US9.2 billion ($AU14.9 billion); by 2025, analysts at Allied Market Research predict that figure will increase to $US50.3 billion. As a result, fashion watch brands have adapted to both differentiate themselves from smartwatches, and – through hybrid technology – mimic them. John Rose, managing director West End Collection, which distributes Paul Hewitt, 32 | <strong>April</strong> <strong>2020</strong>
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