Apple’s iPhone made Blackberry all but nonexistent. Should Rolex and Chopard start to worry?
Maybe not just yet. But Apple’s introduction Tuesday of the Apple Watch loudly announced the company’s intention to disrupt the luxury watch market.
Apple has long since carved out its niche as a producer and marketer of premium products—Macs cost more than PCs, iMacs more than Notebooks, iPads more than Microsoft Surface tablets, and iPhones more than Blackberry or LG phones. Apple’s genius has been to turn technology into something more like fashion, creating an aspirational brand in a series of markets in which there is a general indifference to design and an overriding utilitarianism. Most people buy computers because they need them, and they don’t have four or five already lying around the house.
With the Apple Watch, it is plunging into a market where the main product is—and almost always has been—a fashion-y status symbol. As Farhad Manjoo put it in the New York Times, the Apple Watch has “a variety of faces and watchbands that bear more in common with luxury jewelry than with gadgets.” In the process, Apple may be about to disrupt an entirely different market. In a matter of months, it’s entirely possible that a $349 digital watch will be regarded in many precincts as cooler than a 18-karat diamond-studded Chopard Happy Sport Medium Watch, which costs $43,140. And it may hasten a process already underway, in which mid-range luxury watches are losing relevance and market share among the connected elite and the merely wealthy, especially in the U.S. and Europe.
But watches aren’t going the way of the Blackberry any time soon. Even today, it’s not uncommon for people to have many watches. I have a distinct lack of interest in all things fashion and in consumer goods in general, but nonetheless own five things that might plausibly be called watches—old-school watches received as presents, a digital watch, a Garmin Forerunner 410, and some cheap swag picked up at conferences. ]
I wear them…never. And I’m not alone. This morning, I asked my 23,600 Twitter followers to tweet at me if they wear a watch valued at more than $350. The plea yielded only six positive responses.
Clearly, people with money and influence no longer need a wristwatch to tell them the time—and increasingly, they no longer need wrist-bound bling to exude status or wealth. In fact, while plenty rich and famous still sport Rolexes and other high-end timepieces, a sort of anti-status attaches to more modest watches. For men of a certain age, who are serious about exercise and staying in shape, a training watch with GPS and a heart-rate monitor is more of a status symbol than a Patek Phillippe—I might be middle-aged and bald, it says, but I could still dust you in a half-marathon. I’m not sure what Jacob Lew wears on his wrist, but when I sat down for interviews with his two predecessors as Treasury Secretary, Tim Geithner and Henry Paulson, the first thing I noticed were the plastic training watches on their wrists.
Watches that come in at the Apple Watch’s price point and slightly above are no longer cool. However, in a trend that is seen in the markets for real estate, art, and cars, we’re seeing a new class of global arrivistes fueling gaudy growth in the gaudiest sector of the market.
The Federation of the Swiss Watch Industry, which accounts for the overwhelming majority of high-end watch production, has great statistics. Total exports have been rising in recent years—in 2013, exports stood at 21.83 billion Swiss francs (a Swiss Franc is about $1.06), more than double the 2000 total. But the number of units being shipped has actually fallen—28.1 million units in 2013, compared with 29.66 million units in 2000.
The sale of “cheap” Swiss watches—those costing under 200 francs—has fallen in both dollar and unit terms, while sales of those in the 200-500 franc and 500-3,000 franc range have risen modestly over the past decade. But at the high end—watches costing over 3,000 Swiss francs—the market is going gangbusters, soaring from 731,000 units in 2005 to 1.16 million units in 2010, and nearly 1.6 million units in 2013. In 2013, exports of Swiss watches under 500 francs accounted for just 13 percent of the total value of exports, down from 24 percent in 2000. By contrast, watches in the 3,000-franc-and-up category accounted for 65 percent of the total value, compared with 33 percent in 2000. The average price of those expensive watches: about 8,400 Swiss francs. And a rising number of them are going to places where new money is being minted. Last year, about one third of Swiss watch exports went to Hong Kong, China, and the United Arab Emirates, more than double the market share those countries accounted for in 2000. Exports to the U.S. have been stagnant.
And that was before the company that makes products that America’s rich and famous love so much began marketing the Apple Watch.