Apple is now shipping more watches around the world than the entire Swiss watchmaking industry, highlighting a growing threat to entry-level price point brands.
After a period of declining demand in East Asia driven by anti-corruption efforts by the Chinese government, the Swiss watchmaking industry has been slowly recovering. However, the industry is still far from the picture of health: 2017’s gains mostly stemmed from mainland China, while revenue in the US continued to decline. In Q4 2017, Switzerland shipped just 6.8 million units, while Apple shipped an estimated 8 million.
The rise of smart watches, and particularly the Apple Watch, had been a relatively small thorn in the side of the Swiss industry, with higher-end timepieces less threatened by the lower price point of smartwatches. As the Apple Watch has accelerated, pressure has increased on entry-level price point watch brands. Quartz watches have been particularly affected, with revenues declining over 7% in 2017. In contrast, Apple has reported sales growth of 50% year over year for the past three quarters, driven by the release of its new Series 3 watch, which doesn’t need to be connected to a phone.
While some brands in L2’s Digital IQ Index: Watches & Jewelry have opted to jump into the game and create their own smartwatches (Citizen, Tag Heuer, Montblanc, Breitling, to name a few), others have opted to create entirely new products. A recent trend has been the one-handed watch, with the debut of new models from Bulgari and Van Cleef & Arpels, among others. As the rise of smartwatches has primed consumers to expect constant new products and updates, the smartest watch brands will be those who continue to innovate.