A recent report released by the Federation of the Swiss Watch Industry (FH) reveals that exports for precious metal-cased watches plummeted during August 2016. It is true that the entire industry is seeing export declines but, interestingly enough, there are some areas of growth or less dramatic declines. The take away message for the people making product decisions in Switzerland is that consumers are fed up with bloated pricing, low value propositions, and products that depreciate faster than an aftermarket-customized G-Wagon. In other words, steel, titanium, and other high-quality, lower-priced timepieces are the rule right now… More at A Blog To Watch.
Despite the title of this article, I am starting to wonder if smart watches are having an effect on traditional watch sales. I now know quite a few people who own smart watches and who really like the experience. The fact that 100% of those people I know wear Apple Watches may say something, but more importantly is the realisation that the smart watch is a product that some people want. Add to this the fact that they are highly visible and they tend to advertise themselves if the owner enthuses about them, more than other products like phones and tablets.
To me, someone who has tried a range of smart watches from Pebble, Samsung, Sony and ASUS, the Apple Watch stands out as by far the best compromise between a computer on your wrist and a sense of elegance. It feels right to the people I know and despite a general sense of novelty, they really do seem to enjoy the experience. Is this a case of the Apple Watch completely owning the space it is in just like how the iPad did for a while and how, arguably, the iPhone does now?
The question of whether watch sales are hindered by smart watches still doesn’t quite get an answer because the vast majority of people live with a watch for many years and do not change it. And if they buy a smart watch, they are not purchasing it in place of buying a new watch, they want to try a smart watch. The old watch they once wore will just sit in a drawer and that does not technically lose traditional watchmakers any money. Over time, however, it may do if the trend grows upwards and people see more and more people wearing smart watches, but at this time I remain convinced that smart watches are not actually damaging traditional watch sales.
Traditional watch sales, however, are starting to come under pressure from our collective understanding of what value is. We now have many more choices open to us with regards to comparing prices of products, but more importantly we have started to think about why a product is a particular price. One example is something as simple as a shirt. It used to be the case that you could expect to pay a minimum of £20 for a shirt, but the supermarkets and cheaper clothing stores arrived and people are happy to pay £5 for a shirt, and to simultaneously be surprised that £20 was ever considered reasonable. The growth of transport, globalisation and everything else has meant that goods become somewhat throwaway, temporary and not so valued which in theory should be an advantage for watches because they stand apart in that regard. They are attached to you every day, they perform a purpose and they are, to many, jewellery. In fact, for people like me who do not wear jewellery, a watch is the only jewellery-like piece I wear besides my wedding ring.
So, this means that there is some downward pressure on pricing, but even that should not cause such a drop in watch sales because of the reasons I mention above. Watches are long-term so what exactly is the problem?
I believe that in a world where stores are simplifying and where people’s attention spans are minimal, offering such a huge range of products causes only confusion and at times resentment. Below is a typical example of Citizen watches listed at a UK retailer-
Why is the top-left watch £77 cheaper than the one next to it when the features are very similar? Why are the 2 Red Arrows watches priced so differently? What makes each watch differ so much in price and why are some watches often on sale at huge discounts?
There is no logic to how pricing of watches works, even at the £100-£400 end of the market and the prices move all over the place all of the time. It is true that most people do not care and when they want to buy a watch, they will just buy what looks nice and stick with it. But in a world where people are more aware of value and what things do before they spend their money these things do start to matter more and consequently confuse more.
The high-end watch market (+£3,000) should not be affected by this because those people will buy specific watches anyway or they are a once in a lifetime purchase for a special occasion, but for the rest of us there is no intrinsic value in what the watchmakers are offering. A watch can be double the price of another because it has a different colour face or because it is a limited edition. Citizen is especially well-known for doing this and I often see £250 models suddenly become £500 because a limited edition has been released in a nice box. The obvious problem with this is that a limited edition Citizen doesn’t really mean anything because it is not a particularly sought after brand. It’s a good brand and makes some of the absolute best watches you can buy at reasonable prices, but you will only lose value quicker by buying a limited edition Citizen.
Seiko, my preferred brand, has in the past released limited edition watches without actually specifying how many have been made. That’s ridiculous and not defensible if someone is paying more for the ‘limited’ moniker. I wear a £300 Seiko diver’s watch every day and consider it to be extremely good value. It normally retails for £500, is very well made and looks fantastic, but alas if you go out and spend £300 on almost any other brand you are paying for marketing, the look and often a made up history of the company making it.
Tag is especially good at fluff and will happily sell you a quartz watch for £1,500. A £30 quartz movement in a metal case with a Tag badge on it. For £1,500. Think about that for a moment and you start to wonder if the world has gone mad. It’s even worse at the high-end where the markups are huge! Seriously astronomical and this is why I believe watch sales are suffering.
In a world where buyers are more savvy than ever and where simplicity rules, the traditional watch industry needs to adjust in almost every single way. We can (sort of) understand the pricing for a smart watch because we understand the way phones and computers are priced, but the watch industry has thrived on us not understanding why they are priced the way they are. That lack of understanding is going away fast and is biting hard.