Almost exactly a year ago, my Kickstarter edition Pebble smart watch arrived. I had ponied up the cash the first week that the founders posted the product on the crowd-funding website.
Already the Pebble has become my primary time-keeping device. This comes as a surprise. I like to think of myself as something of an early-adopting tech geek. Over the years I’ve developed a small collection of 16 mostly affordable watches in all shapes and sizes. And I would have never thought that the Pebble would displace all of them.
But it has. There are many reasons for this. Not least its sheer utility, and the the small moments of triumph and smug satisfaction the Pebble offers as it displays live train times or turn-by-turn directions.
And yet the luxury watch industry still doesn’t get it. Over the last 12 months, my Pebble has become a sure-shot conversation starter at meetings with executives at some of the world’s most exclusive watchmaking brands. I cover the luxury watch industry for Mint, one of India’s most widely read business newspapers.
Sure, some executives are curious to know how the Pebble works. Others want to know what apps I run. Most, however, are dismissive of smart watches. And the higher up I go in the world watchmaking food chain, the more derision I ran into. Reactions range from “This is just a fad” to “No self-respecting person would wear a mass-produced device like that” to “Tell us when Apple makes one.”
Even executives at brands with serious technology pedigree such as Seiko and Citizen seem to take no notice of this product segment. Based on my interactions with these watch executives, the traditional “dumb watch” business is not exactly quaking in its shoes at the prospect of smart watches. In fact they mostly don’t seem to care at all.
This is a terrible position for the industry to take. Here are three reasons why:
Many watchmakers are certain that luxury watch buyers will never wear a watch made of plastic. That is possibly true. Right now. Only as long as smart watches remain what they are today: experimental, geeky devices of questionable utility. As these watches get smarter and more powerful, they can and will offer much more functionality. Imagine if Apple brings out a watch that integrates well with an iPhone and is genuinely useful. (Not inconceivable.) If the proposition is strong enough a large enough market might switch to the smart watch. (Unless wearing both a smart and dumb watch becomes a trend.) What about exclusivity and luxury? The mobile phone market has already shown us that even the wealthiest consumers are satisfied with mass market products. The luxury mobile phone market is a joke.
Most smart watches right now cost around $200 to $300. As these watches get bigger and better, these prices could go up. (Especially as smart watch brands try to emulate the external fit and finish of mainstream watch brands.) This could put them squarely in competition with the low- and middle-range brands of the Swiss watch industry. Exactly the segment that is currently undergoing great upheaval. The company that supplies over half the Swiss industry with the movements that power them has announced that it is paring back supplies. By 2020, Swatch will no longer be under an obligation to supply parts to other companies. This means that most brands will have to approach other suppliers for parts or invest heavily in their own factories. This is exactly the kind of crisis you don’t want aggravated by a new smart watch segment that is cheaper and way more useful than your products.
This isn’t the first time something like this has happened. The last time a major new technology was introduced into the watch business, there was a bloodbath. When cheap quartz technology first arrived on the world market, most traditional watchmakers didn’t make much of it. In 1969, Seiko launched the world’s first quartz watch. Established brands reacted to that in much the same way that many are currently reacting to smart watches—mostly by not reacting at all. Fifteen years later, almost two-thirds of all Swiss watchmakers had shut shop. Thousands of jobs were lost. And power shifted to the Japanese and American watch industries. With what seems to be derisory disregard to this nascent new smart segment, are the Swiss—and now even the Japanese—going to see that horrible history repeat itself?