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Watchmakers under pressure in 2017

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Canalys forecasts the smart watch market will grow 18% in 2017, with 28,5-million units being shipped. This will mean the total value of smart watch shipments in 2017 will reach $10-billion.
Canalys predicts there will be further declines in the traditional watch industry as smart watch manufacturers release more high-end models. As the average selling price of smart watches climbs, the value of the smart watch market will reach about two-thirds that of the predicted value of the traditional Swiss watch market this year.
A series of Android Wear smart watches is expected to be unveiled by high-profile traditional watchmakers at Baselworld 2017. While the traditional watch community is trying to catch up with the smart watch trend, some watchmakers are still reluctant, and are expected to release connected watches instead.
Also known as hybrid watches, Canalys sees connected watches as a short-term, intermediate solution for watchmakers as they find ways to stabilise the decline in the traditional watch market.
“Connected watches appeal to buyers who want a watch first and a basic band second. With fewer people wanting to buy traditional watches, connected watches with limited functionality risk ending up like basic bands: being taken over by smartwatches by 2018,” says Canalys Analyst Jason Low. “Watchmakers yet to take action need to switch their focus to smart watches for long-term growth.”
Fossil Group, for example, has seen its traditional watch market shrink, and wearables quickly become the growth driver.
“Basic bands have been eroding the low-end watch market and, despite being a nascent market, smart watches have negatively affected the high-end mechanical watch segment,” says Low.
“Global watch conglomerates, such as Swatch Group and LVMH, echoed similar sentiments. But companies such as Swatch are still slow to react to the change, and have yet to take the next major step into smartwatch territory.
“Watchmakers’ survival will depend on creating competitive smart watches.”
This requires watchmakers’ full attention as the approach to making and selling a smart watch is different from that for a traditional watch. It is a fight to change a business culture, but the watch industry must adapt to survive.
“Forming partnerships with technology companies will be the first step. A well-formulated strategy to sell a watch will play a larger role as watchmakers have to appeal not only to watch fans, but consumers who are yet to buy a wearable,” Low adds.