Apple is expected to unveil its long-awaited watch at its Cupertino, Calif., headquarters today, and it will be—wait for it—a watch. This isn’t as obvious as it sounds. Unlike Samsung and other competitors that have pitched their own wrist-mounted devices as “wearable technology,” Apple is embracing its watch-y-ness. If various pre-event reports are to be believed, Apple’s watch will come in two or three versions, all with round faces; straps and bracelets will be interchangeable, and by the time the watches are available (most reports are saying it’ll be 2015) there could be dozens of possible combinations from Apple and others.
The Apple watch will also undeniably be a gadget, intended to give wearers access to their iPhone apps and features without having to fumble through a bag or a backpack. Steps will be counted. Alerts will be haptic. Siri will be fully on board.
It’s also likely to keep really good time, although by now, every watchmaker from Switzerland to Japan knows that’s hardly the point. Since 2000, time-telling smart phones have become ubiquitous, yet Swiss watch makers have more than doubled their exports to more than 20 billion Swiss francs ($20.4 billion) worth of watches.
An important note about that growth: it’s lopsided. Dollar and unit exports of battery-powered electronic watches have been flat, while the market for luxury mechanical watches has nearly quadrupled. In 2000, mechanical watches accounted for only 8 percent of the watches leaving Switzerland; in 2013 they represented 27 percent. Nearly all of this growth is coming from watches priced over 3,000 francs ($3,200).
From this perspective, high-end watch-makers should have little to fear from Apple. The lower end of the market, on the other hand, is vulnerable. The Swatch Group, which owns technology-driven watch brands Tissot and Rado along with more traditional high-status brands like Breguet, has hinted as much by raising concerns over Apple’s iWatch trademark applications. It’s also reported to be developing its own smart watch.
Nevertheless, Swatch CEO Nick Hayek says he’s not worried: “When mobile phones and devices came on the market, we were asked about their impact on our industry. … Media were already anticipating the end of watches; however, it was just the contrary.”
In the run-up to the introduction of its watch(es), Apple has hired a deep bench of experienced fashion executives. In July, it announced that Patrick Pruniaux, was leaving his role as vice president of global sales and retail at LVMH’s TAG Heuer, to take an undisclosed vice president position that reports directly to CEO Tim Cook. This comes after former Yves Saint Laurent CEO Paul Deneve and former Burberry CEO Angela Ahrendts joined Apple in 2013, as vice president of special projects and senior vice president of retail and online stores, respectively. Even with shadowy titles and the pretense of mystery, this slate strongly suggests that Apple isn’t competing with the FitBits and Jawbones of the world.
Entering the world of high fashion presents a unique set of challenges. Simply casing an Apple watch in gold or placing it on a crocodile strap won’t be enough to compete with the likes of Rolex or Patek Philippe. Watches are also a radically different business than consumer electronics or computing: most of Apple’s products have a two- to five-year life span and little resale value. High-end watches are supposed to live forever, and the secondary market is robust. This gives customers a sense of security when they write checks with extra zeroes.
“There is so far much more excitement than fear,” says Jean-Claude Biver, the Switzerland-based director of timepieces for Louis Vuitton Moët Hennessy (LVMH), owner of luxury watch brands including Hublot and TAG Heuer. The Swiss watch industry has been forced to adapt before, he added. “It has gone through crises and restructures. It’s an industry with a lot of cash, a lot of R&D development, a lot of marketing skills, and a very strong and structured distribution network.” Sounds a lot like Apple.
Stephen Pulvirent is an associate editor at Bloomberg Media.
