Swiss Makers Quietly Gear Up With Smartwatches of Their Own

To observers of the secretive Swiss watch industry, its quiet, seemingly passive response to Apple Inc's plan to attack their centuries-old business could be mistaken for submission before an overwhelming adversary.

But luxury and fashion groups Richemont, LVMH, Swatch Group and Guess Inc have been busy in the past year tinkering with smartwatches of their own, while aiming to preserve their products' more timeless appeal.

When Apple Watch was first announced last September, some experts dismissed such devices as appealing to a different class of customer - those who prize technology over prestige.

Now analysts and industry executives are starting to think that maybe the Apple Watch juggernaut will stoke sales of luxury timepieces among younger consumers used to telling the time with their phones, rather than on their wrists.

"Apple has the potential to make the watch cool again," said CCS Insight mobile analyst Ben Wood, a confessed wearable gadget freak. "I think the Swiss watch industry are going to be absolutely delighted."

Swatch - which has dabbled with smartwatch experiments for more than a decade and already makes components for fitness band wearable devices, has told Swiss newspapers it is gearing up to offer smartwatches of its own in the next few months.

"Apple is not the only company which is about to toss a smartwatch on the market," Nick Hayek, chief executive of Swatch, the world's largest watchmaking group, told SonntagsBlick in January. "This is not a threat but a huge opportunity for us and the Swiss watch industry."

On Monday, Apple revealed that its line-up of watches will go on sale in April. The entry-level Apple Watch Sport will start at $349 (roughly Rs. 21,600), the standard version at $549 (roughly Rs. 34,000) and the high-end "Edition" watch at $10,000 (roughly Rs. 6.2 lakhs).

The upcoming Swatch Smartwatch will include a chip that allows users to make contactless payments with a swipe of the wrist. It will use long-lasting batteries and work with both Apple and Google-based phones, according to news reports.

While the Apple Watch has drawn rave reviews for many of its features, its limited battery life of no more than 18 hours before re-charging is considered a big drawback.

Luxury of time
The threat of the smartwatch may also be limited due to its short shelf life as a hi-tech, frequently upgraded product.

An iPhone tends to lose half its value within the first year after it is introduced, while Rolex's flagship Submariner model has risen in value, analysts at Berenberg Bank noted in a recent report.

Montblanc, owned by Richemont, announced in January the launch of the TimeWalker Urban Speed e-strap watch, which combines a traditional mechanical watch with an interchangeable strap containing a Bluetooth connected device.

That offers "the best of both worlds", according to Berenberg's luxury goods analyst, Bassel Choughari. He said this is less risky than the strategy of LVMH's Tag Heuer, which has partnered with an as-yet-undisclosed U.S. tech company to produce a watch outside Switzerland.

"It creates a bit of a grey area between Swiss-made and probably made-in-China products, so that could be a bit difficult to manage over time," Choughari said of the danger to brands.

Guess Inc has also announced plans to launch a smartwatch line called Guess Connect later this year.

The new models, which come in sporty and jewel-encrusted versions, will link wirelessly to a user's nearby Apple or Google Android smartphone. Guess says these will be compatible with thousands of existing mobile phone apps and can be controlled from the watch using voice activated commands.

Fossil Group, another U.S.-based fashion group, has toyed with smartwatches since 2003. A year ago, it said it would produce a smartwatch based on Google's Android Wear software, and in September, it said it had partnered with chipmaker Intel Corp.

It too early to know whether the Apple Watch, whose price tags run as high as $17,000 for its yellow or rose gold models, will steal share from the Swiss industry, which sells about 30 million watches a year.

The threat that Apple will cannibalise existing watch demand is most acute for Swatch, analysts say, because it has the highest proportion of products selling for a few hundred dollars, instead of several thousands as high-end names do.

If Apple sells 20 million watches in the first year, as some analysts estimate, and all of those purchases divert buyers from other watch brands, Swatch could suffer a 6 percent hit to annual revenue, according to a calculation by Barclays analysts.

Watch connoisseur Steve Baktidy says he is interested in the Apple Watch but only as a tech gadget to play with. But he also welcomed efforts by luxury makers to introduce more tech features of their own.

"Absolutely I'll buy one (from Apple) but it's not going to replace my everyday watch," said Baktidy, owner of two auto body repair shops in New York and two dozen watches by luxury brands including Patek Philippe, Audemars Piguet, Breitling and Omega.

© Thomson Reuters 2015