Can Swiss watch brands sell 1,000+ USD smart watches?

Basel world this year has certainly seen its fair share of Smart Watch Announcements our own Kenneth Cole connect watch being no exception. But I was interested also to see the announcements and releases made by many of the watch making elite. TAG Heuer being a good example making the bold statement that they will be working in collaboration with Intel and Google although details of how or when are limited.

While I welcome wholeheartedly the development in the watch industry that Smart technologies can bring, I do have a nagging question that other watch industry commentators appear to ignore. That question being "Are Swiss Luxury watch brands really in a position to sell smart watches?"

Don't get me wrong, I love Swiss watches, I even own a few myself and that's the problem! What were my motivations in buying my Swiss luxury watches? There is a lot of discussion regarding why someone might buy a luxury Swiss watch over a Japanese equivalent costing 250 USD, but for me its the notion of quality, heritage and the fact that this is not just a watch, rather a piece of man jewelry. I carry images of an artisan horologist sitting in some amazing Swiss setting, muttering to himself in French, German and Italian while pouring over miniature hand crafted parts. The fact that this expert is using a culmination of a few hundred years worth of experience to create a mechanical masterpiece. Using only the finest materials and metals, decorated by hand to create something that with some care and semi regular servicing will not only last my lifetime, but my children will be able to enjoy this watch as well - clearly I have taken the marketing bait hook line and sinker! But that is why I buy a Swiss luxury watch.

Now let us consider the Smart watch market. Smart watches are accessories to your Smart phone, they assist you in your every more complicated and increasingly mobile or autonomous lifestyle. As a result in order to keep pace with the dizzying pace of innovation, I change my Smartphone at least every two years, mainly with contract renewal as western markets now tend to offer contracts based on two or more years with the latest smartphones. What is new and a "must have" today is guaranteed to be worthless tomorrow. Who after all uses cassette tapes, and even CD's these days?

My first Swiss watch is a Baume & Mercier Capeland S, Lower end of the scale in luxury brands admittedly, but in a similar range to TAG and other Swiss brands talking about Smart Watches today. I bought this watch 13 years ago. Thirteen years ago! That's literally a lifetime in the mobile and consumer electronics industry. In comparison, its only 8 years since Apple released the first iPhone. 13 years ago Nokia was the undisputed king of mobile and king of the "Smartphone", Blackberry was the must have business accessory - how times have changed. But that's OK, because my trusty B&M Capeland S continues today as strong as it was thirteen years ago.

Considering the same scenario with a Smart Watch and I begin to scratch my head regarding luxury Swiss brands releasing smart watch products. They will be hard pressed to keep a pace of the technological advances in the mobile market, in comparison today's luxury Swiss brands take years to design and perfect a new mechanical movement, which in turn remains in their watch line for years, even decades.

Smart Watch movements on the other hand, due to their co-existence with a Smartphone are a different story. Recent releases to market include watches costing 1200+ USD, but unlike my Capeland S they will not be considered a product that lasts a lifetime, rather you will be lucky to have the technology within be viable for more than 3-4 years. Not only this, but the latest and greatest Smartphones cost around 700 USD, so you are paying more for the accessory than the main device.....

Then there is the question of Swiss heritage and the "made in Switzerland" badge. This reputation has been carefully crafted over the years regarding the artistry in a mechanic watch. But with a smart watch we are talking about an electronic movement, something that requires chips and resistors and antennas. As I understand it the Swedes invented Bluetooth back in 1994. China, Japan and Korea are by far the leaders in wireless product manufacturing (China makes the iPhone after all) and arguably the Americans with companies like Motorola (the father of mobile phone technology) and Apple / Silicone Valley offer a hotbed of innovation. If that's the case, then why would we believe that the same mechanical artisans in Switzerland are likely to create a product that is so much better technically (when considering function vs price point) to the likes of Samsung, Apple or indeed any other company with even a brief history of technical or wireless innovation?

The guts of the product is no longer mechanical with hand made parts, rather mass produced chips (intel inside) placed on circuit boards via high speed machines.

"Ah yes but what about the design of the watch, the look and feel to create an item that does not look like a computer on your wrist!" I hear you say. A valid point. But does the case kit, dial and hands justify the price when the insides of the watch are more common machine made electronics? We only need to see recent watches from Withing's among others to see that there are many companies operating in the fashion watch space that have some excellent ideas for how a watch product can be made "Smart" using stainless steel cases, but at a fraction of the price.

If we consider the Bluetooth headset market, we could argue that this remained reasonably unchanged for many years, although innovation in voice control and noise reduction improved the products over time. A headset you bought 10 years ago will likely connect to your smart phone today. However, smart watches offer far more potential function than the Bluetooth headset and the interaction is greater than simply placing the device in your ear. Bluetooth low energy is not as mature as traditional Bluetooth in comparison. Also consider the vast majority of Bluetooth headsets sold are under 100 USD retail.

It will be fascinating to see how it plays out, but I believe that the constantly changing and improving technologies will require that Smart Watch products will need to continue to improve and evolve at least at half the pace of mobile.

For these reasons, I believe watches priced over 1,000 USD will struggle to sell in any significant volume because customers will realize that these watches no longer have the longer term appeal (long term being 10 years +), they will become obsolete sooner or later, which is not something you might consider with a premium priced luxury mechanical watch. I would also say the same for a 10,000 USD Apple watch. But I assume this is more of a PR stunt than a serious attempt to enter the luxury watch market.

Working in the fashion watch arena I would suggest that the sweet spot will be sub 300 USD.

One thing is for sure, these are some of the most interesting times in the watch industry for 30 years. There will be winners and losers and as we like to say in the watch business - "Only Time Will Tell".

Please let me have your thoughts on the matter.