Smartwatches already impacting traditional watch sales?

Graph - Going downTraditional watch makers are nervously watching to see how smartwatch sales will affect the sales of traditional ones. Elmar Mock, the co-inventor of the Swatch, already warned that the Swiss watch industry could soon find itself in an Ice Age. He is not alone in warning that sales could plummet as consumers opt for smartwatches that not only tell the time but offer a wide range of functions including fitness and health tracking and notifications. New data from NPD Group suggests that those effects are already being felt.

The report found that U.S. watch sales in June fell to a point not seen since 2008 when the U.S. economy nosedived into recession. U.S. watch sales in June came in at US$375 million, an 11% drop over the same month a year ago. Watches priced between US$100 and US$149.99 experienced the biggest drop, a 24% decline. NPD’s Fred Levin, head of the market researcher’s luxury division, warns that things will get worse, especially for watches selling for US$1,000. “The Apple Watch is going to gain a significant amount of penetration,” he explained during a Bloomberg interview. “The first couple of years will be difficult for watches in fashion categories.”

Apple Watch

While it may be a bit too soon to attribute the slow down in sales directly to the Apple Watch, the timing certainly correlates with the launch of the Apple Watch and growing sales of the entire smartwatch market. While Apple has yet to reveal Apple Watch sales numbers, Strategy Analytics recently estimated that some 5.3 million smartwatches were shipped in Q2 2015 with Apple accounting for 75% of those.

With more than 70 brands vying in the U.S. watch market, discounts offered by lower-priced fashion brands may have also contributed to the decline as brands such as Burberry, Guess, Timex and Tissot found the market saturated. At least two of those brands, Guess and Tissot are already eyeing entries into the smartwatch market in a bid to stay relevant.

Tissot smartwatch prototype

It will be interesting to see how the U.S. and global watch industry fares in the coming quarters. While there will always be a consumer base that appreciates fine horological devices, most average consumers are likely to opt for a device that can offer a range of functions at a wallet-friendly price.

Source : Bloomberg