Despite most of us always carrying a phone that can tell us the time, we seem reluctant to let go of wristwatches as timekeeping devices. Consider the smartwatch.
Alongside the rise of smartphones, wearables became popular, with smartwatches a notable success story. They fit into the larger ecosystem of apps and enable users to stay connected, especially when out and about. Fitness and health tracking capabilities have been a key part of smartwatch growth.
The Apple Watch ($AAPL) set a new standard when released in 2015. Though customers still needed a phone nearby until 2017 for calling, streaming and other functions, sales went from 8.3 million in the first year to 53.9 million in 2022. The Watch is now Apple’s fourth best selling product behind the iPhone, iPad and AirPods, and the top of the range even includes the same sapphire-crystal glass used by Rolex and Breitling.
It’s only natural that other smartphone manufacturers would try to enter the smartwatch sector. Motorola ($MSI), Sony ($SONY), Huawei and Samsung have all joined the race, while Google ($GOOG) bolstered its offering after acquiring Fitbit in 2021, and has seen its Pixel Watch sales power ahead.
Profit margins seem healthy. The manufacturing costs for the Apple Watch were estimated at US$136 in 2021 – comfortably below the US$399 price tag at launch. Meanwhile, the Pixel Watch costs Google around US$123 and retails between US$300 and US$400.
Smartwatches are unlikely to become family heirlooms when compared to a coveted Cartier, but they have different strengths. Users enjoy personalising the look and settings on a whim, as well as various other technical functions; sporting and outdoor specialist Garmin ($GRMN) championed GPS capabilities and has even created a solar-powered smartwatch to address the pesky issue of recharging.
Some businesses have combined old and new. Fashion firm Fossil ($FOSL) presents ranges of both classic and smartwatches. Swiss watchmaker Tag Heuer, now owned by LVMH ($LMVUY), broke away from tradition and embraced technology. They even have a smartwatch that plans and tracks golf shots in 3D. This feature might not have mass appeal, but it aligns with the accuracy the brand is known for.
For many, activity tracking is more about the gamification of fitness and receiving a motivational nudge to get started. How good the data is for health-related measurements depends on the activity, research suggests. There can be many inputs. Apple is facing a copyright trial regarding the function that measures oxygen saturation in a user’s blood. This could result in an import ban to the U.S. of affected models in Series 6 and up.
After two negative quarters, the global smartwatch market resumed growth in Q3 2023, with big numbers in India, and is estimated to reach revenues of US$44.15b this year. For traditional watches facing a decline in sales, the answer has been a focus on the high-end market. They’ve long been associated with craftsmanship, longevity and the mechanical precision of the Swiss industry, and so luxury Swiss brands have increased prices for particular pieces as new trends ticked upward.
People’s tastes in watches change, and time doesn’t stop for anyone. Related companies should use theirs wisely to keep up.