In 2015, TAG Heuer introduced the Connected, the Swiss watch industry’s first luxury smartwatch.
Five years later, the category it defined — and that now includes offerings from the likes of Montblanc and Hublot — has yet to really take off. But brands are still rolling out new models and predicting success.
Sales of wearable technology have grown this year, at least partly driven by consumers’ interest in devices with health applications. The Apple Watch Series 6 sensor and app, for example, measures blood oxygenation, a possible indicator of coronavirus infection.
According to a report published in September by the market research company International Data Corporation, the global market for wearables, which includes wristbands, watches, in-ear devices and the like, will grow by 14.5 percent this year, shipping a total of almost 400 million products. The report forecasts that the watch category will total 91.4 million units, rising to 156 million by 2024.
Swiss smartwatch manufacturers hope their high-end models, priced at $1,000 and up, will help protect brand profitability. But there’s a long way to go. Even TAG Heuer’s sales have been far from earth-shattering.
“Over the last five years, we have sold between 100,000 and 150,000,” said Frédéric Arnault, TAG Heuer’s new chief executive, referring to the Connected. (The third-generation Connected, which runs Google’s Wear OS operating system and retails from $1,800, was introduced in March.)
Vontobel, the Swiss private bank, estimates that TAG Heuer produced 600,000 watches in 2019 — which would mean that the Connected accounts for about 5 percent of the company’s annual sales by volume.
Price is clearly a big factor in the luxury smartwatch sector’s performance, especially now that luxury sales have plunged since the spread of the coronavirus.
The new Apple Watch SE, a lower-end model than the Series 6, retails from $279, and Samsung’s top-end Galaxy Watch 3 starts at $399.
In contrast, Hublot’s Big Bang e smartwatch costs $5,200, even though it uses the same Qualcomm Snapdragon Wear 3100 processor found in Fossil watches that cost a few hundred dollars (and in TAG Heuer’s Connected). “We will sell around 5,000 pieces a year,” said Ricardo Guadalupe, the company’s chief executive.
For many outside the industry, it is no surprise that there are not more luxury smartwatches.
“True luxury objects should be free from obsolescence,” said the Swiss-based designer Ini Archibong, who last year worked with Hèrmes on the Galop d’Hermès watch, which is not a smartwatch. “Their intrinsic value should come from something beyond their use value.”
A relatively short operating life is not the only threat: Switzerland still lacks the skill base to develop its own technologies. So even though some brands are owned by large, well-financed groups — TAG Heuer, Hublot and Louis Vuitton by LVMH; Montblanc by Richemont; Tissot by Swatch Group; Frederique Constant by Citizen — most rely on third parties such as Google and Qualcomm for hardware and software.
Some, however, have developed proprietary applications in a bid to add value and desirability: TAG Heuer’s sports and golf applications, for example, were developed by the Paris-based TAG Heuer Connected Team, a group that was acquired by the brand for an undisclosed sum in 2018.
Retailers have also not lost faith. “We have been running waiting lists on the TAG Heuer Connected since launch” of the third iteration in the spring, said Brian Duffy, chief executive of the Watches of Switzerland Group, which operates more than 130 showrooms in Britain and the United States.
Peter Stas, co-founder of FrédériqueConstant and the Geneva-based technology company MMT, went even further. He said it was essential for Swiss brands to develop smartwatches and that many entry-level names were struggling because they lacked them. “Swatch Group always said they would never touch smartwatches, and now they’ve come with the new T-Touch,” he said “It’s clear they’ve seen the light.”