Nicolas Hayek, the boss of the Swatch group, the world’s biggest watchmaker by sales (CHF9bn in 2014), is quoted by journalists in articles published yesterday in the context of the release of the group’s annual figures for 2014 to have said that the Swatch group would be launching an Internet-enabled smartwatch in two to three months. As such, this would pit the Swiss group against Apple, which has announced the roll-out of its own device for April (to be priced at USD349). Mr Hayek has said that his group’s smartwatch (running on Windows or Android) would not have to be charged and that it would let consumers make mobile payments at supermarkets (the names of the two main Swiss retailers, Migros and Coop, have been mentioned in the press).

In comments made almost two years ago, Mr Hayek had sounded a little sceptical about the potential of smartwatches, claiming that they would not bring about a revolution because their screens were too small for communicating and battery life was too short. One would expect that Mr Hayek knows what he is talking about because Swatch had already made an initial foray in the smartwatch market some ten years ago with Microsoft (press release here), but the market was not ready.

So why is the Swatch group going to enter this market again? Part of the reason is that, although nobody can predict with any degree of certainty the size of the smartwatch market a couple of years from now (some stockmarket analysts have issued some pretty optimistic forecasts, but this appears to be a constant trait of such self-proclaimed pundits as their firms make money from clients buying or selling the shares of the companies on which they issue recommendations or on which they express favourable or unfavourable opinions), many in this country can remember the severe battering the Swiss watchmaking industry took in the 1970s and 1980s as a result of having failed to adopt the quartz technology even though the Swiss (and not the Japanese) were the first to have developed a quartz wrist-watch.

According to some stockmarket analysts, the Swatch group, which owns brands such as Swatch, Tissot, Longines, Omega, Harry Winston, Breguet and Blancpain inter alia, is the player in the watchmaking industry that stands to lose the most from the advent of a robust smartwatch market on account of the group’s exposure to low- and mid-range brands for revenue generation (roughly a third of overall sales). For my part, I believe that Mr Hayek’s announcement makes full sense because by entering the smartwatch market, even if this might lead to some cannabilisation of sales in the lower end segment (e.g. Swatch, Mido, Calvin Klein watches, etc), the Swatch group is likely to expand its addressable market and thus increase overall group sales. There might even be the added bonus of getting those who did not own or use a watch move higher up the price ladder by buying brands like Tissot (which already offers a watch with a touch screen).

Whatever the outcome over the longer term, not only the Swatch group (whose number of patent applications reached a record in 2014, at close to one patent every two days according to an article in Le Temps), but other Swiss watchmakers (Tag Heuer, Frédérique Constant) or even makers of luxury accessories (Montblanc) seem to have been working on smartwatches, so that 2015 looks set to become the year the Swiss watch industry will have embraced the smartwatch concept. I guess several watchmakers will be unveiling models at Baselworld in a few weeks’ time, thus demonstrating that they have decided to be ‘smart’. 😉


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