Swiss Watchmakers: A Goliath in the era of Smartwatches?

Apple dominated headlines this yr by changing into the very best promoting watch maker on this planet, outselling all Swiss watch makers (by way of income). For a watch that started off 4 years back, this is an unparalleled feat. Bother is brewing for the Swiss watch business although; sales are dropping, demand is shrinking and watch innovations haven’t kept up with time. These signs portend robust days ahead. A disruptive reckoning is on the cards for the Swiss watch industry. Although, this wont the primary time they’re going through a crisis. The Swiss watch trade survived an identical wave within the 70’s with the introduction of quartz watches. Can they survive this one too?

Reports from IDC mark Apple as the king of watchmaking. Q3 2017 marked a historic point where Apple pipped Rolex to take the crown by way of revenue. To put things in perspective, an Apple watch four retails at $600 while a mean Rolex commands $6000 for an computerized mechanical watch. Business estimates peg revenues for Rolex at $5B & Apple at $5.4B, annually. All this while Apple watch sales are increasing upwards while the Swiss trade is facing a serious downturn. Swiss exports fell 10% in FY18 which adopted the same sample in the final 4 years.

And they are not taking it well.

Swiss watch business incumbents have typically taken a ham handed method to disruptive competition. Just take a look at Tag Heuer, whose CEO Jean-Claude Biver first dismissed the Apple watch as a information bracelet after which a 12 months later rushed right into a partnership with Google to get one out anyway. As of Sep 2018, Jean-Claude Biver is now in a non executive operational place as a consequence of well being reasons. Steve Ballmer moment for the watch industry.

To understand watches and its stints with disruption that you must perceive the history of watch making. At the turn of the twentieth century, Swiss watches had been known to be an inferior low value knockoff of British and German watches. They have since then come a protracted way.

Textbook disruption is available in waves. The primary wave is always new class creation. In this case, the wrist watch was the aha second that married ingenuity and convenience. The second wave is always of scale, the place you are taking the product and remedy the size & distribution problem. Industrialization/mass production is always the answer to this. The last one is twin forked — you see a piece of the market commoditized with low cost items until they are eventually distrupted by a new class; and one other where costs keep rising and goal a niche market and finally turn out to be disrupted.

THE ERA OF WRIST WATCHES

The primary wave of disruption got here in the dimension of the devices. Timekeeping equipment was at first a large box with just a few gears, springs and coils. With passing time, there was a robust consumer have to “take time with them”. Watches naturally found their approach dwelling on the wrist. You see this pattern in all places — from automobiles to computers. Big to small.

Watchmaking, specially in miniature kinds started with the Germans who had designed smaller verisons of huge timekeeping items and wore them as pin-up dress accessories. This was expanded via horological inventions of the Dutch, Germans, sous traitance mécanique people moving to Swiss fleeing French persecution & a interval of British industry. Watches in your wrist, as intuitive as it’s to us now, was not commonplace within the 18th century.

While the British & Germans had been all about accuracy, it took Breguet, a Swiss watch maker, to design the primary wristwatch, or watches as we know it now. The decrease in size meant that watchmaking became a miniature art-kind that needed exact instruments & finishing. This beckoned the period of wristwatches.