Wednesday, September 10, 2014

When is a watch not a watch?

Apple's announcements yesterday were guaranteed to stimulate feedback from pundits everywhere, myself included. The Apple Watch introduction has generated a lot of interesting feedback, both because it's a new product and category for Apple, and because it's competing in an established market. A few writers have speculated that the Apple Watch spells doom for high-end watch brands such as Rolex, Omega and TAG Heuer. I don't think it does, because the Apple Watch competes in a completely different market than the high-end watches.

Comparing the Apple Watch to, say, a TAG Heuer Carrera Calibre 16 chronograph, is like comparing a Honda Odyssey minivan to a Lamborghini Huracan, or like comparing a food processor and microwave oven with a gourmet kitchen. Neither one is a great analogy, to be sure, but both get the point across. People will buy the Apple Watch, as they buy other smartwatches, to be an extension of their smartphones. Timekeeping is just one of many functions that they expect a smartwatch to perform. Buyers of the Calibre 16, on the other hand, are buying the watch for two reasons: 1) To keep time, and 2) To demonstrate their taste (and that they can afford a Calibre 16.) The TAG Heuer watch, which is relatively inexpensive for a high-end watch, is priced at $4,950. It's a mechanical watch with a Swiss made movement that can run up to 42 hours without rewinding.

Everyone in the watch industry knows that electronic movements are more accurate, more convenient and less expensive than mechanical movements. In fact, the widespread introduction of quartz movements by Seiko and Citizen decimated the mechanical watch industry in the 1970s and 1980s. The mechanical watch makers that survived did so by making their watches more sophisticated and more expensive. Their watches evolved from functional timepieces into collector's items and works of art. Someone who buys an A. Lange & Sohne Tourbillion Perpetual Calendar Handwerkskunst for $357,700 (that's not a misprint) is willing to trade off the inconvenience of winding for the chance to own a gorgeous watch that only a handful of people in the world can afford or appreciate. The Apple Watch, on the other hand, will be an heirloom to be enjoyed until the Apple Watch 2 comes out in a year or two.

The Apple Watch, and all the other smartwatches out there, are gadgets and compete with other gadgets for consumers' dollars. High-end mechanical watches compete in a completely different category. That's not to say that I'd be surprised if Rolex, Omega or Tissot releases their own smartwatch to participate in the category, but it's still not going to compete with their high-end mechanical watches--it will be for people who find the Apple name on their smartwatch to be too pedestrian.

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