Apple Watch speculation; 10 years on from the first predictions

In December 2011, five years before hitting the market, Jeweller explored the likelihood of Apple competing with traditional watchmakers and asked: Will Apple launch an iWatch?

Former publisher of Jeweller, Coleby Nicholson, noted that it would not be the first time a computer company entered the watch market. He predicted that; if Apple launches an iWatch, it could be the greatest shake-up of the international watch market since the launch of the Swatch watch in 1983.

Nicholson, who had previously published some of Australia’s first tech magazines including MacNews, MacUser and Desktop, noted that the Swiss behemoth Swatch, entered a joint venture with Microsoft – its equivalent in the computer market – in October 2004 and announced the Swatch Paparazzi.

The Paparazzi – which may have been ahead of its time – was a smartwatch based on Microsoft’s SPOT (Smart Personal Objects Technology) technology and could be connected to MSN Direct. It was ‘killed-off’ in April 2008 when Microsoft announced that it did “not have immediate plans to create a new version of the Smart Watch, as we are focused on other areas of our business.”

Much of the speculation about Apple’s plan for a watch began around the time of the launch of the iPod Nano in 2005, which, when resting, displayed time as a watch face. Third party manufacturers designed plastic watchbands to hold the iPod. The rumours about an Apple Watch were heightened because Steve Jobs is said to have alluded to the ‘watchband Nano’ when it was launched.

Ten years later

Now, a decade after Jeweller’s first detailed speculation about an ‘iWatch’, and six years after the release, Apple is believed to sell around 40 millions watches per year. The figure is a calculation because it is well known that Apple does not release sales figures.

According to Neil Mawston, executive director devices, Strategy Analytics, “We estimate Apple shipped 10 million Watch units worldwide, for 46 per cent smartwatch market share, in Q3 2021”.

Strategy Analytics, a US market research firm, defines a smartwatch as “a computerised wristwatch with an expandable operating system, which can be loaded with third-party apps, such as Wear OS or watchOS.”

It’s definition does not include “less-computerised or less-expandable devices, such as sports-watches, basic digital watches, kids-watches, fitness bands, fitness trackers, medical trackers, and so on”.

Mawston told Jeweller, “Apple owns half the global smartwatch market today at 46 per cent. Samsung has 18 per cent Garmin 7 per cent while the remained 29 per cent is “other’ brands. The top-three brands make up 7 in 10 of global sales.”

Sujeong Lim, analyst Counterpoint Research, another firm that specialises in technology industry analysis, believes the Apple Watch ‘user base’ is now above 100 million.

“Showing a full recovery from COVID-19, global smartwatch shipments in the second quarter of this year increased by 27 per cent compared to the same period last year, according to Counterpoint Research’s recently published Global Smartwatch Model Tracker,” Lim explained.

“Apple maintained its solid No.1 position in terms of shipments, but its market share declined slightly compared to the same period last year due to intensifying competition with Chinese and Indian brands. Among the global Top 5 smartwatch OEMs, Samsung and Garmin showed a remarkable shipment growth of 43 per cent and 62 per cent year-on-year, respectively, exceeding the average market growth rate and recording higher growth rates than other top brands,” she added.

Pivotal year for watch industry

According to Mawston, 2019 was a pivotal year for the traditional watch market; his research showed that Apple Watch outsold the entire Swiss watch industry by a large margin.

“We estimate Apple Watch shipped 30.7 million units worldwide in 2019, growing a healthy 36 percent from 22.5 million in 2018. A blend of attractive design, user-friendly tech and sticky apps makes the Apple Watch wildly popular in North America, Western Europe and Asia.

“And we estimate the entire Swiss watch industry together shipped 21.1 million units worldwide in 2019, falling 13 percent from 24.2 million in 2018. Analog wristwatches remain popular among older consumers, but younger buyers are tipping toward smartwatches and computerised wristwear,” Mawston explained.

It should be noted that firms such as Counterpoint Research and Strategy Analytics do not have ‘official’ insight into Apple’s sales data, supply or retail channels; they provide estimates based on their own independent research.

In the past Apple has questioned and cast doubt on the methodology, and more importantly results, of many market research firms and Apple executives have sometimes dismissed the data as incorrect.

However, it is fair to say that the studies from various research firms seem to support each other’s results and sales trends.

Although watch unit sales are not made public, revenue from Apple’s Wearables, Home, and Accessories category accounted for $US7.9 billion in Q4 of 2021 (compared to $US6.52 billion 2020).

While Mawston believes the tipping point for Apple Watch outselling the entire Swiss industry was 2019, Jeweller reported that it happened two years earlier.

“Technology giant Apple reportedly sold more watches than the entire Swiss watch industry in the fourth quarter of 2017, a sign the industry is potentially at a tipping point in terms of smartwatches and wearables,” a February 2018 news story outlined.

“According to a report from research company International Data Corporation (IDC), Apple’s global smartwatch shipments reached approximately 8 million units between October-December last year. This estimation was then compared to figures posted by the Federation of the Swiss Watch Industry, which noted it had sold 6.8 million units in the same period.”

Regardless of the exact date, the writing was ‘on the wall’ in December 2012, around three years before the watch was released.

Nicholson wrote: “Regardless of all the guesswork about Apple, one thing is sure; if an iWatch is coming it will be the greatest shake-up of the international watch scene since Seiko and Citizen ‘stole’ the market in the 1970s with their quartz watches, only to see the Swiss taking back the high ground in 1983 with the launch of the Swatch watch.”

He added, “The fact remains, apart from a few trends and fads, the watch industry has been relatively staid for more than 20 years.”

Ten years on, it’s anything but dull!

Best in market not first to market

A recently released study into the Swiss watch industry demonstrates that the major Swiss brands either ignored the potential threat of Apple or knew they couldn’t do anything about it. After all, ‘brand Apple’ has never focused on being ‘first to market’, only ‘best in market’.

The ‘Deloitte Swiss Watch Industry Study – Adapting to a changing landscape’, published in July 2021, states: “In our 2020 study, over 60 percent of watch industry executives said that the Swiss watch industry missed the boat when it came to smartwatches.”

It goes on to accept the ‘unofficial’ Apple sales estimates: ”The global market for smartwatches has more than doubled since Q2 2018, rising from 8.6 to 18.1 million units in Q2 2021, and the fitness renaissance during lockdowns only made wearables more popular. Apple maintains its dominance over the market with over 50 percent of global smartwatch market share.”

The study correctly points out that tech company smartwatches serve a different function and target a different consumer to traditional timepieces, which means, “many brands operating in higher end price segments do not consider the likes of Apple and Samsung to be competitors.”

It is often said within the industry that watches are jewellery for men, which explains why many men own more than one watch.

However, Deloitte study goes on to accept a harsh reality: “But wrist real estate is finite and traditional brands have been responding over the past years with their own foray into the smartwatch segment.”

Indeed, Nicholson took the concept ‘wrist real estate’ a little further when, on the opening of Baselworld – the largest watch and jewellery fair – in 2015, and only a few weeks before the Apple Watch was launched, he suggested that Apple’s real ‘game’ has nothing to do with watches it’s all about access to people’s wallets!

He asked whether Apple is even in the smartwatch business, and questioned whether it should be compared to existing brands such as Casio, Sony, LG, Motorola, etc.

“You see, maybe there are now three categories of ‘watches’; the traditional market dominated by the Swiss and Japanese, early ‘smartwatches’ like Casio, Sony, and Motorola and now a new category perhaps more aptly described as wrist media”, Nicholson explained.

“Think about it; the business model of traditional watch companies is to sell a watch, get paid and hope the customer returns to buy another watch at some point in the future. The same goes for the likes of the smartwatch category, but Apple doesn’t play that game.

“That’s a traditional business model; sell a product and earn more revenue only when the customer buys a second product. However, the iPod, iPhone and the iPad all generate income for Apple long after the initial sale of the product,” he wrote in 2015, before the Apple Watch was launched.

Picking your pocket

In other words, traditional watch manufacturers have only one income source – the sale of the watch – however, the coming Apple Watch, and a rumored watch from Google, would be focused on driving future income streams, directly from that product.

“No, Apple and Google aren’t competing against the Swiss and Japanese and nor do they need revenue from selling you a watch; but they do want to own your wrist to gain access to your wallet every hour of every day, long after you made that original purchase.

“In affect, they want to “pick your pocket” or, at least, your wallet, and they now have the technology to do that. What’s more, you will be happily assisting them by strapping the device to your wrist,” the March 2015 article explained.

An Apple Watch with Apple Pay is exactly how it seems; you pay and pay … Apple, on a daily basis.

Whether the Swiss missed the boat when it came to smartwatches or they recognised that Apple entering the watch industry was not only a fait accompli, it was something that could not be challenged, is now a moot point.

Edouard Meylan, CEO of Swiss watch company, H. Moser & Cie told Deloitte: “If you think about the watch industry in Switzerland, the revenue of the biggest watch groups is less than the R&D budget for Apple or Google. We cannot compete with them to develop new operating systems or technologies. But we can partner with them to bring our knowledge and expertise into the product design and the hardware.”

The major issue for traditional watchmakers, whether they be the Swiss or Japanese brands or the many thousands of smaller, independent companies – often called microbrands – is whether Apple has expanded the overall market for watches, and whether people who start with a smartwatch, will ultimately upgrade to a traditional brand.

All Apple and Samsung watches look the same, unlike traditional brands that allow consumers to express their personalities; watches also function as ‘jewellery’.

Deloitte’s study attempted to answer the question, on behalf of the Swiss brands.

“For the second year in a row, we surveyed 5, 558 consumers on their watch-wearing habits. In the ongoing battle for wrists, smartwatches are gaining ground on traditional ones. Of those respondents who do wear smartwatches, 75 percent wear them every day.

“There was a decrease of seven percentage points in the number of consumers wearing traditional watches compared to our 2020 study, but an increase of four percentage points in those consumers who wear both traditional and smartwatches, as illustrated in Chart 11. In China almost every second respondent wears both, though presumably not at the same time.
Millennials and Gen Z are more likely to wear smartwatches,” the report explained.

However the most encouraging thing for traditional watch brands is that, “if given 5000 Swiss Francs ($US5,500) – or an equivalent amount in local currency – to spend on a watch, all generations are more likely to choose a luxury mechanical watch (48 per cent) rather than the latest release of a smartwatch (39 per cent) each year for the next 10 years.”]

The study also found that around 20 per cent of consumers don’t wear a watch, something that has remained constant throughout its past annual studies.

It should also be noted that the Apple Watch was not an instant success and many believed it would fail. The Apple Watch wasn’t always the king of smartwatches and sales plunged by 90 per cent at one stage.

Industry shake up and shake out

So where does all of this leave the watch industry?

Well, thanks to Apple, the greatest shake-up of the international watch market since the launch of the Swatch watch in 1983 happened, however; there is no doubt that traditional and smartwatches can sit alongside each other, not only in the market but in the consumer’s draw at home, waiting to be worn for specific ‘functions’.

In February 2014, Jeweller reported that Nick Hayek, CEO Swatch said he had no concerns regarding the possible impact on traditional watchmakers and is instead treating it as an opportunity and expressed optimism towards the wearable technology trend.

“The smartwatch is an opportunity for us, whatever happens. If people who never used to wear anything on their wrist start wearing a so-called smartwatch, then we certainly can convince them quickly to try wearing a beautiful watch instead,” Hayek said.

It’s up to the traditional watch brands to capture the significant advantage they have over their tech competitors: a story, the history and emotion behind the watch and therefore why it suits the customer.

A smartwatch is a smartwatch; the reason for owning it has nothing to do with emotion. It will need to be updated next year! It lacks personality; it’s a tech product, just waiting to become outdated. 

Deloitte’s study advised the Swiss: “Storytelling brings brands to life, highlighting their history and personality, their values and their uniqueness. Consumers expect an authentic story and a consistent experience, across all touchpoints. Understanding how to create a connection with consumers that transcends channels will be paramount. Brands will need to understand how their heritage and values align with those of their consumers. Rarity and exclusivity were safe bets in the past but younger generations prize social attributes, such as sustainability and inclusivity.”

This story has a long way to go and there has been a backlash against the tech companies in recent times. The game isn’t over and there one thing is for sure, the history of the Huguenots is far more interesting than the latest OS.

Then & Now: Apple Watch in 2015 vs 2021

While Apple Watch wasn’t the first smartwatch launched, its intuitive interface helped skyrocket its debut in 2015 with its First Generation release.

The Series 7 Apple Watch launched on the 15 October this year with larger displays and faster charging. Designs have become more rounded with larger casing sizes.

EVOLUTION of the Apple Watch