Apple Watch is Making Luxury Watchmakers Uncomfortable - Above Avalon Premium Weekly Recap

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Apple Watch is Making Luxury Watchmakers Uncomfortable

The luxury watch industry still can't understand why someone would buy an Apple Watch.

Here's Alexander Schmiedt, managing director for watches at Montblanc, 
speaking with Bloomberg: "Our products should have very long life cycles. In modern technologies the life cycle is exactly the opposite. It may be the hottest thing today, and in one year it's already outdated, and in two years you're made fun of for still using it."

Montblanc will be selling a $390
"e-Strap," a stainless steel display designed to be attached to the watch band and worn on the underside of the wrist. Functionality is pretty limited compared to something like Apple Watch.

And here's Johann Rupert, owner of Montblanc: "I love Apple, but just when I've gone and set everything up for an iPhone 5, the iPhone 6 is coming out and the cords change. That is not to say the Apple Watch is not a great product. I predict it will do very well, but I don't think that customers are going to be ecstatic to throw away watches in one to two years when the technology is obsolete."

I thought those two quotes summed up the luxury watch industry's reaction to Apple Watch pretty well. Jean-Claude Biver of TAG Heuer has said something similar, unsure how to compete with something that isn't timeless. It's not that technology is foreign to luxury watchmakers, but I suspect software and the fast-pace of change found in technology are creating headaches. An iPhone 5 doesn't become obsolete in two years on its own, but rather a legitimately better device in the market helps to make it obsolete. The same dynamic is not found in the watch market. 

Such uneasiness towards Apple Watch originates from the changing value proposition found in the luxury watch industry. With Apple Watch, consumers can begin valuing utility on the wrist. A luxury watch's timelessness was something that you were required to value if you wanted high-end jewelry for the wrist.

I suspect we are entering an era where people are still going to want the jewelry aspect found in their old watch, including the craftsmanship, but no longer place the same kind of value on a device's timelessness. For an industry built on timelessness, you can start to see how the Apple Watch spells trouble.  

The other common reaction that I'm seeing related to Apple Watch is that the product increases awareness for other timepieces and wearables, almost like the Apple Watch is a gateway drug for "real" watches. I'm not so sure about that. After using Apple Watch, I don't have a greater appreciation for wearables or traditional luxury watches. If anything, the feeling is less. I just don't look at the Apple Watch as a watch.  

If I craved something that looked more refined or polished, I could just upgrade from the Sport to Watch collection or change watch bands, and that type of reasoning is why I think Apple will actually keep the innovation and updates pretty vibrant for the higher-end Watch models. The Watch and Edition collections will likely account for 80% of Apple Watch profits despite only accounting for 20% of sales.

Consensus already assumes the low-end luxury Watch market (watches selling in the $200-$1000) is in trouble, but very few people will go on record and discuss how the overall watch market, including watches sold at higher prices, is in trouble because of devices that add utility to the wrist. The problem may not necessarily be that their current customers will run out and buy an Apple Watch, but that young professionals end up valuing utility over the traits the luxury watch market have traditionally marketed.

If new money stops flowing to the luxury watch market, the environment will become very difficult.

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