Smart Watches: A Fashion Statement That Only the Select Few Can Afford

Despite the still very weak ‘performance’ of smart watches, which have not, at least for now, achieved what was expected of them, this fresh market dominated by Apple (holding about half of the market) has not yet given up the fight for the attention of advanced gadget enthusiasts. Even the entry of this large company into that delicate area has not brought smart watches the popularity among users that phones or tablets enjoy, but it is too early to write off this attempt to create a new cash cow in consumer electronics. The current underperformance is actually understandable – the smart watch in an era of increasingly larger portable screens is simply too small, impractical, and offers functions that are already available on other devices. Data confirms this: according to IDC, a market research firm, the number of smart watch shipments fell for the first time in the second quarter of this year, by 32 percent, and a similar trend is expected for the entire year. The saturation of the market with smart technology is such that nothing but revolutionary can attract mass interest anymore, but it seems that manufacturers are largely aware of this, which is why they are relying more on marketing and more careful market segmentation.

Smart watches today are not a new mass market hit, but rather a ‘side gig’, or a smaller, yet new source of revenue with the potential for stronger growth in the future. In this case, Apple has immediately decided to cover as many pockets and tastes as possible with a wide range of prices and models, keeping in mind the segment that will likely be the most profitable, at least in terms of margin – expensive, designer watches. Although the Apple Watch can be obtained in America for a few hundred dollars, the company has also offered very expensive models from the beginning that exceed a thousand dollars. Unlike mobile phones, which primarily target a very broad audience, the real potential of smart watches seems to lie in emphasizing greater purchasing power. Their advantage is not so much in revolutionary technology, practicality, or competition (or pairing) with portable devices as it is in design and luxury.

According to all indications, the most profitable will be as a fashion statement that only the select few can afford, which Apple quickly recognized. The result is a collaboration with the French luxury fashion manufacturer Hermès, with watches priced at around 1500 dollars each. It may sound like a lot for that device, but it is a real bargain compared to the 17 thousand dollar Apple Watch Edition, a special edition made of 18-karat gold produced last year in limited quantities and available at select retail locations. The new series in that collection is based on white ceramic and costs around 1400 dollars. Competition is heating up as the profiling of the smart watch towards the luxury category has begun to attract established players like Michael Kors. Although his entry into the story is currently very modest, Kors’ Access is priced at an affordable 350 dollars, much less than the competition. Movado Bold Motion, designed by HP, compatible with iOS and Android, is priced at nearly 700 dollars, while the equally compatible Tag Heuer Connected costs 1500 dollars. The market is developing in line with the expectations of IDC analysts who wrote in July that ‘perhaps one of the biggest oversights in the smart phone market is the absence of brands from traditional watch manufacturers among the largest sellers.’

Their lagging is not incomprehensible; it is an industry based on tradition where smart watches still seem like something for tech enthusiasts, not ‘fashionistas’, as Kors himself admitted. However, this is changing, and Apple is beginning to face entirely new competition that it has not been accustomed to until now. – The trend seems to be changing, albeit slowly, after key sellers like Casio, Fossil, and Tag Heuer have introduced their models – believes Ramon T. Llamas, an IDC analyst. In his opinion, combining design, practicality, and functionality with recognizable brands and established distribution could stimulate more significant growth in a market that is currently struggling for a clear identity. Whether it is a product for tech enthusiasts or fashion-conscious individuals willing to spend large sums on a smart watch remains to be determined by the market. Apple, for example, is currently trying to sit on two chairs by covering the entire range, but it somehow seems that it will not be able to compete in the highest class. Its brand is almost inextricably linked to technology, high-end, but technology, and it is less likely that fashion-conscious individuals in search of a new style statement will choose Apple, especially after the market has begun to fill with serious fashion players. Therefore, a big question remains whether the unreasonably high price will be sufficient for survival in that highest segment; it is more likely that the current market leader will maintain that position with a ‘sport line’, which is much more affordable and for which it already has an established fan base.

An interesting detail is that Samsung and Apple raise the prices of their watches with excessive amounts of gold and diamonds, which repels people with taste, while their competition from the fashion world mainly plays on their brand and decency. Although the smart watch market is developing significantly slower than phones or tablets, analysts expect that it will still offer profitable growth in the medium term, so it seems that Apple has once again outsmarted the competition and established dominance. However, this market is a bit more sophisticated and segmented in marketing, leaving room for established watch manufacturers, especially in the luxury segment.