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Fashion

Luxury smartwatch brands can’t compete with Apple

By Hilary Milnes
May 10, 2016

Luxury smartwatches are fighting a two-front battle. They have to be desirable and well-crafted timepieces. And they have to be easy-to-use tech products that consumers will actually find useful. Often, with watches, customers can have one but not the other.

“Luxury watches and smartwatches are different segments that appeal to different consumers,” said Will McKitterick, senior analyst for mobile apps and platforms at Business Insider Intelligence. While the luxury watch buyer is looking for a legacy brand name and a timelessness that calls for a slow replacement cycle, McKitterick said, smartwatches are anchored by technology that needs to be constantly updated in order to be relevant.

Still, when Apple enters a space as it did with the release of the Apple Watch in 2015, everyone begins to pay attention to it. Luxury brands have been toeing their way into the smartwatch territory over the past year with a few variations: Tag Heuer released a $1,500 luxury smartwatch, the Tag Heuer Connected, in September, which runs on the Android platform. Michael Kors’ Access Kors, an Android-powered line of smartwatches that retail for $395, will be released this fall. Then there are the startups looking to make their own name as a company straddling the balance between luxury and technology, like Olio Devices, a company selling $600 digital watches that will be sold in Nordstrom locations this year.

While it’s no surprise that brands want a piece of the luxury smartwatch pie, angling to compete with Apple in the technology space is a risky gambit.

“Watch companies are realizing it might be worthwhile to bring the smartwatch into their own devices,” said McKitterick. “But it’s very difficult for these companies that don’t have a background in building operating systems and software to integrate that level of sophistication into their devices.” (Indeed, Nike offers a cautionary tale with Fuelband. The apparel giant tried to become a tech company, but was forced to admit failure in 2014.)

Customer acquisition platform Fluent released a smartwatch survey in April, and found that among those surveyed, 8 percent owned Apple Watches. Of those who did own, just 11 percent purchased it as a fashion item, while a combined 77 percent purchased it for its features or convenience.

“The smartwatch sector needs to be approached electronics-first,” said Fluent CMO Jordan Cohen. “The people who want a Tag Heuer watch are looking for a traditional watch, while the people that want the wearable are looking for top functionality. There’s generally little overlap.”

New players in the space, like Olio Devices, they’re not saddled with the burden of changing consumers’ perception, whether it’s wanting them to buy into the idea that a tech product can be fashionable, or that a luxury watchmaker can make tech products.

“The purpose behind not joining Apple or Google or any company that is established in the space is because they’re rooted in one side,” said Olio CEO and co-founder Steve Jacobs. “When we started Olio, we could start with a clean sheet of paper and be on both sides of luxury and tech.”

Olio watches are made from traditional Swiss watch materials like stainless steel, 24-karat gold and Italian leathers and start at $595. The watches are Bluetooth-enabled and are compatible with both iPhone and Android. Without disclosing specifics, Jacobs said the company has so far sold “thousands” of units of its Model One watch, selling out four different batches of product, and the brand went on sale in five Nordstrom locations, and its online store, on May 7. Nordstrom buyer Christina Watson said that the company is stepping into the smartwatch sector because it’s an “industry game changer.”

“It’s going to be really hard to go up against well-established tech companies like Apple, and then existing luxury watches at the same time,” said McKitterick. “Apple has captured a large share of the market even at this early point.” Business Insider Intelligence projects that by 2020, the Apple Watch will account for 40 percent of the smartwatch industry, but McKitterick added that even Apple is having a hard time convincing people that they need a third screen.

For now, luxury watchmakers shouldn’t feel so threatened by Apple eating their lunch.

“Apple Watch is a new sector of the industry: wearables. They’re not meant to compete with luxury timepieces,” said Cohen.

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