With the launch of the Apple Watch now imminent, the connected watches market has been displaying a lot of dynamism, coupled with wide diversity of devices on offer. So will the advent of the giant newcomer to this market sound the death-knell for ultra-specialised gadgets and steer demand towards multi-purpose wrist-worn equipment?

[Study] Connected watches: the hour of truth approaches?

Apple launched the iPhone in 2007 and the iPad in 2010, so we are justified in wondering whether the connected device leader might be about to take the watch market to new heights in 2015 with the Apple Watch. However that may be, experts in the field agree that the smart watch market is in a dynamic phase, a view which the figures do nothing to contradict. According to independent research company Smartwatch Group,  around forty companies launched on to this niche market in 2013, selling over 3 million units and generating some $700 million in turnover. In 2014, the number of watches sold reached 4 million, and could really start to soar in 2015 with sales of around 26 million devices, according to forecasts by market research institute GFK. ‟We can expect double digit growth for the next three to four years, with a peak between next year and the following year,” predicts Laurent Michaud, Head of Consumer Electronics & Digital Entertainment at European digital economy think tank IDATE.

Today the large number of players already in the market are selling a diverse range of wrist-worn devices. However, Xavier de la Croix, Director of the Watch Business Unit at Casio France, argues that ‟the connected watches market isn’t yet a market, it’s a small niche that isn’t yet profitable. This is mainly due to three problem areas: design, shock and water resistance, and power autonomy.” While many consumers find the ‘gadget’ aspect appealing, smart watches so far still lack many of the most attractive features – including durability and the value-store aspect – of a traditional high-quality timepiece that is handed down from generation to generation. In an interview with the New York Times, Jean-Claude Biver, President of the LVMH Watch Division, summarised the situation thus: ‟Technology is wonderful, it’s most impressive. But there is one thing that it lacks: eternity”.

However, if smart watches manage to surmount these difficulties, they could well become the new smart fashionable device and many people like Laurent Michaud believe that the advent of the Apple Watch will give the market the boost it needs. ‟Every Apple product arouses great expectations because we’ve grown used to seeing its products disrupt markets, whether we’re talking about business models, design, content or functionality. The factors that made smartphones and then tablets so popular could also boost the popularity of connected watches,” argues the IDATE expert. This view is shared by Frédéric Saint-Etienne, Spokesman and Head of Communication at the French arm of US GPS navigation systems company Garmin: ‟Apple is one of the players that are able to educate the market. The company is adept at giving its products real credibility and teaching its customers how to use them.”

Les montres connectées, de vrais mini-smartphones

Linked to your smartphone, a smart watch enables you to send messages, listen to music and manage your diary

A segmented market ?

While many people are expecting Apple’s latest brainchild to breathe new life into the market, the Apple Watch could also change its entire structure. To date, the products which the smart watch audience find most appealing have mainly been ultra-specialised devices designed for a specific use. However, the Apple Watch is designed for more general use, and if it catches on it may well steer demand towards multi-usage smart watches going forward. Laurent Michaud feels that ‟it’s likely that Apple will set the pace. However, it’s difficult to predict the impact of the launch of the Apple Watch on the industry. We’ll probably start to see segmentation in the market, but the specialised players may perhaps find it hard to survive when they have to compete with watches offering a much greater range of functionality.”

In any case it is very likely that, as usually happens whenever a new market arises, there will be a significant increase in the number of players up to the point where the best begin to stand out and gradually eclipse all the others. ‟Not everyone will succeed. The ecosystem will be a deciding factor. The company that manages to offer the best customer experience in a varied ecosystem – helping us to manage all our social networks seamlessly, giving us access to games, music, and even video – will emerge as the winner,” predicts the IDATE expert. Xavier de la Croix is even more cautious about the success of specialised devices going forward: ‟If you look at the connected wristband sector, you see that two years ago there was real enthusiasm for these products. But customers often give up using them after just a few months. There is still no overall ecosystem.”  Most of the experts concur in foreseeing a scenario in which the market moves towards increasing domination by multi-purpose wrist-worn devices and that firms which manage to forge a solid ecosystem providing first-rate data management will stand out from the rest. Frédéric Saint-Etienne believes that this is where the key to success lies. ‟We’re seeing players from many different fields – including watchmakers, mobile device players and sports goods manufacturers – arrive on the market. They all contribute their own know-how, but it’s clear that data is what makes them all tick. Will the product be able to record, interpret and make available the data gathered and then do something with it? Today the market is converging on the data management aspect.”

To date, wrist-worn devices designed for specific uses still dominate the market. Sports and fitness-oriented smart watches are notably very popular with the general public. In 2013 such devices accounted for only a fifth of the market, but in 2014 they garnered half of all smart watch sales, Smartwatch Group figures reveal. Among the equipment in this segment, the products from Nike, Sony and Garmin, with its Vivoactive watch, all measure your sports/fitness performance, and come with apps specially geared to running, cycling, swimming and even golf. There are also watches that focus on the world of music, such as Casio’s G’Mix, which enables you to browse your smartphone music library from your watch and also to obtain identification of music that you hear playing in your vicinity.

Meanwhile other wristbands are intended to ensure their wearer’s safety. Swiss company Limmex has a watch that is specially designed for elderly people, enabling them to alert friends or family when they are in difficulty.  At the other end of the age-scale, Ohio, US-based Filip, has developed a watch for children which has a simplified interface and a GPS so that parents can locate their offspring at all times. The general feeling among the experts is however that the Apple Watch is likely to turn the market in favour of more multi-purpose devices.

4 montres connectées aux fonctionnalités différentes

Top left Casio’s G'Mix; top right Pebble Technology’s Pebble Time; bottom left, the Apple Watch; bottom right, the Horological Smartwatch by Swiss watchmaker Frederique Constant

Market attracting telephone giants, start-ups and watchmakers

The more generalist smart watch market could almost be described as a mini-smartphone market, and this is the area that the telephone giants seem to have their eye on. Whether we are talking about Samsung, with its Gear S, or Sony and its SmartWatch, or LG, Asus, Wiko, Motorola and – from this month onward – Apple, all are looking to seize the lion’s share of the market. Their connected watches enable you to receive all notifications from the smartphone to which they are linked, to send messages and emails. With the Apple Watch you will even be able to carry out remote transactions using Apple Pay. Some watches use a Bluetooth connection to link them to your smartphone so as to send messages and receive calls, while others, such as Samsung’s Gear S, have their own cell connection.

In addition a few startups are in there competing with the smartphone giants. US startup Pebble enjoyed a roaring success with its recent Kickstarter campaign. During this month-long crowdfunding campaign to finance further development of its Pebble Time watch, it raised over $20 million. This watch differentiates itself with a touchscreen using electronic ink (‘e-paper’), which means that it consumes far less power that its competitors’ digital screens.

Campagne Pebble sur Kickstarter

Kickstarter campaign for Pebble Time. The $500,000 target was reached in a record 30 minutes.

So where do traditional watchmakers fit into the scene? ‟At first they were taken by surprise. New players entered the market with disruptive innovations, and these traditional watchmakers found it hard to bounce back,” explains Laurent Michaud, pointing out that: ‟Some watch manufacturers have now started to react.” Swatch is a clear example. The company has developed a connected watch designed for beach volleyball players, with launch scheduled for this summer, which will be able to run without recharging for an incredible nine months. Meanwhile Hewlett Packard has teamed up with fashion designer Michael Bastian to produce an elegant classical watch boasting high-tech functionality. It will let you read messages, give you sports and stock exchange information, a calendar, and so on. This is undoubtedly the area where traditional watchmakers can re-gain some market share by combining the sentimental and symbolic value of high-quality watches with all the modern convenience of the smart watch. In the New York Times article, Jean-Claude Biver confirmed his intention to offer a range of luxury smart watches, with one proviso: ‟They must be different and unique; if they aren’t, we should leave the floor to Samsung and Apple,” In any case, Apple has already set its sights on this niche, with an 18-carat gold version of the Apple Watch costing a whopping $11,000. Today some companies seem determined to bring out a watch as a ‘me too’ exercise to show they are on the ball, but it remains to be seen whether the smart watches market will really drive growth in the watch industry as a whole. ‟It’ll take a while to see”, Laurent Michaud told us. ‟And if the business potential for smart watches proves positive, there are two possible ways to go. Watchmakers can try to grow organically, developing their own competitive products, or they can opt for external growth by acquiring other firms”.

 By Pauline Canteneur and Guillaume Renouard