No one seriously expected the Apple Watch to take on the high end watchmakers. The CEO of Montblanc, Jerome Lambert has said:
“The Apple Watch, smartwatches, the Google watches - 99 percent are under $500. In that price zone, the relevance for fine watchmaking is zero.”
He's right - the luxury watch market is one in which appearance is paramount. Actual style and functionality have always been secondary to the cachet of having a very expensive chunk of metal on your wrist.
According to Bloomberg, one luxury watch seller in Paris sold no watches from any brand between the terror attacks there in November 2015 and mid January 2016. While the attacks may have contributed, the problem is industry-wide, with a global decline of 3.3% in 2015 - the first slowdown in sales for the industry since the GFC.
Borrowing your brand
It's not an uncommon ploy for any industry that wants to create a feeling of exclusivity, but the luxury watch market has always relied on celebrity endorsements as a primary part of their marketing.
Omega has recently signed Eddie Redmayne as a brand ambassador, a term which I unpack to mean 'brand lender'. In the balance of brand recognition, celebrities are financially compensated for publicly lending their superior brand power to that of a lesser brand. While luxury watchmakers might have more enduring brands, they simply don't pack the punch of a top celebrity at the height of their fame.
Which means that while these brands have long-term recognition they don't have much brand power.
It's the mark of a weak brand where your own brand pillars can be subverted by someone else's brand.
The luxury brand formula
(Brand Reach ÷ Perception of Expense) × Perception of Quality = Brand Power
In this case perception of expense is a positive thing, imbuing the product with a feel of luxury. All numbers are subjective - which is why it works: each of us have a different perception of expense and quality, and the brand's penetration into our lives is variable. Your own brand power score will be different from my own.
Let's use the formula to score a few companies and see how they fare:
BR = 100, PoE = 40, PoQ = 60
(100 ÷ 40) × 60 = 150
BR = 40, PoE = 60, PoQ = 80
(40 ÷ 60) × 80 = 53
BR = 50, PoE=90, PoQ = 100
(50 ÷ 90) × 100 = 56
Of course in each individual, these perceptual 'ratings' vary. There are those outliers for whom the appearance of wealth is so disproporionatly important that the formula inverts itself - in which case Rolex becomes a clear winner, Omega is an alsoran and the Apple Watch would be unthinkable.
But it effectively demonstrates why H. Moser, a tiny independent high-end watchmaker would build a near-exact replica of the Apple Watch. It's less an attempt to cash in on Apple's design, more of a cheeky statement: After the 2014 announcement of the Apple Watch Moser's peers were dismissive of its potential to erode their market. 2015 was the nose-bloodying jab from a competitor during their first bout in the ring. No doubt it sets a worrying precedent.
It's not about the tech
While Tag Heuer struggle with techno-toys of their own, almost all of the luxury watch market stand in contrast, committed to the mechanical roadmap.
They're not wrong.
We haven't all been waiting with bated breath for the era of Dick Tracy wristphones. Normal humans simply aren't that excited about wearable tech for its own sake, and for the most part those who don't already own an Apple Watch have next to no idea of its actual featureset.
That's because they don't care about the features.
Apple have spent the last decade positioning themselves as the largest brand in the world, creating a raft of aspirational products. I don't need to re-iterate the success of the iPhone or the amazing fact that the Apple Mac even exists today, let alone that its an object of desire for fashionable computer users everywhere.
People simply want Apple products - irrespective of whether those products are actually the right ones for them.
That’s the power of a strong brand. Your products have mindshare, which will always convert to a greater percentage of marketshare. Without mindshare, you’re not even on the table when it comes time for customers to make a purchasing decision.
And that's what the luxury watchmakers need to recreate if they want to continue to compete against an arguably lesser quality product.