Smartwatches Will Never Replace Luxury

Luxury is in the DNA of a product, and smartwatches are from another planet.

A luxury watch that has smartwatch functionality is just that, a luxurious apparel item that has been augmented to have additional functionality, but at the core, it remains a traditional luxury watch.

Innovation coming out of Silicon Valley has resulted in major global disruptions to many industries that were previously considered impregnable. Automotive, telecommunications, finance, music, mass media, and education have all been wildly altered as a result of the seemingly steady stream of life-altering technology flowing out of Northern California. Despite this, the luxury goods industry had gone largely unaffected, with the more conservative aspects of jewelry and accessories going largely unchallenged.

That all changed with the launch of the Apple Watch, an event that marked the first time that this luxury category was directly threatened by the technological giants of Silicon Valley.

While part of the traditional luxury watch industry was quick to react to this potential disruption from Apple, many traditionalists were just as quick to dismiss the digital revolution of traditional watches as nonsense. Skeptics of the supposed digital watch revolution claimed that traditional luxury watches and digital smartwatches are inherently incompatible, and thus the tradition of fine watchmaking craftsmanship is irreplaceable. On the other hand, many European watchmakers took the threat seriously and charted a new course to keep their business relevant.

Photo by Colleen at Pixabay

The debate on the future and strategy of the luxury watch continues today, and whoever gets it right will likely stand to profit greatly, while those who choose the wrong path risk becoming irrelevant.

The Clocktower & The Microchip

In 2015, the first Apple Watch was released. It was a digital timepiece that was neither mechanical nor the typical quartz electronic device, and the new timekeeper was much more than just a digital time display, as it provided its owner with an entirely new world of functionalities, previously only seen in sci-fi fantasy or comic books. Apple dubbed this new device a smartwatch, a nod to the smartphone, its most successful product at the time.

This new high-tech apparel quickly spawned a new debate across the entire watch industry and raised many questions about the future of what was previously perceived to be timeless devices.

While many watch producers found shelter in the high price of the Apple Watch, many traditional luxury watchmakers began to question the future of their products, as their watches were often far more expensive than even the Apple Watch. Thus began the debate if to whether or not the luxury watch would be next to be rendered obsolete by the technological revolution.

Would You Like A Side of Luxury With That?

The big questions today for luxury watchmakers are, will many traditional luxury watch brands be greatly affected by digital disruption, and if so, which brands, why, and most importantly, when?

To obtain the answer to these questions, we can look at the semiotics and luxury codes that shape and define luxury goods, particularly luxury watches.

Luxury codes are pretty straightforward and identify the core elements for every single luxury brand. The codes themselves are based on the notions of timelessness, customers as believers, authenticity, and heritage.

When it comes to luxury watches, semiotics help us understand that the watch as an object will be perceived as either hedonistic, symbolic, or statutory.

Even young brands must link themselves to a commonly shared heritage

Also of importance is that all luxury watches fall into four different categories regarding the functionality of the device. The four functional categories are the companion watch, the legacy watch, the tradition watch, and the accomplishment watch.

All of this can seem a bit technical, but understanding these mechanisms behind customer purchasing decisions of luxury watches is what allows us to predict whether or not digital technology can alter those mechanisms.

A Time For Pieces

The luxury industry in general only produces goods and services that are not essential for survival, and as a result, the luxury industry is vulnerable to social and cultural trends in society and, therefore, must respond accordingly in order to stay competitive.

In the contemporary luxury goods business, there is a growing awareness among eco-minded customers who care about the impact of their choices upon the environment and society. Many customers have come to expect products that are environmentally friendly, and meet minimum ethical requirements. Luxury companies, therefore, have a motive to be concerned about their perceived impact on society and have a warrant for devoting resources towards what their customers deem important.

Photo by Alexey Sukhariev on Unsplash

In a study published in 2017, it was determined that by analyzing the type of narratives that were being used during customer interviews in regards to their own luxury watches, three different semiotic approaches could be easily distinguished. Many of the respondents focused on the objective characteristics of their timepiece such as rarity, mechanics, and origins. Others, however, tended to explain more about the temporal context on which the watch depended.

In other words, some customers tended to consider the tangible qualities of the watch, while others were more aware of the social appropriateness such as wearing it to a wedding, a nice dinner, a business event, or other social gatherings.

Essentially, the study found that many respondents placed a high value on the social dimension of their watch, and greatly considered what class and category of people were associated with a specific brand and style of watch. Perhaps most important was that the study captured the semiotic temporal ideologies that customers were considering when receiving the various messages and symbols of luxury watches.

In other words, the study captured the emotional motivations for why people spend a lot of money on watches.

Without a Story, It’s Just Expensive Metal

In order to be legitimate, luxury products must always impart a sense of timelessness. This sense of timelessness is typically embodied by the design of the luxury product itself, but also in the way that a brand communicates about its universe and vision.

In the case of luxury watchmaking, brands must routinely communicate about their history and heritage, as this creates a sense of continuity and durability. More importantly, this connection to history sends the message to the customer that they are a legitimate luxury watchmaker. This doesn’t necessarily mean that in order to be successful, a luxury watch brand must have existed for a long time. It does, however, mean that even young brands must link themselves to a commonly shared heritage.

A luxury watch must be something more than just another industrial product, otherwise it is simply not legitimate in the luxury world.

An example of this connection is easily seen in the label that states Swiss Made on any watch. If a luxury watch brand uses this label, then it means that it is adhering to a particular quality and precision that exists within the broader Swiss watchmaking tradition, regardless of the actual age of the brand itself. Therefore, a young brand claiming that it is Swiss-made positions itself not as a pioneer of this heritage, but as an ardent follower of those shared values.

This concept is important for new entrants in the luxury watch space to attain legitimacy within the overall category, while still being able to stand out on their own as a young luxury watch brand. However, it is important that a young brand be careful about how they employ this communication strategy, since simply claiming heritage does not provide effective differentiation from competitors. For this reason, young brands often find themselves taking a unique approach for providing the link to tradition and heritage.

Photo by mauriciodss on Pixabay

We can observe this marketing approach in the brands of HYT and Bell & Ross. In the case of HYT, the brand was launched in 2012 and today is selling watches at prices starting from $25,000. HYT has no historical heritage of its own, however, it has managed to create its own philosophy about what it calls fluid time, and though this has been connecting to the historical heritage of general watchmaking. Bell & Ross was first created during1992 in Paris, however, in order to obtain the label Swiss Made, the company now produces its watches in La Chaux de Fond, a town on the Swiss side of the French/Swiss border. The watches could just as easily be made on the French side, however, the brand would not be able to claim itself as a Swiss-made watchmaker.

The world of luxury is characterized by the connection of the brand product to tradition and heritage, the brand personality, and brand communication.

One luxury code that is particularly well represented in the luxury watch industry is that the final customer is more than just a consumer, and is an admirer, a follower, and a fan. That a watch brand customer is willing to spend more than $10,000 for a steel watch indeed suggests devotion to a set of shared values. The world of high-end watchmaking is still reserved for experts and enthusiasts, as it is an exclusive and relatively closed environment with strong barriers to entry.

Electricity Is Fleeting, Watches Are Forever

In luxury watchmaking, craftsmanship is what establishes a watch brand as a legitimate luxury producer, as the watch must connect to a sense of heritage in the trade skill of actually building a watch. This in turn increases the quality perception of the watch and thus the value. In other words, a luxury watch must be something more than just another industrial product, otherwise it is simply not legitimate in the luxury world.

Therefore, the relationship between the luxury watch craftsman and the customer depends on the notion of authenticity, which is really just another way of describing legitimacy. It is no accident that the most prestigious luxury watch brands have their headquarters in remote areas located around the French/Swiss border, specifically in Jura, an area considered home to what we now know as the watchmaking tradition. By associating themselves with this region, brands establish themselves as authentic, since this association connects them to the timeless heritage and tradition of the world’s finest watchmakers.

Why do people buy luxury watches?

Through this analysis, we know that the primary motivating factors of luxury watch consumption are functionality, aesthetics, and social status.

Functionality is perhaps the most obvious factor, as a watch is expected to accurately display the time. Not as clear, however, is the expectation of how the watch displays time, and via what mechanical functions and performances. In this category, the seller tends to focus on such things as battery life, durability, comfort, and pragmatism. Functional luxury watches might display the time, but they also might display the day, or have built-in world clocks.

Aesthetics then is the more intangible and hedonic elements of a customer’s motivation. In these instances, the watch itself is oftentimes considered as a piece of jewelry, with appearance and brand being more important than the actual function of the watch. These types of watches can be used as accessories, to complement a specific outfit, and can oftentimes be companion watches.

The Apple Watch may keep perfect time, but it will not be timeless.

Luxury is typically defined by exclusivity, which is why major luxury brands advertise in major sporting events, and to people who could never afford their products. The goal of these campaigns is not to generate sales, but rather to elevate the brand above and beyond the reach of the ordinary consumer, not just in the buyer’s eyes, but in everyone’s eyes. This type of practice strikes at the core of socially driven motivation for people to become luxury customers, as the luxury industry is unique in the sense that the needs of customers are often driven by a willingness to fulfill a symbolic functional requirement, rather than obtain a useful functional utility.

As another example, when a customer buys a Rolex submariner, the purchased object is not only a watch, it is a device that can withstand full immersion in water up to depths of 300 meters. Most people purchasing this watch will never take it under the depths of the ocean, however, they have the ability to do so. This is a symbolic functional requirement as it is entirely unnecessary, yet the function itself is a key part of the motivation for the customer to purchase it in the first place. This type of consumption impulse, therefore, falls into the motivation of social status, rather than functional. This type of luxury consumption satisfies a customer’s psychological desire to become the desired self, as having a symbolic function creates a personal image and style that allows the owner to come close to what they want to be. In the instance of the Rolex Submariner, the owner likes the idea of being able to dive, and perhaps of actually engaging in the activity, even if they never actually will.

It is because of motivations such as this that certainly not all luxury watch consumers can be considered as fine connoisseurs enjoying the horological product for what it concretely is, namely a technical performance tool which has been developed through time and history. There is a significant part of the luxury watch clientele that is buying watches for their social meaning, making this category an authentic luxury sector where conspicuous motivation is very present.

Photo by qimono at Pixabay

Customers purchasing watches for functional reasons are principally seduced by the mechanical aspect and the product’s complexity, and can be described as connoisseurs who are interested in a brand especially for its contribution to the common watchmaking history, and not only for its marketing and advertising potential. Customers attracted by the design and the appearance of the watch tend to be those who wear a watch but still check the time on their phones, and therefore they wear it only for the beauty of the object.

The Potential For Digital Disruption of Luxury Watches

For many luxury watchmakers, smartwatches may indeed threaten to disrupt the industry primarily due to the technology industry’s strong innovation potential. Traditional watchmaking places a strong emphasis on brand roots, traditions, and heritage, and even the younger new entrants in the luxury watch business must subscribe to this class heritage of watchmaking, or risk being deemed illegitimate.

Whereas all Rolex watches are expensive, and exclusive, the Apple Watch has various versions that sell to vastly different customer profiles.

On the other hand, Apple has a history of creating market demand where there previously was none. Apple Founder and former CEO Steve Jobs was famously quoted as saying that he didn’t trust market research because he believed that consumers didn’t actually know what they wanted until they saw it. The luxury watch industry must conform to established norms and values of the luxury markets, whereas Apple is free to attack the status quo and time-honored traditions that have kept certain brands exclusive. Apple has already attempted to enter the luxury market via its partnership with Hermes, and several traditional watchmakers have tried to keep up by creating their own smartwatches.

At first glance, the smartwatch does not seem an immediate threat, as according to a survey conducted around the time of the Apple Watch launch in 2015, 90% of traditional luxury watch owners stated that they were not immediately interested in the purchase of the Apple Watch. However, two-thirds of all respondents in the same study did mention that they will consider the Apple Watch when making future purchasing decisions. At the very least, this should behoove the luxury watch industry to consider the Apple Watch as a potential future competitor, and to better understand the motivation for purchasing it in the first place.

It’s Not a Rolex

Out of the three primary motivating factors for purchasing luxury watches, smartwatches definitely fall into the functional category. While they are, indeed, successful tools that may be specialized in a number of functions, namely connectivity, they cannot appeal to the consumer motivations of aesthetics and social status. If Apple is going to compete in the luxury consumer market, they will need to penetrate the younger market, since the older demographics tend to be far more rigid and inflexible to innovation when it comes to luxury purchases.

Since we know that luxury authenticity is rooted in craftsmanship, we can safely say that for this reason, the Apple Watch will struggle to position itself as a true luxury watch.

Apple and the smartwatch do have one primary weakness, and that is obsolescence. Technology products are notorious for not lasting very long, and once they break, they are essentially worthless, whereas traditional watches can function for decades, or longer, and if they break, there is a strong likelihood that they can be repaired. Ephemerality can, therefore, indeed be considered as a major weakness of the smartwatch when competing with credible luxury products. The Apple Watch may keep perfect time, but it will not be timeless.

The most expensive Apple Watch to date was made with rose gold and sapphire crystal, and had a price tag of around $20,000 USD. This one version of the Apple Watch is indeed in the same price range as major traditional luxury watch producers. However, unlike the traditional luxury competitors, the Apple Watch will become technologically obsolete in a few years, whereas the traditional luxury watches will be timeless, and may actually increase in value as time passes.

Photo by Carlos Esteves on Unsplash

Unlike most luxury brands, the Apple Watch is not positioned exclusively for the luxury category. Whereas all Rolex watches are expensive and exclusive, the Apple Watch has various versions that sell to vastly different customer profiles. The rose gold Apple Watch for instance may sell to a wealthy individual or a celebrity, while the most affordable version of the watch might be adorned by a high school student with part-time employment. This certainly does not help Apple position itself as a luxury brand.

Are luxury and tech compatible devices?

Both smartwatches and traditional watches are inspired by the need for control, and the human instinct to master time. Smartwatches expand upon this concept and provide users with added functionality for achieving this. Examples of this are the agenda, reminders, notifications, and personal monitoring. The Apple Watch gives its owner the ability to be far more efficient and available while enhancing their ability to measure their social, physical, and professional performance. None of these functions, however, are enough to make the Apple Watch a legitimate luxury product. Since we know that luxury authenticity is rooted in craftsmanship, we can safely say that for this reason, the Apple Watch will struggle to position itself as a true luxury watch.

A Rolex will almost certainly be passed from grandfather to grandson, whereas a single customer will see several generations of Apple Watches processed through recycling centers in just a couple of decades.

Another problem for the Apple Watch is that several market studies have shown that luxury customers tend to develop a very special emotional relationship to the traditional luxury watch and that the watch itself arouses in the customer a sense of attachment and fidelity. Many luxury watch customers also have a near ethereal attachment to the watch, which oftentimes imparts a spiritual quality to the object itself. This customer perception that the watch is in a sense alive, invokes a profound sense of timelessness and authenticity. Because of the electronic and obsolescence factors, Apple cannot recreate this experience with a digital watch.

Photo by Luke Chesser on Unsplash

In the instance of a traditional luxury watch, an artist designs and builds something following centuries-old practices that have consistently delivered the utmost quality and value. The smartwatch, as it is today, is at least in part mass-produced in a factory that utilizes many different cost savings techniques. Furthermore, standardized software must be loaded onto the watch, and the device must be charged with electricity in order to provide any functionality.

Simply put, traditional watches are very good at creating emotional attachment, while smartwatches struggle to do so, primarily because there is no sense of heritage, craftsmanship, or timelessness.

Rarity is also very important to the luxury industry as a whole, and this is especially true for jewelry and watches. This concept of rarity comes from a perception that something is difficult to find and craft, and luxury watches accomplish this further by using limited, hand-selected, and therefore prestigious raw materials. Add to this formula intense craftsmanship that requires a tremendous amount of skill, and you have an exclusive luxury watch.

Smartwatches, on the other hand, don’t follow this rarity principle that applies to luxury, simply because they cannot. In order to maintain and manage a cost-efficient supply chain, companies like Apple must use economies of scale, and therefore it is impossible for them to use small quantities of limited materials in their manufacturing. Indeed, as high-tech objects, the Apple Watch is produced on a mass-scale and is not the result of any kind of particular craftsmanship. For this reason, it is impossible for the smartwatch to generate an emotional connection based on the production method.

In order to be legitimate, the luxury watch must be perceived as timeless, and therefore, must be durable enough to last for a very long time, but also must have a design and appearance that are equally as timeless. Customers and brands oftentimes use the term classic to describe this principle. Smartwatches are in total contradiction of this because they will be functionally obsolete in only a few years, and further cannot escape the need for a digital display, which will never be timeless.

The luxury watch category is to watches what vinyl is to music.

Timelessness can only be built at the very moment when the technology is mature, and as previously mentioned, the element of transmission and durability between generations is also very important for luxury watch consumers. A Rolex will almost certainly be passed from grandfather to grandson, whereas a single customer will see several generations of Apple Watches processed through recycling centers in just a couple of decades. Because of this principle, luxury watches oftentimes increase in value as time goes on, whereas Apple Watches become worthless within a single decade.

Implications to Luxury Marketing

The smartwatch, in particular the Apple Watch, is to the watch industry what iTunes and Spotify were to the music industry. These innovations, while not brand new inventions, completely changed the market and consumption habits of music listeners. However, the traditional routes of music distribution prior to these online platforms were largely functional. In the luxury watch industry, history, heritage, and tradition are very important in order to attain legitimacy, and therefore, the disruption will not be felt as profoundly in those markets.

In a crude sense, this is similar to how some music enthusiasts still covet vinyl records and hold them to be more authentic and valuable than all other forms of musical recordings. The luxury watch category is to watches what vinyl is to music.

Furthermore, a luxury watch can last many generations, while functional watches will break or become obsolete, and lose value in the short-term. Luxury watches are investments, whereas all other watches are functional. It is therefore unlikely that the smartwatch can outright replace the luxury watch since it simply does not match with the values of the luxury watch customer, in this regard.

As a product, the luxury watch is probably safe, however, the consuming habits of customers are always evolving and changing, and experience and personalization are becoming increasingly valued. In this respect, the Apple Watch could be a convincing luxury product if Apple and its partners are able to position the watch as a gateway to a luxury experience, rather than as a traditional luxury object, subject to the codes of the luxury watch industry. The question then becomes, will the Apple Watch, and other smartwatches, be able to convert customers from object driven luxury to experience-based luxury?

Trying to tell the truth, and be truthful about it.

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