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Why shouldn’t jewelry retailers sell the iWatch?

By Jan Brassem

May 06, 2014


Jan Brassem is a senior partner at MainBrace Global Partners, a global jewelry advisory and M&A firm. You can e-mail him at Jan@MainBraceGlobalPartners.com.

Remember back in the mid-1960s when Seiko launched their quartz-driven watch?  The Swiss economy, due to their mechanical watch’s high labor costs, had lost more than 60,000 jobs to their Japanese competitor.

The Swiss were prepared to throw in the towel and hand over a major portion of the centuries-old symbol of Swiss pride and history to the Japanese. In certain respects, Swiss watch companies, the industry and even the nation itself were fiscal train wrecks. Thankfully, Nicolas Hayek -- a brilliant Swiss consultant -- saved the day and created a turnaround strategy that resulted in one of the most spectacular industrial comebacks in history.

Will history repeat itself with the slew of smartwatches recently developed along with the near future launch of the much touted, and anticipated, Apple iWatch?  

“The iWatch may turn the global watch industry ‘upside down’, just like Seiko did in the ‘60’s”, said Chhimi Lama, a senior watch professional at the Tourneau legendary watch pavilion on New York City’s Madison Avenue. Will some, or most, of the demand for the successful watch brands, many with a tradition spanning centuries of mechanical excellence and breathtaking design, become passé?

All of this brings up the many variables of the emerging wearable technology market, with its huge potential. You don’t have to be a Harvard graduate to see that technology companies quickly jumped on the smartwatch category, the “lowest hanging fruit” of the wearable technology market. But wait, we’re getting ahead of ourselves.

A short history of the smartwatch
Like rush hour at LaGuardia Airport, the race by tech companies, i.e. Samsung, Pebble, Addme (China), Sony, Meta1, Google, Shenzhen (China), Microsoft, Motorola, Fossil, Android (some of these, and a host of others, are still in prototype development), to enter the emerging “wearable technology” industry was no surprise. The smartwatch market seems to have been driven by an almost perfect blend of consumerism and technology: the Bluetooth and the smart phone.

Simply, smartwatches do their jobs by communicating with the smartphone in your pocket. By leveraging this connection via Bluetooth, the smartwatch can receive all kinds of information that wasn’t possible just a few years ago. Obviously, the Bluetooth is the critical element. You get the idea.

Today’s smartwatch, however, lacks a commonly recognized label. Some are mini-PDAs that fit on your wrist; some are luxury analog watches with tiny digital screens embedded on its face. Some are engineered to run specially designed applications; some can even give or take messages to Siri. Some are equipped with cameras. Some are designed with a mix of these applications. Some measure you heart rate and health and look like rubber bands.

Today’s smartwatches receive text messages and Facebook updates from your iPhone, email contacts, run apps and, yes, even tell time. The biggest advantage of a smartwatch is that, instead of having to whip your iPhone out of your pocket 150 times a day (if you don’t believe that, count it sometime), you can take a quick glance at your wrist to see why your phone is buzzing.

Says Bill Geiser, an industry pioneer, and developer of the soon to be released Meta1 smartwatch, “Smartwatches don't just tell time -- they save you time.”

None of those now available, however, are designed to meet the consumer’s fashion appeal. They’re generally square and boxy, especially compared to the beautiful fashion watch brands found in Tourneau. Says Geiser, “Most of the smartwatches are generally designed by tech engineers and computer geeks. It’ll be just a matter of time before they are designed with more fashion eye appeal.”

Clearly, with more than ten (at last count) smartwatches fighting for customers of the emerging wearable technology category (tech venues like the SXSW Show in Texas were jam-packed) an industry overhaul could be on the horizon.

The shakeout should be accelerated when Cupertino, Calif.-based Apple launches its highly anticipated iWatch. As reported in the New York Post by Jonathon Trugman recently, Apple’s “10-ton gorilla” is awakening. Samsung’s Gear, the current smartwatch sales leader, and something of a marketing flop, should be forewarned.

When Apple makes products, generally industry-transforming products, it makes them carefully to sell in large quantities and to make immense profits. (Think iPhone, iPad, iPod, etc.) The smartwatch has been around for a while and enough time has passed for Apple, as is their custom, to view the competitive landscape and adjust and refine for their competitors’ expensive mistakes. Apple considers consumer fashion, in contrast to the current players’ dithering design approach, a critical ingredient to success.

Apple is rumored -- only a rumor, mind you -- to start production of the iWatch in the fourth quarter of 2014, a projection that carries some weight thanks to confidential reports from Asia. Two models of the iWatch are expected, a 1.3-inch or 1.5-inch face with a rumored retail price around $1,000 or less.

Once launched, and if history is a judge, Apple’s remarkable products could change the lives of people all over the world, including ours.

Please tell Tourneau to start reserving showcase space.

The current U.S. jewelry industry
Newsflash: based on a 2014 multifaceted jewelry industry study by the world-renown McKinsey & Co., (Linda Dauriz, et al.), the global jewelry industry “seems poised for a glittering future.” Annual global sales in 2013 totaled $155 billion and are expected to “grow at a healthy annual clip of 5 to 6 percent totaling $235 billion by 2020.”

Although jewelry is primarily a local industry, in my view anyway, this will change. Following a break in jewelry consumption brought on by the recession, the consumer’s appetite for jewelry has returned and appears to be as voracious as ever.

Consequently, changes in both U.S. consumer behavior and industry configuration are underway.

Globalization, consolidation and the growth of jewelry brands will focus the consumer on a narrow style range. (The recent consolidation of Zale-Signet, representing about 3,200 stores in the United States, is a good example of industry consolidation.)  

Tiffany & Co. and Cartier are becoming leading global jewelry brands. Jewelry web sites continue to be important and a growing distribution channels.

Almost as important, the Jewelry Consumer Opinion Council (JCOC) performed a recent study showing that “consumer interest in so-called wearable technology, smartwatches and bracelets designed to make life easier, is growing.” According to the study, 72% of those questioned had heard of wearable technology and 44% they would buy wearable technology jewelry.

An Apple iWatch distribution strategy--the traditional jewelry retailer
How will Apple distribute their innovative iWatch?  If Apple were to continue its current distribution channel, through 1,000-plus Best Buy stores and its 225 Apple stores, the company would be missing a significant opportunity.

Visiting a Best Buy store, you may find the iWatch next to a stainless steel refrigerator. No watch image or expert there. Visiting an Apple store, if one is near, you may have to call for an appointment if you have a tech question.

Dare I say it? There’s a solution here. There are 30,000-plus jewelry stores, large and small, in the U.S. Many, if not most, have watch departments and experts, with watch skill sets. Why not use these stores as U.S. Apple iWatch distributors (with proper training on the product from Apple, of course)?

Apple will have an immediate, dedicated and experienced iWatch sales force of 30,000-plus dealers.

But there’s more. The jewelry industry is expected to grow at a healthy 5 to 6 percent for the next five to six years. The Apple iWatch could capture this growth by using the jewelry store channel.

The U.S. jeweler profits as well. His store, or chain, immediately becomes part of the celebrated tech industry which, to this day, has passed him by. The jeweler will end up carrying a world-class product that should offer more sales dollars than most of the watches he carries. Finally, he has the opportunity to sell add-ons to the iWatch customer or their relatives/friends, such as diamond stud earrings for the girlfriend of a male iWatch purchaser. Store owners could also offer their own promotions: buy an iWatch and get 10 percent off another purchase. The ideas are endless.

The Apple iWatch jewelry store distribution strategy could end up being a valuable win-win opportunity. Everyone benefits.