Apple Watch Could Set Back Traditional Watchmakers
Hot, new accessories trends usually come out of New York City, not Cupertino, Calif. The Apple Watch opened to much fanfare Tuesday, but does it stand a chance against the fashion-savvy in traditional watches
Starting at $349, the price isn't far off from any other designer purchase, and there's no lack of choices in exchangeable wristbands to suit your mood, including everything from Milanese loops to leather to 18-karat rose gold. (No word on how much the rose gold edition costs.) "It's not something you'd be embarrassed to have on your wrist," Macquarie Group analyst Liz Dunn told IBD. "It's interesting that they went with a traditional looking watch and not a fitness product.
Of course, that is by design.
"They want to go head to head with traditional watches," said Dunn.
Apple (AAPL) shares rose 3% to 101 after falling slightly on Tuesday in an up-and-down session.
Vogue International Editor Suzy Menkes said that the Apple Watch "neither super-stylish nor repellent." And GQ has said, "We'll never vouch for wearing a digital watch with a tux," which means that the high-end luxury market may yet be safe from the clutches of Cupertino.
Apple's smartwatch isn't even the first on the scene, as Samsung, Motorola, LG and others have all been there, done that.
About a quarter of consumers plan to buy a smartwatch in the next five years, according to a study from Accenture Interactive's Acquity Group.
Fossil (FOSL), a maker of traditional watches priced $85 to $600, has partnerships with Intel (INTC) and Google (GOOGL) to try to keep pace with the new kid on its turf.
"I do think that competition is going to boost interest, and I think smartwatches are going to be a major trend," said Dunn, though she believes that it's not going to be a positive for Fossil, which holds about 44% of the under-$1,00- U.S. watch market.
Fossil and luxury watchmaker Movado (MOV) fell on the Apple news. For them, the rise of smartwatches is a double-edged sword.
Sterne Agee's Ike Boruchow said in a note that while the smartwatch impact is a "black box" now, Fossil's sales could take a $250 million to $300 million sales hit by 2016 as a result.
Macquarie's Dunn adds that "(smartwatches) will grow the overall watch market but eat into traditional watch sales."
