As continued falling exports and steeply declining net income hinder the days of the Swiss watch industry, analysts at Canalys say the Apple Watch sales accounted for about 80% of the smartwatch market in sales value in the first three-month period in the fiscal year of 2017. Apple has reported record numbers for both units and revenue for iPhone, services, Mac, and Apple Watch in the fiscal quarter that ended with the holiday season on December 31st. All this accounted for a reported a record quarterly revenue of $78.4 billion for Apple. Let’s analyze what this means and what both the traditional and connected technology watch industries can glean from this information.

What’s the point for the watch industry overall? Well, a lot of media over the past couple of years seemed to look for evidence that Apple Watch and smartwatch sales overall were not that impressive – something that aBlogtoWatch has rebuked the negative conclusion of. Moreover, it demonstrates that, as we predicted, smartwatch sales would be gradually going up as consumers became acquainted with the new technology and products which they previously did not have in their lives. Smartwatches sales and growth is gradual because rather than fit into existing needs many consumers have, their presence in the market will slowly create new needs and utility that consumers will gradually adopt into their lives. The Apple Watch in most ways is the flagship smartwatch product, so we feel that its success is both telling for Apple as well as smartwatch products overall. In other words, Apple seems to be winning the fight of making smartwatches increasingly relevant for today’s consumers.

As far as traditional watches go, it is important for us who keep close track of the watch industry’s performance, as well as how sales revenue and volume shaped up when comparing Apple and the entirety of the Swiss watch industry. In the last three months of the calendar year – between October 1st and December 31st, 2016 – about 9 million smartwatches were shipped in total, about 6 million of which were made by Apple. Apple has realized about $2.6 billion in revenue from these 6 million watches sold in 3 months. We’ll note that Apple does not specify these figures in their financial reports, as the company puts Apple Watch sales in the same larger category as other accessories they sell – which is why we have to rely on analyst data.

By comparison, Swiss watch exports in the last three months of 2016 accounted for about CHF5.1 billion in sales from about 7.2 million shipped units according to FH reports. That puts the average price of Swiss watches exported at 710 CHF, compared to $433 USD per Apple Watch sold (which is about the same in Swiss francs at 430 CHF). Notably, Apple has ditched the 18k gold Apple Watch Edition (that cost between $10,000 and $17,000, depending on the version) in favor of the new high-end model which is in white ceramic and costs $1,299. There are further high-end Apple Watches when considering the special Hermes strap-equipped models.

Still, comparing about 7 million shipped Swiss watches to 6 million shipped Apple Watches from the same period is an interesting development. Especially when considering what the approximate average prices for these two products are as compared to one another. As mentioned above, the average price of a Swiss watch export is only a few hundred dollars per unit more than the average price of an Apple Watch. Thus, the gap is not that large. With that said, the products most watch enthusiasts consider (and buy) are several times (if not many times) the cost of an average Apple Watch.

What is important to note is that Apple has done what the Swiss seem to struggle with. Moving fast (when considering it’s one of the largest companies in the world with a yearly revenue about eleven times that of the entire Swiss watch industry) as it re-positioned the Apple Watch by re-aligned pricing (keeping the Apple Watch Series 1 available at a lower price after the debut of Series 2), re-focused its messaging, and streamlined its marketing to highlight on the watch’s fitness support functions and introduced some (long-awaited) hardware and software improvements.

Making the product more attainable and more relevant is what appears to have been the correct technique for Apple. We could say that Apple is succeeding where many traditional watch brands are failing, and that is creating relevancy with consumers. Many traditional watch brands seem to take for granted that people want their products – which is a major error in today’s market. Alternatively, Apple has invested heavily into marketing campaigns that specifically assume consumers do not yet want an Apple Watch, but should want one for a variety of reasons. In other words, Apple is at the forefront of making timepieces relevant to a large portion of the population, while at the same time the Swiss watch industry continues to struggle in marketing relevancy (especially to younger consumers).

Are Apple’s efforts enough to make naysayers change their minds over smartwatches? Clearly not, but it was enough to help them fortify their leading position in the smartwatch market, moving 11.9 million watches in 2016 and taking 49% of the market share.

In other related news, Samsung and Fitbit moved about 3.6 million and 4.1 million smartwatches and wearables in 2016, accounting for 15 and 17 percent of the market, respectively. Other vendors held around 19 percent collectively.

It is admittedly a bit like comparing apples to oranges, but there actually are two important takeaway messages from the last three months of the year as we look back at the performance of the Swiss watch industry and that of the Apple Watch. First, there clearly is a strong market for timepieces costing on average around 400-450 Swiss francs and do bear in mind that people seem comfortable spending that much knowing that they will be upgrading to another (similarly priced) model within a few years at the latest. Second, the combination of focused marketing messaging and some flexibility in terms of pricing can go a long way.

So, is the smartwatch industry the main cause of the Swiss’ problems? Nope, that still isn’t the case, but the major traditional Swiss watch players remain eager to take as much of the sub-$500 segment as possible. Source: canalys.com, via 9to5mac.com