uropa Star: In what way are smartwatches a danger for the Swiss watchmaking industry?
Peter Stas: The way I see it, and I already said this three years ago at the launch of MMT (Manufacture Modules Technologies SA), if the Swiss watch industry does not get involved in smartwatches, it will see sales fall increasingly and irrevocably. At Frédérique Constant, smartwatches already account for 12% of turnover, and at Alpina 35%. Next year, we’re going to introduce new technology that will raise these percentages even further. In my view, and we’re already seeing it although the official statistics aren’t showing it yet, watches in the over-CHF1,000 range will also be affected. The cannibalisation effect is gradual and is going to affect even the high-end brands.
- Peter Stas, CEO of Frédérique Constant
Can the industry make up for lost time?
Another reason for this development, which is inevitable in my view – and that’s also an opportunity for the industry – is that the health aspect is going to become increasingly important, especially among the over-55s. The algorithms have already been developed, but not implemented yet. But gradually, smartwatches with “health” functions are going to become indispensable items. Apple will go there, but the first one to offer genuine, effective and reliable solutions will carry off the trophy. We’re talking about millions of items a year.
"The cannibalisation effect is gradual and is going to affect even the high-end brands."
Swiss made has a serious card to play here, because not only does it go hand in hand with expertly crafted watch exteriors – does a “health” watch have to be ugly? – it is also synonymous with reassuring reliability and quality. As proof that the medical world is keenly interested, we’re in talks with health insurance companies in Germany for watches they’d like to buy directly to offer them to their insurance customers. It’s a potentially huge market. Including China, around 150 million smartwatches a year are being produced today. There’ll be no going back.
One idea that we’re hearing more and more from the heads of watch companies is that smartwatches worn on the wrist are just a passing fashion. And that its functions are going to migrate…
Migrate? Yes, connectivity is going to be built into clothes, glasses and so on. That will come too, but after four years of experience I can tell you that getting reliable measurements with a watch on the wrist, even though it’s an ideal place, is already a tough task. And in a watch, even though it’s a tiny object, you still have room to place a dependable battery, a screen under a real dial, a mechanical module and an electronic module. You can fit all that in a watch case, and by the way, we’re going to issue a lady’s smartwatch with a 36mm diameter. But that’s impossible with glasses. There’s not enough space, they’re too small. How can you fit a battery worth anything in there? It wouldn’t be very reliable. You can also conceive of an earpiece, but there again, it’s too small, too fragile. We need to think along different lines. Today 95% of smartwatches are still a kind of black box. But with MMT, we’re offering other solutions, with real dials, real hands. I can tell you that the number of interested brands, including the biggest, is growing all the time.
How do you explain the fact that you’re one of the rare Swiss brands to have really invested in this field?
Probably because I come from elsewhere. In the Netherlands I worked at Philips for eight years, which taught me quite a few things, especially about electronics. Then I went into watchmaking, in Holland, right in the middle of the quartz crisis. I also studied the Swatch phenomenon at Harvard Business School and I remember that Nicolas Hayek said back then that to succeed, the Swiss watch sector had to be strong in every segment, from the top to the bottom range. It’s a lesson which still stands. And the risk culture is lacking. Where there’s opportunity, there’s always risk.
But I feel that the tone is changing. I recently talked with five or six CEOs of major companies and I noticed that discussion is different now, they’re more open. Yet our door has been open from the start. MMT has become my priority and that of my wife, Aletta. We’re going to focus our efforts on that.
- AlpinerX, Mike Goulian Edition
At the same time, at the other extreme, at Frédérique Constant you’re selling a perpetual calendar for CHF3,850. That’s an unheard-of price for this kind of complication.
The market is difficult for everybody. You have to offer innovative items with an excellent price/quality ratio. That’s more important than ever. As it turns out, it’s a limited series to mark our 30th anniversary. There’s a whole audience of collectors who are very interested. It’s a high-end mechanical watch at an affordable price.
At the other extreme, we can see that smartwatches are also moving upmarket. The Garmin Marq collections, for example, are selling at between €2,000 and €3,000. Connectivity is climbing into “our patch”, what the Swiss watch industry thought was its private preserve. And the smartwatch brands are increasingly reactive.
It’s sad to say, but quartz watches are right in the line of fire. You can even find Garmins at €200 – enough to make any young man waver. I’d be very worried if I was in some people’s shoes. But with “Swissness”, the resulting quality, expertise, the Swiss watch industry can and must still have a successful future ahead.