A CONTRARIO - Differentiation or saturation in the watch industry?

September 2015

In this special commentary feature, we connect with Mr. Fabio Anderaos de Araujo, a.k.a “The Mechanical Watch” and look into the reasons why watches are becoming more and more similar.

A CONTRARIO - Differentiation or saturation in the watch industry?

Today it is very difficult to find a famous or traditional consumer goods producer which has not had its products copied. This is especially notable in the durable consumer industry. (Here I am not referring to counterfeiting activity, which is another type of situation and deserves a separate article.)
Like apparel and fashion accessories, the watch industry is no exception, if not one of the most copied. But why is this the case?
During periods of high economic growth, new players are incentivised to enter the market, and the number of competitors in the watch industry rises. Their aim is usually to reach a new demographic by introducing something novel in their watch designs, meaning more market differentiation.
But what is interesting is when new players offer similar products to those already on offer by the established luxury brands. In those cases, new brands try to offer their products at a lower price than brands like Rolex or Zenith. Their target customer is the person that wants to have the highest end luxury product but is not always able to pay for it. Usually, their watches are ‘inspired’ by existing models. Some might call that copying, others might call them ‘tribute’ watches. In the last few years, we have seen both examples. Several new and independent small watch brands have emerged. Some are focused on new designs. Others have released models imitating the iconic ones, with minor visual or physical differences. As a result, the number of watch companies has increased to the point that many watch models are becoming visually very similar to each other. Of course, the most acute and sensitive consumer is able to distinguish small differences among the watches, and is able to recognise a higher quality watch and whether the design belongs to a specific brand.
But with so many brands in the industry providing so many similar products, is the watch industry becoming saturated? Does it really matter? Perhaps creativity and being unique is not the most crucial point? So long as consumers with less expertise and less sensitivity to the quality of movements and materials used in watchmaking are driven mainly by price, this trend might well continue.
The Swiss watch industry is a great example of a huge and very diversified industry, where independent watch brands (and watch component producers) live together with other large and medium sized groups. Those small and independent watch brands have helped to make market differentiation happen. But whether or not they will have the financial resources to survive in a more competitive environment in the coming years is an important question. What is certain is that if only a few players are left standing at the end of the day, the questions of copying and differentiation will not be as relevant.

And for more insights on the watch industry direct from its HQ in Brazil, be sure to check out:

Source: Europa Star September 2015 Magazine Issue