Category Archives: Watch Industry

The Apple Watch Threat

Apple is the big threat. It sold just under 18 million Apple Watches in 2017, according to industry estimates. (Market data companies International Data Corp. and Asymco put the figure at 17.7 million; Creative Strategies estimates 17.4 million. Apple itself does not disclose watch sales data.)

But it’s not only Apple, IDC estimates that all other producers sold 15.6 million. “The IDC data means there is 47% that is not Apple.”

Indeed, last year’s total sales of 33.3 million smartwatches far exceeded the entire Swiss watch industry’s output of around 25.5 million units. (Switzerland exported 24.3 million watches in 2018, according to the Federation of the Swiss Watch Industry; another 5% were sold in the country itself.)

Concern about the impact of smartwatches on the Swiss quartz-watch market was a factor in our decision to compete in the smartwatch category. Frederique Constant is a leader in Switzerland’s “accessible luxury” category of watches (priced roughly from $1,000 to $4,000). It produces quartz men’s and ladies’ watches for the lower end of the product line.

But that wasn’t the main reason. First of all, we started this in 2015 because I like it. I like the product. I like the innovation part. That’s the driver. I like it because you are adding features to a fine quartz watch, which is inherently a little bit boring, a little bit standing still for at least 25 years already. So now we can add really meaningful features, things we can experiment with, things we can use. I like the apps. And I am increasingly intrigued by what kind of insights we can give to people.

But at the same time, it is a defensive move. I also see clearly that the smart category is going to eat into the quartz category. So, it’s also partly a defensive move. I am very open about that.

We see the real value of the Horological Smartwatch being its ability to breathe new life into the quartz watch category.

We are very glad we took the leap into smartwatch technology. Smartwatches have become an important niche for the group. In less than four years, they account for 15% of Frederique Constant’s and over 30% of Alpina’s annual revenue.

Hybrid watch market to grow more than three times faster than for touchscreen models

A study by Juniper Research has estimated that sales of hybrid connected watches will soar to 80 million units in 2022 from 14 million in 2017.

The report also suggests that there will be a 50/50 split in the connected watches market, with analogue hybrids and touchscreen models like Apple Watch each accounting for 50% of the market.

Touch screen models are currently ahead in unit shipments, but while that market is expected to grow by 160% by 2022, the hybrid market will expand by 460%.

“We started in 2015 with Horological Smartwatches. Both Frederique Constant and Alpina smartwatch collections have been growing in past years. The horological smart watches now account for around 12% of our sales, so it has developed into an important category.”

“I feel that the Swiss watch industry still doesn’t understand how much the Apple watch and other smart watches have eaten into the figures, particularly the figures for quartz movements. The Apple Watch Series 3 is the next level, which moves from notifications and fitness tracking to health orientation. I think this is where we will start to see the true benefits of the smart watch and once again Apple is in the lead. They are starting to inform people if their resting heart rate is too high and are even branching out into medical information. Apple has sold 18 million watches and when I go to the US I see more and more people wearing Apple Watches. The Apple Watch is now in its third generation and who knows what they will bring with the fourth generation. If they start to adapt the case and have something other than just a black screen then the Swiss watch industry could be heading for trouble. I still say quite frankly that many of my colleagues in the industry don’t know what is happening.”

News travels fast, you may have heard already, we hope to inform you personally about the acquisition of our company.

We have been approached in past to be taken over. Until last year, we never engaged in such discussions as we had idea that our children may take over in future. By now, we know that both our children do not want to work in the company, we started to have discussions with the two groups that approached us last year.

After a year of deep discussions, we felt best with one group in terms of expectations and strategy. This group required, specifically, to keep both us and the current management team in place for at least 5 years. Within this group, we will be the largest Swiss entity and we will continue to operate independently.

The group that will take over is Citizen Watch, a strategic watch industry buyer that has over 125 subsidiaries. Citizen has a reputation for innovation and letting its subsidiaries manage themselves independently. Coincidentally, this completes a circle for our company as Frederique Constant started with an order from a Japanese customer. The company has always had strong relationships with Japan and we feel good about long-term collaboration and continuity within the Citizen Group.

Today we are doing the official announcement and attached is our letter for our employees and stakeholders.

We are exited about this next chapter of our company. Thank you for your continued support and sharing this journey with us.

Best regards,

Aletta and Peter Stas

Haute de Gamme

Swiss watches can be categorized in three families: LUXE for watches priced over CHF 8000, HAUTE DE GAMME for watches priced CHF 1500-8000, and ENTRY LEVEL for watches below CHF 1500. Typically brands have most of their models in one segment, for Frederique Constant is that the Haute de Gamme segment. In an article by the prestigious newspaper Le Temps, Frederique Constant was ranked 5th place.

Source Le Temps May 27, 2015

Frederique Constant’s continued growth can be attributed to its long term Accessible Luxury strategy. Frederique Constant offers beautiful watches at an accessible luxury price for younger people and watch enthusiasts who don’t necessarily have thousands of dollars to spend, as well as the more value-conscious customer in all kinds of categories today. The company held this positioning for 25 years and Frederique Constant watches have never deviated from it, so people know what the brand stands for. Unlike some other brands that have changed their strategy or tactics over the years, becoming less credible.

Slimline Moonphase Manufacture FC-705S4S6 – Public Price CHF 3190

See here the overview for the Luxe segment:

Source Le Temps May 27, 2015

Baselworld 2015

Thank you all for the great reactions on our Horological Smartwatches in Basel! We are very happy to see the very positive enthusiasm to the concept that we introduced end February in Geneva, Tokyo and San Francisco. frederique-constant-montre-connectee-cover_0 The Horological Smartwatch is a Beautiful Swiss timepiece with connected functionality. It has all the attributes of a beautiful Swiss watch, characterised by the fact that it is based around a dial rather than a screen. The watches connect to an app on Android or iOS phone, allowing to track activity, measure sleep cycles, and get reminders to be more active if sitting too long. Activity and sleep quality can be seen on a secondary analog dial on the watch face itself. The health benefits of being more active and getting better sleep are well understood. Activity monitoring and sleep tracking are the most successful wearable application of today, used by over 20 million people. We are now combining a beautiful Swiss watch with the advanced MotionX technology platform. Traditional watchmaking uses applied technology (five centuries of research in mechanics), the smartwatch uses embedded technology in the form of dynamic firmware that is in constant communication with the world. It is a long way from the mechanical calibre hermetically sealed inside its case, only to be opened every few years to add a bit of oil. We very quickly realised that we couldn’t do this on our own. So we set up the MMT joint venture with our partner Fullpower. MMT designs the circuits and manages the production of the modules in Switzerland. Fullpower developed the schematic, firmware, the apps and the cloud. MMT offers the technology platform also to other brands in the watch industry.

We have 2+ years battery life, an extremely important advantage compared to other smart watches. We always focus on improving battery life over time and we expect we will see further improvements. For comparison, most popular smartwatches run for less than 12 hours in continuous usage, and the longest lasting smartwatches run for at most a few days before needing to be recharged.

Modules for Swiss Horological Smartwatches have been developed, manufactured, and assembled in Switzerland. MMT is a Geneva based Swiss manufacturer. Modules are made to stringent quality and legal requirements. MMT Horological Smartwatch Modules already meet the new legal requirements for “Swissness” that will become active as of January 1^st, 2017.

Results 2014

Frederique Constant Classics Manufacture

We are very happy to report that we have closed the year with 16% sales growth compared to 2013. This is an enormous performance considering that the watch industry exports only grew approximately 2% in 2014. We are very proud on this result! All teams in the company, our distributors, and our retail partners have been working very hard to realize maximum sales in an often-difficult environment. Thank you very much for this hard work!

Not only has the result been good in 2014, very important is also that we have made structural changes last year in our management approach. Aletta and myself have stepped back somewhat from day-to-day operations and this work has been picked-up increasingly by our Management Team. With hard work, help of coaches, planning meetings, and various IT systems, our overall accountability culture has improved significantly. This is very important as it creates a solid base for the future. We thank all at the company for this new way of working.

With more time available, Aletta and myself have been able to focus more on external relations, collection creation, and strategy. Never before have we had our new collection so well developed at this stage, more sophisticated, all details fine-tuned to a new level. Our merchandising strategy is showing increasing strong results.

All this gives us strong confidence for 2015. As always, we have great ambitions and we are sure that we will have another year of excitement and strong growth.

With our target to grow production and sales from 135K to 150K in 2015, we will let more people enjoy luxury. This core purpose is our reason of being and the driver to live our passion.

Thank you for your interest in Frederique Constant, thank you for your support. We wish you an excellent start of the year and are looking forward continuing our journey with you. Together we are strong and together we will be living our passion!

It’s all about Manufacture

Read in the NY Times this weekend:

In the past decade, many Swiss watchmakers, from luxury kingpins such as Vacheron Constantin to mid-market brands such as Frederique Constant, have embraced the notion of becoming manufacturers, a term of prestige that distinguishes companies that make every bit of their watches from those that buy components for assembly and marketing.

Full Article: http://nyti.ms/1BQru0z

Apple vs Swiss Watch Industry Cont.

In my previous post on Apple vs Swiss Watch Industry, we looked at (perceived) short comings of the Apple Watch. This blog post will be about what makes Swiss Luxury watches.

Relevance

The Swiss watchmaking industry is unique in the world. Unsurprising as this may seem, it is undeniable. Despite an unpredictable global economic climate, Swiss watch exports continue to confirm the healthy state of the industry, which has enjoyed successive record years. Swiss watch exports now exceed 21 billion francs annually, representing 54% of the world watch industry.

Swiss Made

Luxury products are mostly about the quality of the item being purchased. Quality refers to the constituent materials used in making the product, the finesse and extent of the craftsmanship involved and the reputation of the brand behind the product. With items such as luxury watches, it is widely known that the best items in this niche are largely made in Switzerland, an area renowned for its watchmaking practices and innovations which have held the attention of those who understand the nature of timepieces for centuries.

Heritage

Most of the world’s best known watch manufacturers are based in the Swiss Jura region. Cross-fertilization between companies as well as co-operation with suppliers enable independent manufacturers to remain at the forefront of precision watch making. Watchmakers are the most important assets of a watch manufacturer, since each watch is individually assembled by hand. Watch making schools in Genève and La Chaux-de-Fonds have educated most watchmakers. Many of them gained experience in the ateliers of renowned watch brands.

Luxury

Swiss luxury watches in general and Frédérique Constant watches in particular are defined by their high quality, differentiation and precision in design and manufacture. We have a passion for designing our beautiful watches. Their perceived value — through quality of design, materials, and manufacture — is a key component of our success. Each of our watches is assembled by hand and extensively controlled with the latest equipment to ensure maximum quality. A customer of a Swiss watch understands the finer details about the intrinsic qualities of luxury timepieces.

At Frederique Constant, our focus is creating luxury timepieces with an intrinsic value usually greater than the offer price of the products being sold. Intrinsic value involves the quality of product both in terms of design, materials used in manufacture and adherence to Swiss watchmaking standards as well as traditions. Our timepieces are exclusively manufactured by hand while the processes involved are regulated with the latest precision equipment available in the industry backed by years of research & development. We recruit passionate watchmakers from time honored watch making schools whose reputations are an intricate part of Swiss watchmaking history.

Manufacture

Craftsmanship can be seen in manufacture animations, seeking to highlight the complexity of a manufacture caliber and other watch key components. Brands are inviting consumers into their manufacturing spaces and seeking to connect them with artisans. The focus for these brands is on design, heritage, craftsmanship and the complexities of creation. An example is this video on the manufacturing of watch dials:

Swiss watch brands tend to distil layers of complex technical information into succinct content. Brands often bring clients into Swiss workshops to visually confirm the expertise necessary to produce beautiful timepieces, and reiterate messages of creativity, quality and excellence.

Longevity

Swiss classical watches are understated, exclusive timepieces, immune to the constructions of age. These are objects of art that can be passed down through generations. Traditions are very important, and what better a gesture than to give or receive a special watch for an important birthday or milestone. A special gift that lasts for generations. The best watches even increase in value over time. Sotheby’s and Christie’s hold luxury timepiece auctions regularly.

Comparison

With all the above in mind, how do we rate the Apple Watch? Or is it something that should not be compared to Swiss Luxury watches at all? Apple states on its website that its watch is designed to be worn during all your daily activities, from morning workouts to nights out. Swiss watch companies develop and design their creations to be precious personal jewels. OK, the Apple Watch certainly looks more refined than prior smart watches being sold in the market, but can it be called a luxury item? It also remains to be seen if the Apple Watch “redefines what people expect from a watch,” per Tim Cook. We will find out in early 2015.

PETER STAS

Personal Blog Peter Stas, CEO of Frederique Constant, Alpina Watches and Ateliers de Monaco