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Apple helps takes a bite out of U.S. watch sales

August 7, 2015 10:28 AM
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(Bloomberg)—U.S. watch sales fell the most in seven years in June, one of the first signs Apple Inc.’s watch is eroding demand for traditional timepieces.

Retailers sold $375 million of watches during the month, 11% less than in June 2014, according to data from NPD Group. The 14% decline in unit sales was the largest since 2008, according to Fred Levin, head of the market researcher’s luxury division.

“The Apple Watch is going to gain a significant amount of penetration,” he said Thursday in a phone interview. “The first couple of years will be difficult for watches in fashion categories.”

The market for watches that cost less than $1,000 is most at risk, as consumers in that price range have indicated they’re the most likely to buy an Apple Watch, Levin said. Sales of watches costing between $50 and $999 registered drops in June, the biggest being a 24% decline in timepieces from $100 to $149.99, according to NPD’s data.

The Apple Watch isn’t the only cause of the downturn. Lower-priced fashion brands suffered as retailers and department stores offered more discounts due to those products’ “saturation” with consumers, Levin said. That category includes brands such as Timex, Guess, Burberry and Tissot.

“In the short term, brands at accessible price points are going to have to think very seriously,” he said.

Most U.S. watch sales data is limited to exports of Swiss watches to that market, which don’t measure sales to consumers. Those shipments rose every month except May in the first half of 2015, according to according to Federation of the Swiss Watch Industry data available on Bloomberg Intelligence. The first half increase was 4.2%.

‘Ice age’

Apple Inc.’s refusal to say how many smartwatches it has sold has investors and analysts relying on guesswork to estimate sales. Harder yet is gauging the impact on the $50 billion Swiss watch market. Elmar Mock, one of the inventors of the Swatch, said in March that Apple, No. 2 in the Internet Retailer 2015 Top 500 Guide, may cause an “ice age” for the four-century-old industry. The computer maker has already shaken up the music market with its iTunes software, while its iPhone supplanted Nokia Oyj’s dominance.

Apple introduced three models of its smartwatch in April, with prices ranging from $349 for the most basic version to $17,000 for an 18-karat gold model. The company said June 22 revenue in the unit containing its timepiece rose by about $950 million in the three months through June compared with the first three months of the year.

That would suggest the company may have sold at least 1.9 million watches, assuming the Apple Watch had an average selling price of $499. NPD estimates the traditional watch industry sold 927,500 timepieces in June in the U.S.

Spur sales

Producers such as Swatch Group AG, the maker of Omega, have maintained that Apple’s entry isn’t a threat and will spur sales of traditional timepieces in the long term by getting young people in the habit of wearing a watch.

NPD’s U.S. watch data estimates sales of about 70 brands from Timex to Harry Winston through department stores, national chains and independent jewelers. It doesn’t include boutiques owned by watch brands, supermarket chains such as Wal-Mart Stores Inc. (No. 3 in the Top 500 Guide), or online retailers such asAmazon.com Inc. (No. 1). NPD’s luxury tracker was formerly known as LGI Network.

 

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