Key takeaways:

While luxury’s moat remains, watchmakers have struggled to build hype for accessibly priced timepieces as consumers increasingly abandon them for smart devices.

Popular upstart brands like Mvmt and Daniel Wellington signal that success in this price category is possible with the right marketing.

Brands need to focus on their history and heritage: reissues of iconic watches like the original G-Shock have performed well with consumers.

Watchmakers need to rebrand if they want to save the sub-£500 market.

A drop in demand for cheaper watches is causing trouble for Switzerland’s manufacturing base and Swiss watch companies specialising in watches under £500. Since 2015, the number of Swiss watches being exported has declined by a third, per the Federation of the Swiss Watch Industry, and most of that shrinkage has been in watches that cost under 200 CHF (£164). Exports are approaching the lows seen in the mid-1980s when Japanese quartz technology brought a raft of cheaper competitors for established brands.

While demand for Swiss watches has been hit hard by coronavirus and Hong Kong protests, the luxury end of the market has still performed well over the past couple of years. The value of exports in 2019 was 20 million Swiss Francs, the highest since the Chinese anti-extravagance campaign crackdown began eating into sales in 2014.

The low-end of the market has been more vulnerable.

In 2015, the same year exports declined, Apple launched the first iteration of its smartwatch. Its latest versions now range from £399 to £1,399, and similarly priced watches have suffered. Mintel has reported significant declines in sales of sub-£500 watches in the UK, while NPD has recorded double-digit decreases in affordable timepieces in the US over the past year. “They’re absolutely getting cannibalised by smartwatches,” says NPD industry analyst Reginald Brack.

Where affordable watch brands have found success is in the direct-to-consumer space. Mvmt, Daniel Wellington and Uniform Wares have effectively combined minimalist design, premium branding and collaborations with influencers into modern strategies. Beyond the attractive price point, the product isn’t drastically differentiated. Instead, they rely on brand identity to attract customers.

Embrace heritage, or pivot to premium

Facing a changing market, watch brands reliant on the accessible price category can either find new ways to position their products — picking up on the history of pieces to spin marketing stories — or pivot products to sit more squarely in the premium category.

Casio’s affordably priced G-Shock, a product initially designed for pilots and renowned for its durability, was key to a strong performance for the Japanese manufacturer’s timepieces segment last year. The group singled out an all-metal version of the watch, known as the GMW-B5000. (which retails for £450), in its annual financial report. “Certain brands over the last two or three years have been able to reach back into their rich archives and retell this story of why that watch was used for that specific purpose,” says Brack.

The 100 millionth G-Shock was sold in 2017, 34 years after the brand launched. © G Shock

That strategy is reliant on having a watch in the lower-to-mid-price bracket that has historical or stylistic resonance. G-Shock is a rarity in that it is a digital watch that has a sense of heritage behind it, but many Swiss watch brands, for example, date back hundreds of years. Success also relies on marketing departments shamelessly pushing a product that is lower-priced than some of their other offerings.

Doing so means often facing honest truths about the brand. Consumers in this price bracket may not connect to some of the traditional advertising topics like sailing, diving and horse riding that is standard fare in the watch industry. “[Brands] advertise to who they dream would be wearing their watch, rather than being honest with themselves about who [they are] and marketing to them,” says watch expert Ariel Adams, editor of A Blog to Watch.

Some have instead tried to restructure their business to move away from the problem. Japanese brand Seiko, which released the world’s first quartz watch, announced it was changing its price architecture to place more of a focus on its premium range in 2017.

Other companies are outfitting their accessible categories with new brands. Affordable American watchmaker Movado purchased Mvmt for $100 million in 2018. Richemont launched a new affordable and sustainable brand, Baume, two years ago. A new brand allows the company to trade off the heritage, while not diluting brand equity by pushing a much cheaper product. But replicating the influencer-driven marketing push of Daniel Wellington and Mvmt may be difficult now as so many watch brands are following the same playbook these brands pioneered, says Brian Lee, principal luxury analyst at Gartner.

“Traditionally, watch brands have been very slow to embrace a lot of digital initiatives. Being that first-mover really had an advantage.”

Swatch, originally conceived as a “second watch”, took a similar approach when it launched in 1983. Japanese quartz timepieces had eaten up a lot of the entry-price market and Swatch pushed fashion-forward watch collections that were at a very affordable price point. This strategy worked at the time but has now left it more exposed than some of its peers, like Richemont, to the rise of smartwatches. The company makes nearly three quarters of its revenue from watches priced under 3,000 Swiss Francs, per Zuercher Kantonalbank estimates.

Silver linings

A Mintel survey showed that only 26 per cent of British adults last year disagreed with the sentiment that phones have made watches less necessary. However, brands like Swatch were able to distinguish themselves by becoming fashion statements with punchy designs and pop-culture collaborations. Watch sales did not decline in the wake of the mobile phone being launched, but only when they had to compete for wrist space with a digital device.

The rise of athleisure has also shown that when forced to choose between utility and fashion, many now opt for utility, with dress shoes and workplace wear among the categories under threat. But without being able to match smartwatch brands for utility, stressing the fashion in the same way that upstart DTC brands have managed might be the right path.

There is also a lot of progress to be made on digital marketing for many heritage watch and jewellery brands, per the 2020 Gartner Digital IQ index. “Watch and jewellery brands prioritised digital efforts later than their fashion counterparts. Digital expertise has yet to extend broadly across brand portfolios,” the report said.

Both Lee and Adams point to community building as key, with Lee heralding the work of micro brands like Lorier in working with watch review sites and organising events for bloggers in building organic growth. This model may be too slow to save the entire price segment, but it can help build organic growth for certain products and brands. There is also room for further collaboration with smartwatch manufacturers, like Apple, Fitbit and Samsung.

“[Mvmt and Daniel Wellington] are brands that have gotten to where they are exclusively because of marketing, not really because of product,” opines Adams.“The large established brands have better products, better histories, more originality – they could do better,” he thinks.

Correction: The wording of a chart in this article was amended to read “Watch units exported by type, millions”. A previous version of the chart omitted the word “millions”. (5 March 2020)

This article was updated with the correct name of Richemont's newly launched watch brand, Baume, not Baume et Mercier. (23 March 2020)

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