Investing in a luxury timepiece has long been revered as the ultimate display of success. It usually marks the achievement of a major milestone in life and is considered an expression of value in design, quality, and craftsmanship. But do tomorrow’s consumers think the same as yesterday’s?
Luxury watch companies are notoriously secretive when it comes to sales figures in order to protect their brand equity, but one thing’s for certain in this lucrative industry. Behaviors are changing and it’s time to re-examine the value of brand heritage for new consumers.
In this post, we’ll be investigating some of the challenges facing the luxury watch industry. We'll go through the responses and strategies adopted by four well known Swiss brands, as well as the focus on consumer centricity to revive their image.
The clock’s ticking, so let’s dive in!
In an industry built on tradition, high prices and exclusivity, it’s seemingly in conflict with the ‘new' tech-savvy generation of tomorrow. Millennials and Gen Z demand omnichannel retail, seamless brand relationships, personalized and customized products, so how can luxury watch brands innovate without compromising their brand heritage?
Audemars Piguet’s 2019 launch of the watch model 'Code 11.59’, is just one example of a legacy brand campaign to receive mixed reviews, and we'll be discussing it later on. But first, what is a legacy brand? Classical luxury brands are synonymous with a core idea that encompasses their historic message and value. It’s what helps grow and maintain their brand equity over time.
A major study by luxury industry experts BCG and Altagamma, based on ‘True-Luxury’ purchasers in ten leading countries, predicts Millennials to make up 50% of the predicted global €1.3 trillion market by 2025. The challenge lies in creating appeal for this leading affluent cohort in search of radical transformation. Unlike Gen X before them, they're open to try products that have created value in the last 24 hours, as opposed to the last 24 years.
What are the challenges facing luxury watch brands
Like most industries, the future is digital and presents both challenges and opportunities in more ways than one. E-commerce is still an underutilized strategy for luxury goods for obvious reasons. Their DNA lies in store, customer experience, relationship building, and luxury hands-on customer service.
Rolex, Patek Philippe, and Audemars Piguet are just a few big names rejecting e-commerce sales through their direct channels and still managed to collectively hold 32% of Swiss watch brand sales in 2018. Alternatively Cartier, one the top 5 luxury Swiss brands in 2018, has opted to use e-commerce and adapt to digital consumer expectations, giving it the opportunity to use a direct-to-consumer strategy, and collect customer data. For Swiss watch brands especially, their lack of online retail adoption has been the cause of grey market players, and the subsequent compromise in their brand equity.
2. Online re-sellers
Like most luxury goods, there is a grey market online. It includes unauthorized dealers, counterfeit goods, and majorly discounted prices. Given advancements in technology, legitimate grey market sellers have thrived since they can provide assurances of authenticity alongside heavy discounts. It presents a huge opportunity for brands to venture into the second hand watch market, take control of their supply of stock and distribution channels.
The pre-owned watch market is growing exponentially thanks to rising e-commerce, new consumption habits and growing watch enthusiast communities. The 2018 Trends Report by Fondation de la Haute Horlogerie (FIHH), estimates that global sales of pre-owned timepieces to generate $5 billion USD a year. Since 2013 the market has outperformed new watches and continues to grow annually by around 5%, either matching or overtaking the new watches category sales by 2025.
3. Digital watches
It's also important to touch on digital smartwatches. While they fall into a different price segment, Apple smartwatches outsold the entire Swiss industry of traditional watch brands in 2019. An estimated 30.7 million units of Apple smartwatches were sold globally in 2019, compared to 21.1 million of all Swiss watch brands combined. The report findings confirm that younger consumers are favoring smartwatches and electronic wrist wear, while analog watches continue to be popular among older consumers.
But, Apple’s capabilities are also appealing to older segments aged 45 and above. The series 4 watches and successor generations are able to take an electrocardiogram, detect irregular beats and automatically call an emergency contact if the wearer falls. Though Apple isn’t considered a luxury brand, it innovated technologically before traditional Swiss watchmakers and eroded some demand for traditional watches. Brands below the one thousand dollar segment face the biggest challenge.
How has the industry responded
Since April 2019, just over 40% of luxury Swiss watch brands have built a presence online to cater to Millennial consumers. David Sadigh, founder and CEO of Digital Luxury Group alternatively raises the point, that brands going into e-commerce need to work on their online strategy in order to save their heritage and luxury label. He reiterates that historic watch brands need to truly understand their segment and target consumers to succeed in the long term.
This brings us to the Audemars Piguet example. In 2019, it launched a new line of watches named 'Code 11.59'. The 11.59 refers to being “on the edge of tomorrow” while Code stands for “Challenge, Own, Dare and Evolve”. It was targeted at a younger, digitally connected, Millennial audience after its iconic model ‘Royal Oak’, was loved by older audiences. There are several reasons the line received mixed reviews. The name was too unique to be relatable, and the watch itself fell into both sports and dress categories. The final negative point was perhaps AP's paid influencer marketing strategy. It received overwhelming applause in stark contrast to consumers, bringing many to believe the endorsements hadn’t been earned but bought. It’s yet another example that even in the aspirational luxury industry, consumers seek authenticity.
It did however in 2018, become the first Swiss watchmaking brand to launch a pop-up store on WeChat, unlocking the vast potential of the growing Chinese luxury consumer market.
The Royal Oak is one of the greatest watches ever made. Everything about it is perfect. To move from that to the code 11.59 has been disappointing to me and other watch lovers. “It just seems like you guys were targeting a market outside” of folks like me (forums).— CJ (@CJZola) February 21, 2019
The Swatch Group is a shining example of watch brands embracing digital. Made up of 18 watch brands in differing price segments, it sought a huge e-commerce opportunity in 2018 by partnering with Tmall, Alibaba’s online shopping platform, and China’s largest third-party platform for brands and retailers. The partnership is another move by Swatch to dominate the Chinese market of imported watches. It allows direct control over their distribution channels, opportunities to re-brand and opportunities to move certain brands further up the ladder within the luxury segment. Swatch also opened its own e-commerce site on Japanese retailer Rakuten in 2018, to keep up with the fast-growing population of young, e-commerce consumers.
In 2017 Swatch Group’s luxury brand Omega, turned to Instagram for the first time in history to sell its watches, specifically the #SpeedyTuesday model. Since 2015, Omega has been creating new limited edition models of the Speedmaster Speedy Tuesday, targeted directly at the vast online community of Speedmaster fans. It granted the social users of this tribe the ability to pre-order the new limited edition Speedmaster watch, and in just 4 hours, all 2012 pieces were sold out. Omega President and CEO went onto acknowledge the feedback from this digital community as invaluable. It was a risk that paid off and went on to help redesign their customer engagement techniques.
Today, Omega is using Instagram to push topic photos, conduct giveaways, collect strap combinations and conduct influencer marketing campaigns. Through customer centricity, targeted marketing, and social media listening, the brand was able to fine-tune messaging and bring even more topics of interest to its audience.
Breitling brand is another example of a brand innovating products through customer-centricity. Like the majority, if not all luxury brands, it uses influencer marketing to target its audience but took an alternative approach in its most recent campaign. The brand rejected the usual luxury top tier sporting activities such as Formula 1 and golf, in favor of real-life sportsmen and women. It will use 3 figures to represent each targeted lifestyle through 'relateable' sports such as flying, surfing, jogging, and bike riding.
The campaign, #SquadonaMission as described by Breitling CEO, has the potential to grow with the brand over time as it matures. “We can even have local squads, such as a cricket squad in India or a music squad”. The campaign allows the brand to incorporate different lifestyles, values, attitudes, and backgrounds to appeal to existing consumers, but more importantly to win over new ones periodically. The company has embraced digital in recent years by adopting e-commerce and social media strategies with the aim of positioning itself as a "relaxed, informal, cooler, and fresher" brand that appeals to the omnichannel needs of younger consumers today.
Our vision of 'tribes' and influencer marketing
Like Breitling, we believe the best way to appeal to your target audience is through a social context in consumer groups that we call ‘tribes’. The interests, attitudes, and activities of these ‘squads’, connect them in their values of consumption. Breitling understood the needs of younger consumers by promoting the collective spirit of authentic tribes over individual aspirational figures. Luxury brands in particular, need more authentic influencer marketing in their strategy to target the consumers of tomorrow.
In the selection of brands we’ve covered, it’s clear that the luxury watch segment is experiencing a period of transition to reposition itself and its products to modern consumers. Companies like Audemars Piguet need to re-examine the value of heritage as a sole driving force of its brand equity and the fact that traditional influencer marketing and paid endorsement should be left in the past.
Swatch, Omega, and Breitling at three different pricing segments, were each able to adapt their operations to modern consumers with the following strategies.
- Penetration of the growing luxury Chinese market
- Adopting and partnering with global e-commerce marketplaces
- Social media listening
- Tribal marketing
In order to innovate the best products and craft target messaging, it's vital for you to understand and segment your audiences. Social media is just one goldmine to help you gather consumer insights and make it possible. Using a bit of expertise and the right tools, you can provide consumers with a voice that will allow you to locate trends, consumer decisions, and the most appropriate ambassadors that speak the language of your target audience.
At Linkfluence we provide solutions to help brands across industries translate their social data into sources of actionable insights. If you’d like to have a conversation about social media intelligence and how we can help identify your consumer tribes, get in touch! Or take a peek at our customer case studies page to see how we’ve helped other global brands.