It is of course not the first smartwatch out there, but now that the last of the expected players is going to enter the market, it is time to have a look at what exactly these smartwatches are disrupting.
The Swiss watch industry?
They are not Apple’s target market, the wearables space is. It has so far been limited in size, but Apple will definitely help to expand it. Keep in mind that MP3 players were also niche until the iPod was released. There are currently no figures on the size of the wearables market so far, but estimates range between 30 and 90 million units sold.
What we do know is that the Swiss watch makers sold 28.1 million watches last year, worth a total of $23 billion. This puts the average price tag for a Swiss watch at $836, compared to the $349 Apple Watch. They are clearly in different price ranges, but more importantly, people buy them for different reasons.
If you buy an Apple Watch or another smartwatch, you are probably doing so for business, travelling or sports. Basically anywhere it is useful to quickly stay up to date with things without constantly having to hold a phone in your hand or taking it out of your bag or pocket.
The Swiss watch market however, largely depends on the fashion aspect of watches. Nowadays over 60% of the 18-34 year olds get the time from their phones, meaning watches are more and more about looks rather than utility. The question is, how large will this market remain? There are more reasons for it to shrink than for it to grow. Over half of all the demand for the Swiss watch market comes from Asia by the way, so people will likely be looking at how they respond to all of this.
Apple often gets critisized for having high prices, by people who only add up the cost of the materials (ignoring employees, R&D, and so on). If you look at the Swiss watch market however, it is a fairly common practise to produce a watch for ~$500 and sell it for $5000-10000. Official distributors are forced to maintain at least 100% profit margins through rules and regulations or they will lose their license. And yet, people are willing to pay this much because they understand this and simply want a piece of art/fashion.
In the end though, no matter how good smartwatches will look, they won’t touch much of that higher end of the market for now as they are bought for different reasons. Smartwatches will become even smarter over time though, ultimately making more people want them as they add more value to their lives. It will likely be similar to having shoes you wear to a party and shoes that you wear at work.
1. The regular watch industry
They are at much bigger risk of being disrupted as they are not rare pieces of art. Few people wear them nowadays and when they do, it is as a fashion statement. The bands on the Apple Watch can be removed though, meaning a whole new market of smartwatch bands is going to open up with countless brands jumping on this opportunity. The display of the watch can also be personalized, so all that is left for regular watches is the shape of the clockwork, which is not exactly a powerful USP by itself anymore. A regular watch is still cheaper, but people are willing to pay more for things that add value to their lives.
These companies are definitely in trouble as the Apple Watch can do exactly what they do and more. Apple likely pissed off a lot of companies and startups that are into health tracking, but probably also made many others happy by opening up the API of the WatchKit. This allows all app developers to extend their apps to the Apple Watch, an ecosystem none of these others can provide.
3. The payments industry
Apple Pay, their new one touch payment system, will also work with the Apple Watch to replace your physical credit cards. This will make it much easier to pay, but mostly for the elite who can afford to buy these devices. It cannot become a global success until everyone can afford them, which is simple not the case in developing or third world countries. The system is also still built on the credit card technology of 60 years ago with large fees, delays and so on. This means that despite the fact that they are providing the best payment experience, they are still vulnerable to disruption themselves because the rails they are on are ancient.
If someone can figure out a way to let you use any smart device for global, fast and secure payments, with a great user experience and low fees, then chances are this will be very disruptive for everyone in the payments industry in the long term. (I’m looking at you, cryptocurrencies)
Learn from this, nobody is safe from disruption
The fact that Apple is disrupting so many companies that are into wearables, clearly shows that just being innovative and digital first, doesn’t mean you are not vulnerable for disruption yourself. No matter what industry you are in, disruptor or disrupted, you must always keep your eyes open for disruptive elements that could affect your business. Don’t make fun of them, take them seriously.
Oh and before we forget, if you’re a keymaker, you might want to look into the fact that the Apple Watch can open doors…like, literally open doors.