Smart watches at a crossroad between electronic gadget and serious watch making

You must be wondering while reading your favorite newspaper or magazine, why is there so much fuss about “wearables” (these electronic gadgets you wear on your body) and how they are going to change your life. You are asking yourself “does it make any sense?” because you’ve heard that litany before (the new tech gadget that is going to change our lives).

Frankly, I was not paying much attention until I read how many of those “wearables” (electronic devices that you wear on your body) have been sold (IDC reports 19 million for 2013) and that they will grow by 78% per year until 2018[1]! This should result in nearly 120 million units sold by then, of which a majority of watches and wristbands; now compare this with the watch industry: 1.2 billion watches sold annually worldwide, of which about 30 million of Swiss watches, representing 54% of total sales in value. You may actually deduct that there will be more “wearables” sold two years out than Swiss watches. Now that is news!

I have been involved with the Swiss watch industry for more than 2 decades and have witnessed the evolution and the resilience, nothing you can compare with the fast fading electronic novelty, where life span of devices is measured in months, not years (think of your smart phone). Now, how can you reconcile two very different industries, with different values and time scales? How is the consumer going to value a nice Swiss wrist watch, as compared to his Samsung or Apple electronic wristband?

The universe will have to seriously warp to reconcile luxury and consumer electronics. Remember Vertu®, the luxurious phone, initially produced by Nokia? Customers always complained that the technology within the phone was two or three generations behind the latest Nokia phones; this is because luxury rhymes with durability and it is very hard to reconcile the fast evolution of electronics technology with the long lasting impression of a precious object.

We believe there is a way of doing this and we are actually speculating that Apple is taking its time because they are struggling with the same dilemma.

We, at ValleyRoad Capital, are working through this dichotomy, finding new ways to bring together luxury and technology for the benefit of our clients.

[1] IDC, 2014