More evidence that Apple are eating the Swiss watchmakers lunch, as October shipments of mechanical watches declined 12 % the largest decline in 6 years.
The new report, released in a statement from the Swiss customs office, showed total Swiss Watch exports to the U.S. dropping 12 percent.
The country with the most pronounced drop-off was Hong Kong, whose share of shipments dropped just under 40 percent. Traditionally a huge marketplace for Swiss watches, weak demand has led to declining sales from high-end Swiss manufacturers like Richemont, while others like TAG Heuer have closed stores in the country this year.
Swiss Watch sales are said to make up one tenth of the country’s total exports, which have declined 3.2 percent over the first ten months of this year. The news follows similar drop-offs over the course of this year, including an 8.5 percent drop-off last quarter, which was reported last month.
At the same time Swiss watch sales are declining, smart watch sales continue to accelerate, with Apple Watch sales reaching more than $1.69 billion in revenue through the end of September, according to numbers extrapolated from the company’s recent 10-Q filing. The smart watch category as a whole has also received a lift from Apple’s entry into the market, with both Pebble and Fitbit reporting better-than-expected numbers for their respective lines of wearable devices.
Despite earlier bluster and claims that traditional mechanical watch buyers wouldn’t be drawn to smart watches, some Swiss watch companies now seem to be doing an about-face and are embracing the idea of smart technology on the wrist. TAG Heuer released a “smart” version of its famous Careera watch earlier this month, which runs on Google’s Android Wear platform and retails for £1,100 in the UK.
“The data would suggest prudence about Swatch,” wrote Luca Solca, an analyst at Exane BNP Paribas in a note to investors. The watchmaker will find it harder to fight inventory build-up due to the difficult wholesale watch market and a significant number of new models the watchmaker is introducing, Solca said.
Competition from Apple Inc.’s smartwatch has also weighed on low-end brands of timepieces. Fossil Group Inc., a U.S. watchmaker, saw its stock slump 37 percent Nov. 13 after saying fourth-quarter sales may decline as much as 16 percent amid competition with wearable technology.
The 11 percent surge in the Swiss franc from a year ago has eroded the industry’s profit margins. The industry has begun to cut jobs to adjust for a drop in demand. Richemont said on Nov. 16 that it’s cutting 85 positions at watch-dial maker Stern Cadrans, shifting some employees to other sites.