Can luxury marry technology? Watch makers seeing danger with smart watches

Luxury brands are built on foundations of heritage, craftsmanship and brand mystique. Bordering on art. From Louis Vuitton to Hermes to Rolex, all of them are almost mythical in their appeal.

Technology brands on the other hand are seen as rational, objective and often good value. Google helps you search, for free. Amazon helps you shop at great prices. Samsung is feature-packed [we will get to Apple in a bit]. 

Of late, technology brands are treading into the space till now occupied by high-end luxury brands. Smart watch is a case in point. 

The early experiments of technology brands trying to climb up the luxury tree has not always been successful. In the mobile phone space, Nokia created the brand Vertu in 1998 as a stand-alone British luxury brand, retailing at prices ranging from $5,000 to $17,000. The brand was offloaded by Nokia to private equity investors in 2012. The brand had till 2013 attracted 350,000 customers and was sold by 500 retailers. But the myth could not sustain and in 2017 the brand shut shop, leaving some of its employees unpaid.

In a reverse of sorts, a recent news item spoke of Louis Vuitton going upmarket with a smart watch. The Louis Vuitton Tambour Horizon is prized $2,450 upwards. About eight times the price of an entry-level Apple watch.  Interestingly  within two years of launch, Apple has become the second bestselling luxury watch brand, after Rolex. And Apple is not a dyed in the wool watch maker [Apple discontinued its own 18 karat gold watches which were retailing for as much as $17,000]. 

Romain Jerome an ultra-premium watch brand in fact disrupted the market in a different way. Their limited edition watch made with steel salvaged from the Titanic priced at $300,000 sold out in 48 hours. 

The luxury watch makers are seeing clear and present danger with the rise of smart watches. The young, the world over today look at their mobile phone if they want to learn about the time of day. And if at all they wear a watch, it is as a fashion accessory, something the Swiss managed to capture with their ever changing, evolving Swatch brand. But the ultra-rich were not going to give up their premium wrist watches, really?

That is happening with the rise of Apple watch and its numerous competitors. Apple watches retail at prices ranging from $349 to $1,399. These are not cheap prices. A typical Timex or Seiko are priced between $50 to $150. Apple charges twice the going price. 

Apple has managed to cross the tech pricing hurdle and command prices that till date only a luxury brand could command. 

In his book The Four, Professor Stott Galloway of New York University’s Stern School of Business presents the “Hidden DNA of Amazon, Apple, Facebook and Google”. His argument is that Apple is as much a luxury brand as it is a technology brand: “Apple has always found inspiration from others [Latin for stealing ideas]. The sector that has inspired Apple’s modern day strategy is the luxury industry. 

Apple decided to pursue scarcity to achieve outsized, irrational profits that are nearly impossible for new-money, gauche tech hardware brands to imitate”. He traces the rise of Apple from a cool tech brand into a cool tech luxury brand to the day Apple opened its first store in 2001.The move met with some serious criticism from respected journals like Business Week. And for three years there was no light at the end of the tunnel. I became a fan of Apple Store after walking into one on Chicago’s Michigan Avenue in the early 2000s to buy a specific Mac Laptop for a friend, only to walk out with an ipod as well [the store was playing my favorite song ‘What a Wonderful World’, and how could I not get charmed by the gravelly voice of Louis Armstrong]. Today it is acknowledged that Apple Store is a brilliant moat that brand Apple has built. 

Tech brands have shown how they can build a bridge into the luxury market, but it has been a long and touch ride. We now have to wait and see if luxury brands are able to build their tentacles into the tech space. The watch industry is going to be an interesting battle ground. I am sure other segments like pens will also be subject to this wave.

Luxury brands have figured a way out of economic and socio-cultural challenges in the past. Brands like Swatch were created to break into a new segment. They now need to think afresh to create new winning strategies. Will LV’s Tambour really show the way, I wonder.

The author is an independent brand strategist, author & founder Brand-Building.com. Email: ambimgp@brand-building.com