Analyst Insight by Rob Walker.
Fashion is out of fashion; that could become the new mantra of the luxury timepiece business as it seeks to tap new opportunities, most tellingly in the fast evolving women's sub-category. Euromonitor International takes a closer look at what is, arguably, the toughest marketing remit in luxury goods.
From Dr No to Casino Royale
In the first ever James Bond film (Dr. No, released in 1962) Sean Connery wore a Rolex Submariner. As the story goes, Rolex turned down a request to provide a free watch for the film, so the producer Cubby Broccoli lent his own, complete with black crocodile skin strap. Ian Fleming, writer of the Bond novels, had selected Rolex as the timepiece of choice for his secret agent hero (the Oyster model rather than the Submariner). It was probably one of the earliest examples of celebrity brand placement, albeit unsolicited from the manufacturer.
How the times have changed. Fast-forward five decades and the latest James Bond, Daniel Craig, wears an Omega Seamaster. What would Rolex give now to be back on James Bond's wrist? The company will be grateful for seasonal television re-runs of Sean Connery Bond films, but it must also grate that Casino Royale (released in 2006) was the first James Bond film to be shown in China. The world's most aspirational fictional hero has arrived in the world's most aspirant market, and he's wearing Omega.
Whatever Omega had to pay to feature in the Bond films, it has to be seen as money well spent. Over the next five years, sales of luxury timepieces in China are forecast to increase 75% by US dollar value, the third highest projected growth rate in the world after India and Malaysia, according to data from Euromonitor International. Omega will almost certainly be one of the frontrunners for men, but what about women?
Diamonds are forever, but the luxury of the timepiece is in the mechanism
The James Bond films raise a number of pertinent issues at a time when the timepiece category is seeking to break new ground in a complex but opportunity-laden global luxury goods market. Bond tends to reinforce the historic gender bias of high-end watches as products primarily for men not women. Bond girls (who can forget Ursula Andress in that iconic scene from the first film?) are mostly remembered for wearing very little. There is rarely a wristwatch in sight. It is the male here that drives the cool car, drinks the sophisticated cocktails and wears the mechanical luxury timepiece.
Mechanical sounds like a clunky term for such an intelligent piece of craftsmanship. In fact, mechanical watches are the most complex of all to make, as they are hand wound or operated from a spinning rotor that generates energy from the movement of a wrist. For many men, the high-end mechanical timepiece is the most desired luxury product on the market. Hidden beneath the cuffs of an ironed shirt, it can be exposed surreptitiously at any given moment. It is subtle product muscle flexing to beat all else.
There has, though, long been a dearth of luxury mechanical watches geared exclusively to women. The commercial assumption seemed to be that women were more interested in the jewellery (and diamond) profile of a luxury timepiece, rather than the intricacy and craftsmanship of the mechanism itself. However, that attitude is changing as luxury watchmakers cotton on to the demands of increasingly sophisticated and technologically savvy high net worth women, especially in the emerging markets.
In the final quarter of last year, Omega itself launched the Ladymatic (could they have come up with a better name?), a range consisting entirely of mechanical watches and ranging in cost between approximately US$6,000 and US$32,000. This new line was launched not in New York, London, Paris or Milan, but in Beijing, the world's new beacon of luxury goods opportunity. Other watchmakers are following suit. TAG Heuer and Zenith, for example, are set to offer new ranges of luxury mechanical watches for women. And they all have an eye on the Chinese market.
Between 2010 and 2015, women's luxury timepieces are forecast to generate compound annual growth of 12% in China, one of the highest rates in the world according to the latest data from Euromonitor International. Last year, China's retail sales in this sub-category were a mere 11% the size of the Japanese market, the second biggest women's luxury watches market in the world after the USA. This is evidence enough of a potentially formidable growth trajectory for women's luxury timepieces in China, probably for the next twenty years given the expected dispersal of wealth from coastal cities to the interior. The projections align with those across the luxury goods market, with China accounting for a dominant share of global investment among almost all the major luxury goods companies.
The fickleness of fashion
What is especially challenging about the luxury timepieces category is that fashion per se is not a driver of demand, unlike, for example, in luxury accessories. The fashion credentials of a brand do have a bearing on the market, but can paradoxically apply more downward than upward pressure on demand. Going back to the James Bond films, it is widely held that the producers switched from Rolex to Omega in the 1990s because they felt that Rolex was too much of a luxury fashion statement for men, while Omega was considered to be more about performance. It was felt that Fleming himself would have chosen Omega had he been writing in the 1990s.
The Rolex versus Omega contest in the James Bond films is indicative of the fine line the luxury timepieces market treads between what is fashionable and what is desirably unfashionable. One school will say that Omega was chosen for Bond precisely because it was not fashionable, and another will say that Omega had assumed the fashion mantle that Rolex once held. And in women's timepieces the challenge is even bigger, because there is a greater need to entwine the allure of fashion into watch design but without making it too obvious.
Furthermore, players such as Vuitton, Dior, Chanel, Hermes and Zegna are synonymous with high-end fashion, so it is especially difficult for their timepieces to operate outside the fashion arena. At the crux of the challenge is that luxury timepieces need to be statements of longevity, not transience, and fashion is by definition transient. Equally, manufacturers want to sell more than one luxury watch to a consumer in his or her lifetime. Quite clearly, like the watch itself, the marketing and commercialisation of the product needs to be perfectly crafted.