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 The costs of development of these hybrid watches, combining elements
of traditional watchmaking with digital know-how and wireless
connectivity, will be mostly financed by the technology providers,
industry specialists predicted.
Therefore, the partnerships unveiled at the Baselworld fair actually
involve little investment for luxury brands - aside from their
marketing efforts - but represent potentially high returns in terms
of image and sales.
On Thursday, LVMH's <LVMH.PA> Tag Heuer and Bulgari, and Kering's
<PRTP.PA> Gucci were among the more than dozen or so watch brands
that announced partnerships with technology companies.
Regarding Tag Heuer's alliance with U.S. chip maker Intel and Google
unveiled on Thursday, independent financial analyst Richard Windsor
said: "I strongly suspect that Intel and Google will be putting up
the majority of the development costs of the product, which is
expected to be launched before the end of the year."
Few details of the watch were provided such as its functions or
price, and Tag Heuer Chief Executive Jean-Claude Biver acknowledged
it was not yet clear whether gaining the "Intel Inside" also meant
losing the precious "Swiss Made" label.
"Swiss brands like TAG are hedging their bets – just in case 'wrist
computers' become popular and they are totally out of the game,"
said Exane BNP Paribas analyst Luca Solca.
But while the announcement helped Tag Heuer make headlines and
project the image of a brand in tune with its times, the project has
many limitations, and could, in fact, fail to ever yield a product,
Windsor said.
OPPOSITE WORLDS
Many luxury watchmakers, including Patek Philippe and Breguet, said
this week smartwatches were incompatible with their brands' values
and the timelessness of their products.
The industry is divided on whether there will be strong demand for
smartwatches whether they are made by Apple, Samsung, Pebble or
luxury brands.
The Apple Watch is due to go on sale on April 24 and will range in
price from $350 to $17,000 for an 18-karat gold model, making the
company's first foray in the personal luxury goods market.
But Apple has been taking more leaves out of luxury books than
luxury brands have been using consumer electronics recipes.
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The Californian computer company provided the first glimpse of its
watch during Paris fashion week and photos were taken of designer
Karl Lagerfeld and U.S. Vogue editor Anna Wintour admiring it in the
trendy Parisian shop Colette.
Apple has joined forces with model Christy Turlington, poached top
executives from luxury brands such as Burberry, Yves Saint Laurent
and Tag Heuer and used architects from Foster & Partners who worked
for luxury brands such as Louis Vuitton, to design some of its
boutiques.
Yet, for many people, the Apple watch is the antithesis of a luxury
product. A Cartier and a Rolex watch usually retains value or gains
value in the second-hand market while Apple devices very quickly
depreciate.
Bernstein luxury analyst Mario Ortelli said the tech industry "seems
to be endeavoring to shape the world into an egalitarian utopia,
with themes such as shared economy (AirBNB, Uber), and
democratization of information until it is universally accessible
(Google)".
Luxury goods companies, however, "are inherently exclusive and most
of the desirability and value of their products is derived from the
fact that not everyone can have it…or even afford it".
Windsor also noted it was not the first time Tag Heuer experimented
with electronics as it introduced a mobile phone called Meridiist in
2008 which "eventually sank without a trace".
(Additional reporting by Eric Auchard in Frankfurt; Editing by
Elaine Hardcastle)
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