It’s About Time: The Future of Watches

Transcript

It’s About Time: The Future of Watches

Soundbites:

ANDREAS 18:08 the markets that see the highest penetration of smart wearables were still only around 50%. So there's a lot of growth, that can still come

FRANCOIS-HENRY: 08:53 these two worlds can perfectly live together. It's not one against the other.

It's like comparing a three star Michelin world and McDonald's with no judgement you can actually enjoy both. 

RUTH: 19:56 my watch seems to determine what I'm doing. And is that healthy and is that good?

TOM 00:03

I'm Tom Parker, and welcome to the next five podcast brought to you by the FT partner studio. In this series, we ask industry experts about how their world will change in the next five years, and the impact it will have on our day to day. In this episode, we’re looking at the watch market, focussing on the Swiss luxury sector and wearable tech, trying to understand what our relationship is with time and the role watches have in a digitally dominated future.

TOM: 

From the existence of primitive sundials and water clocks in Egypt around 1500 BC our fascination and obsession with time was set. Over the centuries portable clocks, pocket watches and wristwatches allowed people the chance to carry time around with them. Many of which turned into status symbols, the luxury of portable time afforded to only those who could. The timepiece has evolved with our societal needs. As has the industry surrounding it.

In 2022, the global watch market was worth 71 billion dollars and in five years time expected to reach 98.6 billion dollars. When Apple launched its Apple Watch in 2015, the traditional watch industry was under immediate threat. In 2019 Apple watches alone outsold the entire Swiss watch industry, and today Apple still sells more watches in one quarter than the Swiss industry does in a year. But according to a Morgan Stanley report, sales of Apple watches are plateauing and the Swiss Watch sector enjoyed its best year ever in terms of value in 2022, mainly due to an increase in exports to the US worth 28 billion dollars. How does a quartz or mechanical device compete with a multi operational one that can tell you more than the time?

FRANCOIS-HENRY  00:53

So what we can say is over the course of the last five, six years, we've seen a huge arrival of new kinds to the world of watchmaking

TOM: This is Francois-Henry Bennehmias, CEO of Audemar PIguet

 and CODIS watchmaking at large because you could go from the automap years of the world to the swatch of the world. But basically, that we've seen a huge boom, I could challenge anyone working in the watch industry in Switzerland to say that we saw it coming. Nobody saw it coming that way, because he came mainly from a generation that we thought would actually be dead for the Switch watchmaking industry, because they would either never wear watches again, or they would wear smartwatches. Guess what, we were all wrong on that topic. And so we saw this rise of young kids, I'm talking about kids as well, from the age of 15, to the age of 2025 years old, that fell in love with watchmaking and became our top ambassadors, not only for them up here, but for many other watch companies, and brought their parents into the picture of oh, by the way, it might be cool to collect watches. One. And the second thing is, during the coming years, many people thought about, okay, what could I do with my money. And few people found out that it could be actually very interesting and smart to build a watch collection. And if done the right way, you could create serious value. And then few people started more and more and more. And we saw this rise of people wanting to get access to watches. And then we saw the prices going through the roof, which, from my perspective, was not such great news. Because when you see such a rise, and so fast, and so high, you know, for a fact at some point, it's going to adjust.

Tom: With the advent of wearable tech over the last decade, what is on our wrist does more than tell the time.

Andreas Zimmer  00:28

So personally, I think wearables are a hugely exciting topic. 

TOM: This is Andreas Zimmer, Head of Product for Huawei Europe

Because if you think about it, they actually encompass a lot of things that in the past might have been considered, you know, science fiction. 

Andreas Zimmer  01:28

If you look at where we came from eight years ago to today, a lot has changed. 

Andreas Zimmer 04:39

I think that the fundamental reason why we wear something on our wrist is, you know, firstly to tell the time but if that's all you want to do, then all you need is a very, very basic watch right? You probably buy a watch that tells the time for like $10, or maybe even less in some cases. So is that the reason why we buy a watch? Probably not so much, right? We look for other things, we look for things like design and style to express who we, you know, want to be seen as. And in the case of smart wearables, you know, we look for the utility that the wearable gives us. So for example, if we are, you know, concerned about our health, we might buy a wearable to help us collect data about ourselves, collect, you know, data on how our heart rate develops over time, and maybe collect data on our sleep and sleep quality. And we do this through the wearable. And if we're, for example, into sports, then we might get a wearable that helps us actually track those sports and track our progress. For example, as we train for a marathon, we want to make sure that we have this kind of progression, and then then the wearable kind of takes a role of a coach on your wrist in a sense, but this is very different to why you would get, you know, a luxury Swiss watch, or, you know, an entry level quartz watch. In the first place.

Tom: Francois, What have been the challenges in recent years for the industry in regards to the rise of wearable competition?

FRANCOIS-HENRY  08:50

Zero. absolutely zero in the sense of, I always said these worlds, these two worlds can perfectly live together. It's not one against the other. If someone wants to wear a smartwatch because he wants to check his steps every day or his heartbeat, all those types of things. That's one type of vibe that you have a guy that loves mechanical movements made which have been made for ages by watchmakers and everything is done manually. It's a completely different world. It's like comparing a three star Michelin world and McDonald's with no judgement at all. Zero but you can enjoy both actually. 

FRANCOIS-HENRY  09:50

I've seen people buying smartwatches and real watches I would say. But at the end, they ended up making a choice. And so far the choice is going much more in our favour. I'm not saying that the smartwatches world is not booming because it is booming in a crazy way, and he's got to keep increasing, but we the volumes that we manufacture every year and for the other watchmaking brands the same way we never be able to supply up to the demand the way it goes now because we are 20,000 watches, which means we are a small, small, small drop in this huge ocean of the number of watches made in Switzerland every year. 

TOM: Gen Z are the most digitally savvy generation. One third of all iphone owners in the US are from this generation. They also far outpace older generations in their use of health related wearables, with 30% of Gen Z surveyed use wearable tech that gives them health information and leads their decision to purchase over a status symbol. They also have a huge purchasing power, with Oxford Economics predicting that by 2030 they will command $2 trillion of purchasing power.

Andreas Zimmer  15:19

So, Gen Z certainly is a very important consideration when looking forward, right? But for smart wearables, we actually see an uptake across the entire population. And in fact, we did some research last year, and actually found that the uptake of smart wearables among older generations was, in some areas, even faster than for younger generations. And specifically, this happened during the pandemic. And I think the reason for that is that during the pandemic, a lot of people actually started actively tracking their vitals and health stats and trying to interpret what they mean, right. So, this is something that we definitely saw. But as we go, you know, we look into the future, we do see that the likelihood that someone from you know, Generation Z will walk down the road with a high end luxury watch, will depend greatly on their personal purchasing power, right? And with a smart wearable, again, you will have different kinds of utility, right. And a lot of people from Gen Z without wanting to generalise too much, are definitely interested in things like versatility. That's something that smartwatches definitely offer because think of changing watch faces to fit your style or mood on that day. That's something that you can really only do with smartwatches. But also, again, health and sports tracking, and this will be maybe a little bit more personal. But it is a utility that is being offered by a smartwatch that that of a traditional watch. can't offer right? Still, they'll both be able to tell the time. 

TOM: Francois-Henry, your thoughts? Are Gen Z an opportunity or a threat to the Swiss watch market and Audemars Piguet?

FRANCOIS-HENRY 12:52

I always want to look at the glass half full. For me, it's only an opportunity and I'm going to tell you why. Let's look at the global population. today. We are 8 billion people on the planet. Now that we have to take the 1% of his global population, 80 million people. You know what? Let's divide that number by four. Let's make it 20 million. And he's in this 20 million. Give me baby 40% of them being Jane's Gen Z. Okay, so 8 million. Okay. 50,000 watches 8 million potential clients and I'm talking about the top of the top of the top. If some of them don't want to wear them again, I think we have to find others.

Tom: In our modern world of productivity, our entire lives have become dependent on accurate timekeeping.

Simon Sinek, author and inspirational speaker, said ‘Time is a commodity that must be spent. It can not be saved and we cannot earn more.’ So what is our relationship with time now that it is commoditised, and there is competition on our wrists?

RUTH OGDEN  00:35

So I think our modern relationship with time is very, very economic. So we see time as being a resource which we need to utilise well. 

TOM: This is Dr Ruth Ogden, Associate Professor of Experimental Psychology at Liverpool John Moores University, where she researches all aspects of how we experience and process time.

RUTH OGDEN  06:54

And so I think Simon Cynic's comment is exactly right, in the way that people think about time, particularly in this day and age.

RUTH OGDEN  07:33 objectively, time is a limited resource, but how we spend it determines how we experience it. And maybe what we need to do is to start thinking about that element of time more than the productive, commercial utilisation of time. 

RUTH OGDEN  01:36

So I think if you think right back to the real olden days, like the Stone Age, and maybe even before, then you've got this situation in which people aren't really aware of time in the way that we are. So we are micro aware of time, we know every second every minute, every hour is planned out for us, you know, your schedule might extend years in advance. Think back, when there weren't any available ways of measuring time, like you might have lived in a tiny village while there was no clock, or you might have lived in a city where you were listening out for St Paul's ringing out the hours for you. So we're in a situation now where we have such a high level of temporal awareness in comparison with our ancestors. And that is changing the way in which we function as a society.

RUTH OGDEN  08:32 and I think we're almost at a crunch point now with our relationship with time and technology. So we've come out of COVID. And COVID has, I think, fundamentally changed our relationship with time.COVID was a bit like being in a tiny prison.

RUTH OGDEN  09:01 the reality of it quickly hit home,all of a sudden, you don't have control over your time. Your time is just there existing. And it's dragging really slowly for most people, because it's super boring, and it's quite stressful.  And all of a sudden, we're aware of the fact that Well, time is limited. I think that the Simon Sinek quote is great. But up until COVID, we probably didn't really understand it. And now we do. Now we understand what it's like to have time taken away from us. I think that's fundamentally changed how we feel about time.

RUTH OGDEN  11:38 For me? I was thinking about this earlier. Wouldn't it be novel? If smartwatches were obsessed with your time instead of your fitness? Like, wouldn't that be a radical idea? So rather than my smartwatch telling me, oh, you know, like, get up and do something. What if my smartwatch was telling me well, actually, you know, any work that you do beyond this point is unpaid work, because you've done your working hours. So what if it says, like, you know, go and do something that you enjoy with your time, or you seem quite stressed time might be passing quickly for you to calm down. But is this the future of the watch? That the watch is no longer necessarily a way for us to feel pressured. But it's a system which alerts us to the fact that we need to stop and we need to slow down and we need to regain ownership.

TOM:  

So with such a rich history, what role do watches have in our digitally dominated future? Whether it’s ‘traditional’ or wearable tech, the status of a watch is evolving. Is what we do with our time affected by the tool that gives us it?

RUTH OGDEN  33:27

I think that the extent to which people want to buy a digital watch is going to be dependent on whether that digital watch is still giving them some level of satisfaction. And I think that what we can conclude about our relationship with time at the moment is that it is a strange relationship. So there is not quite enough time for most people. For some people, there's far too much. But again, that's the same problem from a different angle. So if we want people to continue buying any form of watch, whether it's digital or analogue, we need to look at our relationship with time and we need to see how we find a harmonious relationship with time. I don't envisage a situation in which people are going to never buy analogue watches again, I don't think it's realistic they're more beautiful, they look nice. To me they represent, like, time and time again, someone has crafted it and the history and all the sort of knowledge and the intricacy of an analogue watch that you're never gonna get into a digital watch. That will always just be a screen. Oh, maybe I'm wrong. Maybe they'll tell me something different. But I think what may be a more interesting question. Why do we need a digital watch? So we have time, everywhere we have it on our phone, we have all the functions of a watch on our phone. So why do we need a digital watch? What's the purpose of it? It doesn't look pretty. But what sort of but not quite as much in my mind. So why have we got it? So is it and I think that's the point that I'm trying to make  is that if they want people to carry on buying digital watches, they need to make them beneficial, and not just about physical activity. And not just about being contactable all the time. Because hopefully society will realise that they are not necessarily the be all and end all have a good day.

TOM: Francois-Henry, your thoughts?

FRANCOIS-HENRY 27:54 The weather web rules are now seen as the infant stage of what they should become. And I'm all in favour of extremely smart, not smart, extremely smart wearables. I'm gonna give you an example a few days before you get a heart attack, your skin pH changes. Doctors are telling you this, if tomorrow through a wearable, you get an indication that within 48 to 72 hours, you've got 90% chances to get a heart attack, I'm all in favour. If a wearable is about going by 10,000 steps a day, I couldn't care less. So if it becomes something where there is some serious information that could help save lives, or that would potentially help older people getting help when they are alone in their homes, or all the types of things for sure. And eventually, eventually, that the day we could implement those technologies in our bracelets, descend to this knot in our mechanisms, because then it will be sending our soul now to implement this in our bracelets strap or go the status, whatever you want. I will be all in favour of but still today, the the size of these things is so big that it will affect the integrity of the aesthetic of the product. So it doesn't really work. But one day it will. So we'll see. And eventually we also know that 510 15 years from now, we will not need to wear something in our race to get measured and to get the right measures of everything is going to be maybe even inside us on cloth. We were going to see an evolution in technology which is so huge. We shouldn't look at Oh, we might die because the risk is occupied already. Because I'm a firm believer that the risk is not the end of the game at all. for wearables, at some point is going to be in us. 

Tom: Andreas?

Andreas Zimmer  23:27

So I certainly think that, that the role of the wrist watch, aside from telling you the time, is to actually express your, your personality, to an extent and to be a part of, of fashion on your wrist. And that's also what we see if we look at the watch industry, right? I mean, the watch industry is a very, very old industry, right? And they've still always managed to develop new designs, and, you know, a watch looks different now to what it looked like, you know, maybe a century ago. And that shows that there's lots of innovation and, and thought going into these products. And so I think that that is going to continue into the future as well. The role that smartwatches, on the other hand, are going to play is probably to supplement this and to give users a way to do different things in different kinds of moments. Right? So maybe there are moments in your life where you, you know, want to go for a run and want to be motivated to get up from your desk. And that's something that a traditional watch is not going to be able to give you. You would need a second device and probably program something on your smartphone, but that's something that So, you know, we can do with a smart wearable pretty easily. Now, if you still want to wear a luxury timepiece out for dinner, and you might want to disconnect for that time, then there's probably still a very good role for you to wear that.

Tom: So what do the next five years look like?

Francois- Henry?

FRANCOIS-HENRY  17:37

There are a lot of things going on in the world today. And normally, I'm a very optimistic person. But I see things happening in terms of the environment for the issues that we know about social issues that we see rising everywhere on the globe. And because of that, Okay, so I said somebody does not know so I see a really potential crisis coming. And that could affect not automatically get on all the variables that could affect the entire business, basically. Which is also why when we are those types of years, these are not years where anybody could say, oh, it's gonna keep booming for everyone. Everything's gonna be great. We're gonna see growth by 20% per year for every single company, whether in the watch world, fashion cars, everything, no, I don't see this at all. I see a sort of world that could shake a little bit. The good news about being an independent company, so not a public one. And being able to adjust volumes accordingly, will give us an advantage no matter what, because if tomorrow we need to reduce production by five or 10,000, which is because the world is shaking somehow, we can and that will not affect the integrity of the other map your path at all. So we'll see. And what I've just said about the next five years for the map again, you know, when I will leave at the end of the year, so my replacement is joining me on the 15th of August, and I will step down as of December 31. But we are already in the pipeline in terms of connections, events, collaboration means everything is pretty much already put together until 2026 to 27, it doesn't mean that she won't be able to change anything, because she will. But in terms of product line, and collection, we work three to up to seven years ahead. So we are on a good path, the brain has reached a level of perceived value, which is extremely high. And I said, keep going at it. Don't shake the boat just going nicely so far. 

Tom: Andreas?

Andreas Zimmer  17:42

Yeah, so I mean, the past years have sort of taught me to try to not predict the future so much, right, but I'll give it I'll give it a try. So we still see a lot of potential for smartwatches uptake, right. Because again, the markets that see the highest penetration of smart wearables were still only around 50%. So there's a lot of growth that can still come from people actually discovering the utility and the benefit of smart wearables for themselves. And I think that is something that we are looking into. And this can basically be two things, it can either be lifestyle, or it can be health. And in some cases, smart wearables even combined both of them together, right? What we do see is that people who do use smart wearables start adopting better routines, and better lifestyles, because they are tracking themselves, right? You can, you can think of this in this mantra, what what gets measured, what gets measured gets done, right. And we do see, through our research, that people who do start tracking their heart rate, their steps, their movements, their sports activities, start actually increasing all of these kinds of activities, because they can see that they're actually building on something and they're getting benefits from it.

Andreas Zimmer  25:43

I think that the role that consumer electronics play in our everyday lives is a very exciting one, because consumer electronics have now become part of our everyday lives. And the exciting thing is to actually see what's the next step. So what's the next thing that consumer electronics can do for you to actually have a better life. And working with this day in day out, is a hugely exciting topic. And especially when it comes to smart wearables, there's still so much that can be done, and still so much that people can get out of this product. So thinking about this day in and day out, is, in my opinion, probably one of the most exciting jobs to have right now.

Tom: And finally Ruth?

So I think our relationship with time in the next five years, is going to be quite a fraught relationship with time, we're at this sort of battle point, I think, between the desire to be productive, the availability of flexibility within our working environments, and our social environments, but also a lack of understanding of how to navigate and develop boundaries within that environment. So I think it's going to be a difficult five years, where employers and employees and individuals in their personal time try to find a balance between the need to always give their time to someone else, and always have their time available to other people. And the need to have personal time, which is just theirs, that they have complete autonomy over. And I think that I mean, it seems fairly clear that there is a huge move towards smartwatches, there is a huge move towards permanent connectivity, and you know, the many advantages and disadvantages that may bring. But one of the things that we might want to think about is how we can change the way that we relate to this permanent connectivity, and that we relate to time in a digital era. So do we always want to be available? Do we want the default settings on our smartwatches to be that our email pings us at three o'clock in the morning? Or do we want it to be well, we have to actively enable that to happen. So how is this relationship going to shift? 

RUTH OGDEN  20:25

24:32 So I do have a smartwatch. I have a Garmin, and I run with my Garmin. But I actually had to stop it from being a watch when I'm running. So it's not allowed to tell me anything about time while I'm running. Because I felt like I became obsessed with looking at how long was left in my run. So it is watch, but I stopped it from telling me any information about time,

One of the things that came out of COVID was that people are more aware of time. So why are we not sort of more timeful? Why are we not aware of our time more and how we spend it and how that makes us feel. And for me, that would be the thing that I would like people to be going forward, I would like them to be timeful, to be aware of their time, and to try and spend that time doing things that make them feel good without guilt 

19:56 Like my watch seems to determine what I'm doing. And is that healthy and is that good? And what does it mean for our well being and our sense of quality of life, if even beyond pressure from humans, we also have pressures from technology telling us what to do and when to do it.

What we really want is a softer, softer relationship with time where we're not trying to fill it all the time, we're aware of the idea that we know, we don't want to lose it. But we can't do everything all at once.

TOM OUTRO 

The famous writer William Penn said, ‘Time is what we want most but we what we use worst’

Time is finite and it is potentially the most valuable commodity on earth. As Simon Sinek said ‘ we can’t earn more.’ Therefore our fascination and ability to control time, to use the 24 hours we have a day in the best way possible has become an obsession for some, and an industry for others. How we tell the time has changed significantly in the last 20 years. Whether it’s your computer, phone, microwave or wristwatch we are able to find out the time from multiple avenues. But the mode of that changes what we do with our time. A quick glance at a wristwatch gives you the time, a wearable gives you the option to do multiple things, order that Uber, cancel a meeting. 

Fine made luxury watches still have something over their digital competition. The beauty, design, quality and collectability of the Swiss luxury watch industry is unrivalled. A consumer doesn’t just buy one to tell the time. Nor do purchasers of wearable tech. But for different reasons.

If you want to put it in terms of time, the nearly 600 year old Swiss watch industry still has tricks up its sleeve, despite the competition from wearables less than a decade old. 

But what will the future bring? Only time will tell.