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Did The MoonSwatch Just Change The Game?

With lines out the door and the police having to be called, you would’ve thought the MoonSwatch release was the latest drop from YEEZY and it might have just changed...

With lines out the door and the police having to be called, you would’ve thought the MoonSwatch release was the latest drop from YEEZY, and it might have just changed things for watchmaking.

The MoonSwatch was a huge release. Maybe one of the biggest watches releases in recent memory. When was the last time you saw people lining up to get their hands on a watch? It’s just not where the watch market is at, they aren’t sneakers. But it seems that the Swatch Group has taken a page out of the streetwear marketing book, and it seems to have worked even better than expected. This success begs the question, “What does this mean for watchmaking?”

Cheap Watches vs High-End Watches

There’s a big difference in marketing tactics and target demographics when it comes to the different price points in watchmaking. To understand why, you need to understand what sets watches a part at different price points.

If we look at a $500 mechanical watch and compare it to a $5,000 watch, the differences are mostly focused on the finishing and materials used, not the design. So $500 watches are often simpler in case shape, have less detail with rougher edges, and flatter dials that appear more two-dimensional. However, you still get a mechanical watch and there is often thoughtful design and craftmanship put into it.

A $5,000 watch will have a little more when it comes to the finishes. You get hand finishing, hand bevelling, hand engraving, hand enamelling, and so on. The materials are typically of better quality with added treatments like non-reflective glass. Even the movement is better as at this price point as they often meet chronometer specifications even if they aren’t certified as one.

$500 Tissot PRX (left) and the $5,500 Cartier Santos-Dumont (right)

Once you start hitting watches above the $5,000 mark, there is less physically different to separate the watches in terms of quality. It’s really just about the brand name and the markups that go with it. That isn’t always the case, for example, when Hublot released a watch made entirely from sapphire (the case, bezel, and bracelet) you can understand the ridiculous price tag. But overall, you are paying for a piece of art on your wrist at or above the $5,000 mark.

Quartz watches (battery operated watches) are very cheap to make. You don’t need a person to put together a movement by hand, you just pop the battery in on an assembly line. Same goes for their cases which are often plastic. A human doesn’t need to assemble any part of these watches. The advantage of this, is that you can sell it consumers for a very low price, thus selling more.

Each of these price points has a different marketing strategy that works for them, but none of them were prepared for smartwatches and the absolute dominance they would have on the market.

The Smartwatch Era

Connoisseurs (or snobs, whichever you prefer) find smartwatches repulsive as they aren’t watches in any sense of the word, they are computers for your wrist. In 2021, the smartwatch market was worth $22.46 billion USD. Now the Global Watch Market was valued at around $92.75 billion USD in 2021. The GWM is ahead in market value but look how many smartwatches were sold in 2021 alone, 127.5 million. Now, there are no numbers available that tally the entire watch market’s number of units sold but given that Rolex only make 1,000,000 watches a year, you can bet even with the help of other luxury watchmakers that it is nowhere near that number.

Again, the luxury market isn’t trying to sell a Rolex to everyone, that would defeat the point. It’s value, in part, comes from its scarcity and perceived attainability. The Swiss watchmakers export just half of what they used to two decades ago, yet they are earning more.

But that only applies to the high-end but what about those hanging around the middle and towards the bottom? That’s where the smartwatches are making their presence felt by cutting into the numbers of the cheaper end of the market.  

In the Deloitte Swiss Watch Industry Study 2021, Millennials and Gen Z are reported to be more likely to wear smartwatches. But if they were given $5,000, 48% would choose a luxury mechanical watch and 39% would still choose a smartwatch. It suggests that price is main barrier to entry here. Enter the MoonSwatch.

How the MoonSwatch May Change Things

Swatch, the brand not the Swatch Group, aren’t doing very well. They sold 3 million watches last year but they are really cheap and so as a result they only contributed 3.5% to Swatch Group’s revenues last year, according to Morgan Stanley. Most of their revenue (65%) comes from their luxury brands Omega, Longines, and Tissot.

Not only that, but according to the Deloitte study,

“Brand image is the top deciding factor when it comes to buying a luxury watch, and social media, brand ambassadors and influencers play key roles.”

Brand image… what better way to get your brand image out there to the mainstream than to pair it with a brand already accessible to the mainstream? That’s what Omega have done with Swatch on the MoonSwatch. They didn’t come up with it, they’ve just taken what streetwear brands have been doing with luxury brands for the last few years. Think what Supreme did with Burberry, or maybe more apt, Adidas x Gucci.

When the MoonSwatch was announced, the Swatch Group used hype-marketing commonly associated with streetwear that resulted in lines out the door of Swatch boutiques… when is the last time you saw people lining up for a watch release?

As Jesse Einhorn, economist at StockX, told the Market Herald, “This was a massive watch release that in many ways taps into the same currents and the same release tactics as traditional streetwear and sneakers… With the Omega Swatch it’s rare that you see a watch release so thoroughly penetrate the discourse.”

What they did was release a plastic quartz version of the iconic Omega Speedmaster, and everyone loved it (until some actually used the watch but that’s for another time). It’s been success not just because they sold out on the same day as their release, but because it has managed to introduce the name Omega to a younger and broader audience.

This could change how watchmakers release and promote their flagship offerings by producing cheaper variants or homages to vintage watches. Considering that reissues or reinterpretations of vintage watches are very in vogue right now, this isn’t out of the realm of possibility. Another reason they may do this is because these bigger brands are often part of larger conglomerates, like the Swatch Group, with a varied list of watchmakers a part of it. It’s possible that they pair up two different watchmakers to make a cheaper option for consumers in order to market their luxury offerings.

We will have to wait and see what kind of impact this has on the market, but this certainly might become a reality, especially if they want to claw back some of their market share from smartwatches.

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