These companies and other makers of non-luxury watches are scrambling to rethink the timepiece for the cell-phone era
Stuart Cameron remembers the first watch he ever owned: a wind-up Mickey Mouse watch, given to him by his parents on his sixth birthday. The face was grass-green, and Mickey's oversize white gloves were the hour and minute hands. More than four decades later, Cameron, now Seiko Instruments' director of business strategy for high-end watches, still has his childhood timepiece. "It wasn't a toy to me and—not to get cheesy with this—it stood as a symbol that I was getting old enough to be responsible," he says.
It's a memory that few of today's children and teens will have—cell phones, MP3 players, PDAs, and other portable digital devices that also happen to tell time are pushing watches to the brink of irrelevance. Of course, luxury never becomes obsolete, and sales of Cartiers, Rolexes, and other pricey status symbols are barreling along. But overall watch sales in the U.S. fell 4.9% in 2005, to $7.6 billion, according to New York market researcher Packaged Facts (2006 figures won't be released until August), with the sub-$50 category taking the biggest hit.
So to avoid going the way of the dodo bird, watchmakers such as Seiko and Timex are rethinking their approach to the fickle, trend-sensitive consumers of the 18-to-43 generation. The strategy: Forget about the business of telling time and give your customers a tool for self-expression.
So watchmakers like Citizen are mounting aggressive print and TV ad campaigns featuring young sports stars such as Emeka Okafor, NBA Rookie of the Year for 2004-2005, and Sasha Cohen, U.S. ladies' figure skating champion, as "unstoppable," like its watches.
Seiko, meanwhile, is shifting its focus to the mid-market: watches retailing for between $50 and $1,000. To break into the segment, they've acquired new licenses, including ones with industrial designers and the estate of pop artist Andy Warhol. The $130 ladies' buckle watch designed by the Spanish star Patricia Urquiola, which can be worn as a wristwatch or necklace, was a best-seller in 2006, says Cameron. Seiko's strategy has allowed it to expand distribution beyond mass-market outlets such as Wal-Mart (WMT) and J.C. Penney (JCP) and into the specialty boutiques that attract a third of all watch dollars such as L.A.'s Fred Segal and New York's Moss.
Licensing deals are nothing new for watchmakers, but they're an increasingly vital competitive tactic in a fragmented industry. Timex recently renewed its license with Gianni Versace, and Fossil announced a partnership with the National Football League. In a bitter battle in 2005, Fossil tried to wrest the Guess license from Timex but failed.
Warhol Watches are Hot
Licensing deals with hot brands can offer a shortcut to the youth market. Licensing also offers companies a way to leverage "second-hand nostalgia"—nostalgia for idealized decades and styles that they have not lived through, says Kiwa Iyobe, a trend manager for Faith Popcorn's BrainReserve, a network of global trend-spotters. Fossil's old-fashioned pocket watches ($75) cater to this yen, as does Citizen Watch's Caliber series, whose digital chimes announce the hour at the push of a button.
In another nod to an earlier era, Seiko's new Andy Warhol Pop Art watches ($150) have been a hit with teens and twentysomethings in Japan, where Seiko has sold 50% more units then it originally forecast. Seiko anticipated selling 3,000 units, and had sold more than 4,500 by end of 2006. This, in turn, fueled large reorders going into spring 2007.
Citizen has launched a marketing blitz, running more than 350 ad pages—a big figure for the watch industry—for its Unstoppable campaign featuring young athletic superstars. The ads ran in publications such as People, Sports Illustrated, Glamour, Men's Health, and Latina and during NFL programming on NBC and FOX. This campaign helped the company secure the highest share in the watch market in the $50-$800 price range (where 20-40-year-olds are most likely to purchase). Citizen credits this campaign with driving its sales growth by 7%-9% each year in 2004, 2005, and 2006, unusual given the slump in the rest of the watch world. It is expanding the campaign in 2007.
Bluetooth on Your Wrist
Going green is another popular approach. Seiko's new "Think the Earth" watch, which retails for $500, contains a small globe, rotating at the same speed as the earth. It displays the wearer's location and the time anywhere in the world. Part of the profits go to environmentally friendly initiatives. Citizen dressed up its solar-powered Eco-Drive watch ($499) with a subtle array of diamonds.
A few watchmakers are defending themselves against the threat of time-telling gadgets by introducing watches that do more than tell time. Nike (NKE) joined forces with Apple (AAPL) to create a watch that connects to an iPod and heart rate monitor. And Fossil recently launched a Bluetooth watch ($249) that communicates with your cell phone and displays incoming phone numbers. If you can't beat 'em, join 'em.