TAG Heuer’s first smartwatch was instantly the best. It just lacked one thing: customers. Is company boss Jean-Claude Biver worried? Not a bit, he tells John Arlidge
Designing a nifty piece of technology is not the same as ushering in a revolution, as Jean-Claude Biver is finding out. Two years ago, the boss of TAG Heuer launched the best smartwatch on the market, the Connected watch. It was every bit as good as the Apple Watch was disappointing. It looked like a watch, not a gadget. Its big screen and controls were easy to use, not fiddly like Apple’s. You could use it without having your phone nearby. You could swim wearing it. The battery lasted a full day.
So, in these tech-obsessed times, it should have flown off the shelves. Not so much. TAG Heuer, owned by LVMH, the world’s largest and most profitable luxury goods conglomerate, sold only 56,000 in the first two years, compared with the Apple Watch’s 11 million. As a share of TAG’s overall sales, ‘that’s nothing. It’s ridiculous!’ Biver concedes.
Worse, news of the poor sales comes as evidence grows that many consumers regard wearable tech as, well, unwearable. A year ago analysts were making multi-billion-dollar forecasts for smartwatches, and Apple was selling a £15,000 rose gold edition. Market research firm IDC estimates that 19.8 million smartwatches were shipped in 2016, missing a 28.3-million projection by almost half. In the third quarter of last year, Apple Watch sales were down more than 70 per cent. Apple recently junked the luxury version of its watch after poor sales. Sony, Lenovo and Motorola are pressing pause on their new smart timepieces. ‘The reality is, these devices have stalled in the marketplace,’ says Ben Wood, an analyst at CCS Insight.
However, Biver, who is the most iconoclastic and ebullient Swiss you might meet — he dresses down Monday to Friday, shouts all the time, and brings giant wheels of cheese made from milk from his herd of Alpine cows to press conferences to serve to journalists — is undeterred. In fact, he’s doubling down. He has just launched the Connected Mk II, known as the Modular because it comes in modular form.
You can choose the watch itself — either the Connected, with dozens of customisable faces, or a traditional mechanical timepiece. You just slot the one your want into the titanium base. You can also customise the lugs (the brackets that link the base to the strap), the strap itself, and the buckle. You don’t need special tools, so you can chop and change everything as often as you want.
‘You can buy history and the future, mechanical or Connected, in the same watch,’ Biver tells me over coffee and — yes — his cheese when we meet at a bar on the banks of Lake Lucerne in Switzerland. ‘Who can sell you the past and the future? TAG Heuer.’ The Connected Mk II starts at £1,400, which is £300 more than the original Connected. The mechanical costs an additional £1,400. Add diamonds and rose gold, and a spiffy tourbillon, and the price can rise to almost £500,000, Biver claims.
The new Connected comes with the latest Intel processor and Android Wear 2.0 operating system, but it also works with Apple’s iOS — although certain functions, notably text message replies, don’t work on iOS. It has wi-fi and GPS and you can make mobile payments using Android Pay. It bears the slogan ‘Swiss Made’ for the first time. The first version was merely assembled in Switzerland.
Biver is cheerful, and not just because that is his default mood. He’s convinced he’s on the right track — and he probably is. Technology is disrupting virtually every business in the world, including the oldest and most traditional: watchmaking. Young consumers are turning away from traditional watches in favour of phones and tablets. The only way to combat the disruption is to embrace it and get ahead of it — by creating a watch for the new digital generation.
‘We want to be in the future already,’ Biver says. The Connected will help TAG attract new customers who aren’t interested in traditional mechanical watches, he argues. ‘Thanks to the Connected watch, the brand has started to become cool again. It’s rejuvenating the brand. People who never would have looked at a TAG Heuer — suddenly TAG Heuer comes into their mind. It gives us a new community of customers. And, who knows, they might, over time, go from being Connected customers to mechanical watch customers.’
He’s not bothered by the low sales figures for the Mk I: ‘It’s exclusivity. It’s prestige.’ He insists the Connected made a profit on its 56,000 sales, although it’s not as profitable as mechanical watches. He aims for 150,000 sales of the Mk II this year, which, he says, is the maximum TAG can tolerate. ‘People say that there will be 40 million smartwatches in the world this year. If we produce 150,000, it means we have 0.4 per cent of the market. That is where luxury should be. The day you have more, you are no longer luxury. We have to keep the growth slow and exclusive.’
Biver’s confidence is infectious, but it does not get round some of challenges he faces — and has not solved in the Mk II. To accommodate all the processors and battery, the Connected is still very, very big. It sits so proud on your wrist that it’s hard to wear under a jacket sleeve. A smaller version (39.5mm in diameter, instead of 45mm) will be launched in October, but it’s still likely to be pretty tall. The battery does last a day, but it should last longer, especially when you consider that many people will wear the Connected when travelling. And it is pricey. You can get a simple Android Wear 2.0 watch for a few hundred quid. Is the TAG Heuer really worth £1,200 more, considering it will be outdated in a few years and the battery shot if you charge it every day? I’m not sure.
Swiss watchmakers are convinced that they can crack the luxury smartwatch. They don’t regard the Apple Watch as a competitor. ‘It does not look like a watch,’ sniffs Biver. ‘We look like a classic watch. We have better materials — carbon, red gold, rose gold, diamonds, sapphires.’
Competition to win first mover advantage is intense. Biver brought forward the launch of the Connected Mk II by ten days to get it out ahead of Montblanc’s £800 Summit, which was launched at Basel World in late March. He’s convinced he will still be ahead a year from now: ‘We have created materials, emotion, beauty, design, art, individuality — that is luxury. That is what we are strong for and what we stand for. We lead and will continue to lead. We are so ahead with the Connected watch.’ Now all he has to do is sell some.