Will the smartwatch replace the traditional watch? Retailers, experts say no

Will smartwatches take the place of the traditional watch?

Watch display cases fill a prominent spot in the center of Smyth Jewelers' sprawling Timonium store, where groups of shoppers last week surveyed the selection, from top-of-the-line Breitling Bentleys to the fashionable Michele women's line with interchangeable straps.

"It's a big part of what we do," said Josh Makowski, director of the sales for the Baltimore-based retailer. "The watch industry has done a great job of keeping up with the time. They … keep the lines fresh and moving along with the time — no pun intended."

People have been shifting to new ways of telling time for years, thanks to smartphones. But even though nearly everyone now carries a device that displays the time, U.S. watch sales remain strong, rising 7.7 percent to $9.1 billion in 2014, according to a jewelry market report from Edahn Golan Diamond Research & Data. But those sales faltered following the April launch of the highly anticipated Apple Watch as watch sales dropped more in June than they had since the recession.

Despite the threats, industry experts say there's still a place for the traditional wristwatch. They remain popular as gifts, accessories and status symbols.

Besides the luxury brands sold at jewelry stores, low- and midpriced watches remain popular sellers everywhere from Macy's to Target. Watches helped drive sales increases at Kay Jewelers and Jared — The Galleria of Jewelry, according to the most recent quarterly results for Signet Jewelers Limited, their corporate parent. And Smyth, which does its biggest business in bridal jewelry, has found that watches often accompany wedding-related sales.

Sales of watches, which sell at Smyth for a couple of hundred to several thousand dollars, have remained steady throughout the years, Makowski said.

"It's a consistent, traditional, timeless gift ... whether wedding or graduation or something that symbolizes a moment in your life," Makowski said.

Fine timepieces can be handed down through generations, he added, explaining that the smartwatch buyer who wants to communicate through a wearable device is a different sort of customer.

"The smartwatches date themselves so quickly," he said. "You don't buy an iWatch for something to hold on to forever or pass down."

The June sales numbers released by NPD Group, however, suggest trouble ahead for the watch industry. Sales of watches at department stores, national chains and independent jewelers fell 11 percent to $375 million, compared with June a year earlier. Even more striking, unit sales of watches fell 14 percent to 927,500, the biggest percentage drop for the month of June since 2008, said Fred Levin, president of NPD's luxury division.

"It's a double-digit, very material drop," caused not only by the debut of the Apple Watch but other factors as well, Levin said. Though sales have declined in previous months, "they didn't strike us at the same level. This is the first month of double-digit decreases."

Levin said watch sales also were affected by a shift in retailers' promotional calendars, fueling more sales in June 2014 than this June. Also, some leading watch brands saw sales fall, possibly because market saturation weakened demand, he said.

But the Apple Watch undoubtedly has had an impact, he said. While the tech giant has not released specific numbers on its watches, estimates say at least 200,000 sold in June.

"When you think about the number of Apple Watches sold in the month of June ... 200,000 watches is extremely material related to the overall market for watch sales," of more than 920,000 units, he said. "There's going to be some cannibalization that's going to affect sales."

The fact that 40 percent of people who have or plan to buy Apple Watches are not wearing watches today could boost traditional watch sales, he said. On the flip side, though, are the 60 percent who wear watches and plan to buy an Apple.

"Had they not purchased an Apple Watch, perhaps they would have purchased a more traditional watch," Levin said.

Apple's wearable, which also sends messages, tracks fitness and pays for in-store purchases with a few taps of the tiny screen, is expected to put a dent on sales of traditional watches that sell in the $200 to $800 range, but to have less impact on the high-end luxury brands, said Cliff Raskind, senior director of mobility for Strategy Analytics.

It already has taken the wearable device world by storm.

In the second quarter of the year, global smartwatch shipments hit a record 5 million units, a 457 percent year-over-year growth rate, with Apple capturing 75 percent of the market share with 4 million units, according to Strategy Analytics. The second-quarter volume was higher than for all of 2014.

"The smartwatch is already taking a bite out of the wristwatch industry — look at what Apple sold," and new applications are being developed to make the watch even more of a standalone device, Raskind said. "The midrange watch makers have more to worry about than the high-end watch makers."

JCPenney, which sells its watch assortment both in stores and online, sees the rise of the smartwatch as an opportunity to appeal to consumers who might find the Apple Watch out of reach financially, said Sarah Holland, a Penney spokeswoman. The retailer is promoting its "affordable assortment" of smart fitness watches and bands that offer activity trackers, heart rate monitors, GPS capability and more, she said.

In June, JCPenney began selling Garmin fitness watches and bands, the best-selling of which is the Garmin Vivoactive that sells for $249, about half the average price of an Apple Watch. The Polar and Soleus fitness watch brands also have been popular, Holland said.

But such smart fitness watches won't replace traditional watches, she said.

"JCPenney remains dedicated to being a leading destination for classic, timeless watches," she said. "Traditional watches continue to be an important gift purchase."

Before the weakness reported for watch sales in June, the watch category overall has been "solid," Levin said.

"Everyone is using cellphones and mobile phones, and the time frame is all over the place," he said. "Does that mean the traditional watch category is dead? In no way, shape or form does the data confirm that. The category overall is healthy.

"People aren't buying watches to tell time. People are buying watches because of what it means to them — the brand appeal, it makes them feel good, or as simple as the cool factor."

Laurie Harroll considers a wristwatch is an essential accessory. The resident of Street in northern Harford County began wearing designer watches several decades ago after admiring a former boss' Gucci timepiece. She invested in one of her own, which she lost recently.

On Thursday, she browsed the estate watches at Smyth, hoping to find one her husband could buy her as an anniversary gift. She said she's particular about her watches.

"It's something I wear every day, and I want it to be nice and go with everything," she said.

For her, new technology hasn't diminished the appeal of the watch.

While smartwatches in general and the Apple Watch in particular represent a short-term challenge for traditional watch sellers, especially over the next two years, Levin said that in longer term it could be a "huge positive."

"When you think about the 40 percent of younger consumers that don't wear a watch that will be introduced to wearing something on their wrist," Levin said, "if only a modest amount want to add a second watch to accessorize ... there's going to be a solid addition to the watch category."

lorraine.mirabella@baltsun.com

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