Tag Heuer’s chairman Jean-Claude Biver announced that the company is ramping up weekly production of their Carrera Connected Smart Watch from 1,200 to 2,000 pieces.
The watch costs $1,500 and features a nice titanium case and Android Wear. Buyers get the option to upgrade to a limited edition mechanical watch for another $1,500. Biver is also trying to move sales away from the web to brick and mortar stores, an effort that attests to the true market for the watch: folks who still buy watches at retailers.
The fact that this is seeing demand at all is a fairly interesting story.
The watch world suffers from a tough dichotomy. Watch sales have traditionally happened at brick and mortar stores all around the world with stratified pricing for “destination” stores like Bermuda and lower prices and specially targeted lower-end brands for less developed regions (Rolex vs. Tudor, for example.) Watch manufacturers would crow about the low number number of “doors” they had – a sign of exclusivity – and they were quite stingy when working with retailers, allowing only certain shops to carry certain items.
With the web, however, manufacturers began to lose control over the sales process. For a while they were railing against “grey market” sales – namely watches sold by jewelers who took advantage of the massive disparity between wholesale price and MSRP – and now they are realizing that the high touch watch experience still moves merchandise even if the web is the real money-maker. Selling watches at retail stores is wildly expensive but it’s clear that demand for the watch – at least for rich watch lovers who might want to try the Connect on a whim – is focused on stores.
So what is happening here? First, remember that $1,500 is small potatoes in the watch world. Watch lovers routinely spend more than that on branded watch bracelets. Price, in this case, is no real object and the Connect allows them to feel fancy while still trying the latest technology. Second, there is a dedicated group of collectors who will buy anything Tag offers and see this as an opportunity to buy a limited edition mechanical while messing around with an Android Wear. Collectors are obviously a subset of the world at large, but we can assume that Biver will manufacture about 20,000 of these or so in the next few months in order to raise perceived scarcity and reduce their chances of having to scrap these things when the hardware becomes obsolete. In short, they are selling smartwatches to their old customers who are primarily interested in the Tag Heuer brand rather than the technology.
So it’s nice that Biver is admitting that he is ramping up production but the fact that he announced it at all, even in passing, means even he didn’t expect things to go very well. His statement sounds like he is pleasantly surprised rather than all-in in the digital space, a fact that should help you understand just what the Apple Watch and Android Wear will do to his shrinking customer list.