This summary of the video was created by an AI. It might contain some inaccuracies.
00:00:00 – 00:15:38
The video delves into the transformation of the global watchmaking industry in response to the advent of tech companies like Apple and Fitbit and the prevalent shift towards smartwatches and fitness trackers. Despite these changes, traditional Swiss-made watches continue to hold their ground, admired for their heritage and craftsmanship, supported by a passionate community and secondary market.
Fossil, an emblematic name in the mid-priced watch segment, has faced significant challenges. Its sales declined from $2.2 billion in 2019 to $1.6 billion in 2020, leading to store closures and stock dips. Fossil's response includes a turnaround strategy that emphasizes smartwatches, digital investment, and expansion into growth markets like China and India. Fossil’s product line is diverse, with 80% of its sales in watches (traditional, smart, and hybrid) and the remainder in accessories and eyewear.
The video also addresses the broader market dynamics, including the Quartz Revolution of the 1980s spearheaded by brands like Swatch, and the subsequent impact on traditional watchmakers. The persistent popularity of high-end mechanical watches contrasts with the decline in quartz models and the immense sales growth of smartwatches, notably the Apple Watch.
Switzerland's watch exports saw unit declines but value increases due to expensive mechanical watches. Fossil's restructuring since 2016, under initiatives like "New World Fossil 2.0," has achieved significant cost savings and aims to fortify its market presence through digital transformation and new product innovation.
Lastly, the competitive landscape reveals that top sellers in the watch market include smart device giants such as Apple, Samsung, and Fitbit. While smartwatch wearers remain open to traditional watches, it is uncertain if Fossil can successfully pivot and lure customers away from leading tech brands.
00:00:00
In this segment of the video, the discussion focuses on the impact of tech companies like Apple and Fitbit on the global watchmaking industry, particularly with the rise of fitness trackers and smartwatches. Despite this, high-end Swiss-made watches continue to thrive due to their traditional craftsmanship. Legacy watchmakers have had to adapt to maintain their market presence, with one notable example being Fossil. Fossil saw a significant decline, with net sales dropping from $2.2 billion in 2019 to $1.6 billion in 2020, and its stock plummeting to around twelve dollars as of May 2021. The company closed 30 stores in 2020 and announced plans to reduce its store count further. Besides its own brand, Fossil Group produces watches for several luxury and fashion brands. To combat market challenges, Fossil has introduced smartwatches, implemented a multi-year turnaround plan, expanded its e-commerce, and targeted growth in China and India. The video also briefly explains the difference between quartz and mechanical watches, noting that quartz watches, introduced by Japanese companies like Seiko in 1969, became popular due to their affordability and accuracy.
00:03:00
In this segment, the video discusses the impact of the quartz revolution in the 1980s, highlighting the popularity of affordable, fashionable quartz-based watches, exemplified by Swatch. It explains how Fossil was founded in 1984 by Tom Kartsotis and gained a cult following for its unique designs and collectible tins. Fossil’s growth led to a large workforce, but it reduced its staff in 2020. Kartsotis left Fossil in 2010 to establish Shinola Detroit. The video outlines Fossil’s product range, emphasizing that watches make up about 80% of its sales, which include traditional, smart, and hybrid models. Accessories account for an additional 16-20% of sales, with a minor eyewear business. Fossil’s global reach spans 140 countries, with significant operations in Texas, Hong Kong, and Switzerland.
00:06:00
In this part of the video, the discussion centers on Fossil’s fiscal performance and challenges faced due to changing consumer preferences and market trends. Fossil saw its production through owned factories decrease slightly in 2020 and experienced significant sales declines, leading to increased net losses year over year from 2018 to 2020. The company attributes some struggles to a shift in consumer interest towards connected/smart watches, with Apple dominating the market. Fossil’s mid-priced watches are finding it tough to compete against smartwatches in the crowded market, especially in sensory-overloading environments like department stores. In contrast, luxury watchmakers are thriving due to their appeal as heritage, handcrafted items with lasting value, supported by an ecosystem of enthusiasts and a strong secondary market. The growing awareness and appreciation for mechanical watches are also noted, fueled by social media, collector groups, and dedicated communities like HODINKEE.
00:09:00
In this part of the video, it discusses the decline in Swiss wristwatch exports, which hit a historic low of 20 million units in 2019, a 13% drop from 2018. Despite this, the value of exports increased due to higher-priced mechanical watches. The segment highlights that the Apple Watch outsold the entire Swiss watch industry that year. The impact of the COVID-19 pandemic in 2020 further reduced wristwatch exports to 16.1 billion francs, a 21.4% decline from 2019, with unit sales falling to 13.8 million.
The video contrasts the struggling quartz watches with thriving high-end mechanical watches, noting the challenge they face from smartwatches, which are integrated with users’ phones and computers. The segment also mentions the decline in brick-and-mortar sales, notably for Fossil, which had 152 retail locations and 121 outlet stores as of January 2021. Fossil’s response includes a four-point plan: boosting innovation and storytelling, enhancing its digital business, focusing on growth markets in India and China, and tightening its supply chain to reduce costs and improve competitiveness.
00:12:00
In this part of the video, the discussion centers on Fossil’s strategic initiatives and market positioning. Fossil initiated a multi-year restructuring plan in 2016 to fund investments in digital marketing and new products. By the third quarter of fiscal year 2019, the first stage of this plan saved $200 million. The second stage, called “New World Fossil 2.0,” focuses on reducing costs and emphasizing key growth markets, especially in Asia, and new product lines like connected watches. This stage generated $50 million in savings in early 2021.
Additionally, the video explores the potential for fashion brands to thrive in a market dominated by high-end timepieces and smartwatches. It cites examples like Olivia Burton and MVMT, the latter bought by the Movado Group, which succeeded through direct-to-consumer strategies and online marketing. Legacy brands like Timex, which reintroduced mechanical watches, also demonstrate how traditional brands can reengage enthusiasts.
The video concludes by discussing the competitive landscape, noting that three out of the top five watch brands in sales are exclusively smartwatch makers: Apple, Samsung, and Fitbit. These smartwatches can serve as a gateway for consumers into the broader world of watches, benefiting brands like Fossil that offer compelling products.
00:15:00
In this part of the video, it is highlighted that most smartwatch wearers are still open to purchasing traditional watches in the future. Fossil’s strategy focuses on revamping its business to ensure survival. However, it remains uncertain if Fossil can reverse its declining sales and attract customers who are interested in the latest products from major tech companies like Apple and Samsung.