Rolex is suddenly battling one of the biggest threats in history

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Seiko

Seiko Astron

1969 marked the beginning of a revolution in the watch industry.

That was the year Japanese watchmaker Seiko introduced the Seiko Quartz-Astron 35Q, the first watch to be powered by a electrical oscillator regulated by a quartz crystal.

It took nearly ten years and teams of engineers to develop. But as soon as it was released it immediately ushered in what is refer to by people in the watch industry as"the Quartz Crisis."

Up until Seiko's Astron, Swiss watchmakers were king. In 1970 there were over 1,500 Swiss watchmakers. But by the height of the "crisis" in 1983, their numbers stood at a mere 600.

Ultimately the rise of the Quartz watch pushed Swiss watch companies into the luxury market.

According to Andrea Squatrito, the founder of RE Analytics, a big data intelligence boutique based in Milan, Italy , new technology is once again drawing a battlefield for Swiss watchmakers. Squatrito's report, "Rolex: An industry under threat" outlines how the rise of smart watches may pose a new threat for Swiss watch brands.

Squatrito's report identifies two main business segments for Rolex: "People who are buying watches in the 2,500 to 11,000 range and people buying watches in the 23,000 to 33,000 range." Together these two segments account for 83% of the company's business.

According to Squatrito, Rolex's lower end watches, which make up 45% of the company's costumer base, are at risk of being challenged by high-end wearables like the Apple Watch Hermes .

Screen Shot 2017 01 18 at 3.34.36 PM

Apple

Apple Watch Hermes retails for $1500.

"There are touch points in the lower end of luxury watches and the higher end of wearables," Squatrito said.

"The Apple Watch hasn't reached its full potential in terms of sales--yet--but there are signals that Swiss watch makers may soon see a large portion of their business threatened," Squatrito added.

Squatrito does not think that the end is nigh for Rolex and other Swiss watchmakers. But he does think that increased competition from premium smart watches will force them to make big changes.

"For instance, Rolex may follow the lead of fashion companies like Chanel and expand into non-core products to make up for the losses brought on by wearables," he concluded.

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