The Watch Bubble

January 17, 2016

The watch industry has changed forever.  The proliferation of so called "micro-brand" watches has permeated every watch forum, review site, and Facebook group.  Additionally, a weekly search of Kickstarter or Indiegogo will reveal a new watch product going live at a staggering rate. We are existing at the height of a watch bubble.

Just as we learned from experiencing the tech bubble of the early 1990's and the housing bubble of 2008-2010, irrational exuberance (I am borrowing the phrase form Mr. Greenspan) has taken over, and is running a muck in the watch industry.  We learned the hard way when government policy embraced the notion that "every American deserves a home" and similarly, in the watch world, it is beginning to look like industry is expounding the notion "everybody deserves to start a watch company."

While the explosion of creativity across the mid to low end watch market has been impressive and entertaining, one must question whether or not there is enough room in this segment of the market to all for all these companies to share a piece of the pie.  Put another way, just how many Miyota 9015 dive watch options need to appear on crowdfunding platforms and watch forums before every person with wireless and the ability to use Skype and Alibaba will own a watch company?

Much of the creation of this watch bubble stems from social media and crowdfunding, but also from the increasing desire of millennials to strive for individuality and luxury in a notoriously stuffy watch market. The same forces that are behind the gentrification of urban neighborhoods are behind the inflation of the watch bubble.

The major problem with these Kickstarter watch companies or second-job start-ups is not that that they offer an inferior product, but that they over value their own designs and do not have adequate facilities to service the watches that they have built over seas and therefore have to outsource the warranty work or worse yet, send their wounded watches back to China.  Without a strong infrastructure to handle warranty work and service, it is difficult to have a true watch company.  

Will all of the micro-brand watch companies importing and selling non-OEM designs as their own survive for a year or become a legitimate company?  Probably not, but this is the upside of the watch bubble.  The companies in the micro brand space today that embrace original design and actually build their watch and perform their own service can survive and become major players in the low to medium priced watch market which the major international brands have easily dominated in the past. 

The major take away from the impending watch bubble is to dig deep into the company that makes the watch and make sure they will be able to go the distance.  

Building Watches at Smith & Bradley


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