Bloomberg

(Bloomberg) -- While Apple Inc. fans obsessed over the lack of a headphone jack in the company’s latest iPhone, its updated smartwatch also had a notable omission: over-the-top bling.

Apple’s “Series 2” watch line, unveiled Wednesday in San Francisco, includes models with leather bands made by French handbag maker Hermes. But Apple scrapped the 18-karat gold version worn by the likes of Beyonce that sold for as much as $17,000, replacing it with a ceramic piece that starts at $1,249. It’s also collaborating with Nike Inc. on a co-branded timepiece aimed at runners.

After an initial pitch as a fashion accessory, Apple has increasingly sought to market its watch as a fitness device, showcasing the risk in marketing gadgets as luxury items. Apple’s gold version was derided by industry bloggers as a gimmick, and rarely spotted in public beyond the wrists of Beyonce and fashion designer Karl Lagerfeld. The pullback could also buoy Switzerland’s watch industry, whose leaders have said that centuries of craftsmanship won’t simply disappear because a technology player enters the fray.

“Apple is making an admission that it’s not a luxury product in watches,” said James Dowling, co-author of “The Best of Time: Rolex Wristwatches.” “In fact, it’s making a declaration that it’s no longer in the watch business, but that it’s in the health-tracking business.”

Second-Best

While the high-end watch segment wasn’t affected by the arrival of the Apple Watch, the product did hurt sales of lower-priced timepieces and prompted brands such as Montblanc and LVMH’s TAG Heuer to introduce electronic functions of their own. Apple was the second-best selling watch brand in the world by revenue last year, behind Rolex, Chief Executive Officer Tim Cook said Wednesday. Apple doesn’t break out sales figures for its watches.

Apple did maintain an element of luxury by broadening its Hermes collaboration to include new leather watch bands such as the double buckle cuff, which costs $689 or $1,500 with the watch included. But the Series 2 is aimed at fitness buffs, with a GPS chip that allows for running and walking to be more accurately tracked. The Apple/Nike collaboration features a Swiss-cheese style band with holes for better ventilation.

‘Can’t Play’

Ditching the gold watch is a sign that Apple can’t play in the same league as Swiss luxury watchmakers, according to Jean-Claude Biver, who runs the watch division at LVMH, the French luxury conglomerate. TAG Heuer has a $1,500 smartwatch, developed alongside Intel Corp. and Google Inc., and gives consumers the option of paying a fee to trade it in for a mechanical version once it’s out of date.

“Apple’s move tells Swiss high-end brands that they were right not to touch the connected watches,” Biver said. “On the other hand, it’s a sign for the lower-end brands that they should try to make a connected watch. Because if Apple has become the second-biggest watchmaker already, without ever having touched a watch in its history, it means the connected watch has some legs.”

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net. To contact the editors responsible for this story: Matthew Boyle at mboyle20@bloomberg.net, Thomas Mulier

©2016 Bloomberg L.P.

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