We’ve encountered many US consumer trends taking root in Europe: Athleisure, craft beer and subscription apparel to name but a few. But it’s European brands that have led the way in changing the global fashion watch market.

The dynamics of the European watch market have progressed considerably over the past decade, driven largely by developments in consumer technology and changing consumer attitudes towards brand creation.

Smart phone penetration has changed the role of the watch amongst consumers: it has changed from being a timekeeping device to a statement of style and prestige as a personal accessory. In the last decade, this has led to license groups (e.g. Fossil, GIII, Movado etc.) developing a fashion watch segment that leveraged global labels (Michael Kors, Boss, Vivienne Westwood etc.) to dominate the mid-market.

However, consumer-centric innovators have caught the industry off-guard and are riding the following trends:

Design
As consumers began to feel that these licensed products lacked identity and newness, challenger brands such as Daniel WellingtonOlivia Burton andCluse have thrived by focussing on innovative product design. They have established the ‘elegant classic’ style, focusing on larger circular dials (for men’s and women’s watches) and personalised colours and straps to set themselves apart.

Brand Ecosystems
These brands leverage social media to present themselves as lifestyle brands. Their digital marketing strategies (utilising Instagram effectively, and partnering with fashion bloggers) are less costly than traditional advertising routes and allow smaller brands with limited budgets to deliver design-led, unique products to consumers.

The rise of online
Online shopping penetration has helped these challenger brands develop a foothold in this segment. They have occupied a relatively low price point (c.£80+) compared to licenced brands (c.£150+) and have therefore made the segment more giftable, particularly online where consumers are reluctant to buy high-ticket jewellery items without viewing them first.

These trends have led to an explosion of what we define as the ‘Instagram fashion watch’ sub-segment, a trend that has now taken root in North America with the explosion of European brands like Daniel Wellington in this market. This growth has been to the detriment of leaders in this segment such as Michael Kors and Kate Spade (Fossil), who have recently struggled.

As with all industries where smaller, agile companies begin to address consumer demand more effectively, M&A activity is on the horizon. With the trade acquisition of Olivia Burton earlier this month, further deals are likely as this sub-segment increases its share of the global market.

Aakash Patel