As Apple's (NASDAQ:AAPL) only new product category since the iPad in 2010, the Apple Watch came to market earlier this year amid mixed expectations. Early data suggested an impressive launch, but skeptics are quick to point out that the Apple Watch leaves much to be desired on the innovation front.
Without question, though, one area where the Apple Watch has helped stir some fresh innovative drive was among its watchmaker competitors, some of whom have scrambled to produce their own smartwatches in response to Apple's reputation for upending industries. As perhaps the best example of this trend yet, LVMH (NASDAQOTH:LVMUY)-owned Tag Heuer recently unveiled its promised response to the Apple Watch.
Inside Tag Heuer's Connected
LVMH's Tag Heuer Connected is as noteworthy for what it does as for what it does not. It will be fascinating to see how the marketplace receives this device.
In terms of features, the Connected is the most serious attempt among traditional watchmakers to fuse luxury and technology, other than Apple's own ludicrously priced Watch Edition. LVMH's Tag Heuer modeled the Connected's design off its popular Carrera watch, using premium materials such as its titanium grade 2 casing, sapphire screen, and vulcanized rubber band to create an attractive outer facade. However, as is the case with all smartwatches, the internal hardware that drives the user experience matters every bit as much as its exterior look and feel.
With a 360 x 360 screen resolution offering 240 ppi and a 1.6 GHz dual core Intel processor, the Connected's computing hardware appears roughly in line with that of most smartwatches currently on the market. LVMH's Tag Heuer includes a gyroscope, accelerometer, and haptic feedback engine in the device, but the designers opted against including a heart-rate sensor. The Connected will run Alphabet's Andorid Wear software, giving its owners access to the over 4,000 smartwatch apps currently available in the Google Play store. It will retail for $1,500.
A watch without a market?
It appears LVMH's Tag Heuer has created a compelling smartwatch in the Connected. However, trying to determine who will buy it remains to be seen for many of the same reasons as the Apple Watch. Like the Apple Watch, the Connected does a nice job of fusing technology and fashion but fails to provide either in sufficient amounts to effectively compete in either market based on its own merits.
In terms of the premium watch market, people tend to purchase luxury watches for a mix of social status, appreciation of craftsmanship, collectability, and the like. And without credible research to help delineate which of these decisions rank highest, I'll simply say that premium-priced smartwatches' market appeal declines with the number of buying factors they can meet. For example, since they lack the mechanical integrity and complexity of normal premium watches, devices such as the Connected and Apple Watch will probably receive little attention among watch collectors.
And unfortunately for the Connected and Apple Watch, their lack of meaningful technological innovation is also likely to limited their appeal among electronics enthusiasts. Although they do some things well, such as making it easier to read text messages or emails, the current generation of smartwatches largely just mimic the functionality of their smartphones, which they still rely on for many core tasks as well. I've long argued that for smartwatches such as the Apple Watch, Tag Heuer's Connected, and many more to become true mass-market devices, they'll need to be able to perform important tasks that smartphones can't. Embedded health sensors have always struck me as a promising area for possible differentiation between the two.
According to Allied Research, the global smartwatch market alone will produce nearly $33 billion in annual sales by 2020. Clearly, there's money to be made for investors in either leading smartwatch makers like Apple any for traditional luxury watch producers like LVMH's Tag Heuer. However, I for one maintain today's smartwatches will need to become more useful as stand-alone devices in order to yield that kind of massive sales base. Invest accordingly.
Andrew Tonner owns shares of Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.