Hybrid watches put an analog face on a limited set of digital connected features. Typically tethered to smartphones, the devices offer notifications, step counts and other features, and they allow consumers to keep abreast of things like alerts and fitness metrics without wearing a techified-looking gadget on their wrists.
The Citizen agreement represents Fossil Group’s first dedicated tech-licensing deal.
“Given the size and growth of the smartwatch market, Citizen is going seriously into the smartwatch market,” said Toshio Tokura, president and chief executive officer of Citizen. “It is with strong determination that we trigger this partnership and enter this category. We, Citizen and Fossil Group, will maximize our combined strengths to become leading companies in the smartwatch category.”
The deal’s terms reveal that Citizen will “manufacture the hybrid smartwatch movements incorporating Fossil Group’s technology,” and sell the completed devices. The two companies also pledge to innovate and collaborate on smartwatch development.
While Fossil Group is a key partner for Google’s Wear OS platform, the watchmaker also offers its own hybrid watch software, which was largely informed by its $260 million acquisition of wearables company Misfit in 2015. Since then, it has put out hybrids and full touchscreen smartwatches for an array of labels — Tory Burch, Kate Spade New York, Michael Kors, Marc Jacobs, Diesel, DKNY, Armani Exchange, Emporio Armani and Chaps — as well as for its own eponymous Fossil flagship watch business and owned brands Skagen, Michele, Relic and, of course, Misfit. The company also has plans to offer upcoming smartwatches for BMW and PUMA.
“Our partnership with Citizen, the world’s largest watch and movement manufacturer, will enable us to broaden and accelerate the awareness and adoption of hybrid smartwatches,” said Kosta Kartsotis, ceo at Fossil Group. “This transaction is the result of our technology investments and demonstrates the capabilities we’ve developed in the wearables category and the larger watch industry.”
Research firm IDC predicts that the worldwide wearables market will tick up 6.2 percent this year compared with last year, going from 115.4 million units shipped to 122.6 million. While it’s still an increase, it’s the wearable market’s first year of single digit year-over-year growth. The firm chalks it up to market “softness” from closed wearables that don’t allow third-party apps.
But, the firm expects new smartwatches and wearable designs to bring back double-digit growth next year. And by 2022, it believes shipment volumes will hit 190.4 million units.
For Fossil Group, that momentum matters. After impressive earnings earlier in the year, the company’s second quarter showed that watches revenue, its biggest business, shaved off 1 percent to $463 million. That was enough to send shares tumbling 14 percent last August.
The company has tied its fate to the smartwatch business, making it imperative to ensure the tech’s popularity and continued growth. That means the coming holiday season may be extremely informative, as the market sees the public’s reaction to new devices from Fossil and partners, as well as the latest Series 4 Apple Watch.