Frédéric Arnault takes a bite out of Apple’s smartwatch market

When Frédéric Arnault took to the stage in March to launch the third generation of Tag Heuer’s Connected watch, he carried the baton for the first Swiss watchmaker to develop its own smartwatch.

The original Connected model was launched in 2015, the same year as the Apple Watch and two years before Mr Arnault joined Tag Heuer, at the age of 22. His appointment was anything but coincidental. Mr Arnault’s father, Bernard, the world’s third-richest person, sits at the top of the LVMH empire of which Tag is a part.

Governments come and go but the Arnault dynasty — which controls the world’s largest luxury group — permeates French public life. Frederic is the latest of Bernard’s heirs to take up a role inside LVMH and is now Tag’s strategy and digital director.

So what can Tag Heuer’s 75,000 or so third-generation smartwatches bring to a sector where Apple has sold 31m of its watches? “Like in every market, there is always room for competition,” says the younger Mr Arnault. “We wanted to design and build a real watch, that feels like a watch made by a watchmaker.” He cites the screwed back of the watch, which allows a battery change and gives extended life.

We wanted to design and build a real watch, that feels like a watch made by a watchmaker

As well as Tag Heuer’s staff in Switzerland, Mr Arnault has a team of engineers and designers in Paris, in effect a well-resourced tech start-up of 30 people. All work on customisation of the watch’s Android operating system.

He says: “Google is opening up its system more and more to partners to customise it as much as they want.”

Mr Arnault was also involved in bringing Tag Heuer Golf to the Connected watch. The app, which has 3D renderings of more than 39,000 golf courses, is also listed in the Apple Watch app store, where 100,000 users have signed up.

It is, however, the potential return on investment that he says makes the smartwatch sector so attractive. “The ROI on this project comes relatively soon: the dynamics are impressive — today it’s between 30 and 40 per cent [growth] in the smartwatch market year-on-year, although this year might be different because of the coronavirus.”

Mr Arnault says a quarter of 15 to 35-year-olds in the US wear smartwatches — a high penetration rate. His targets for the new Connected watch are customers who have yet to own a Tag Heuer and even those who have never owned a mechanical watch.

He says: “We see this as a point of entry into the mechanical watch world. A high percentage of Connected watch owners [say] they would be interested in two to three years to purchase a mechanical watch from Tag Heuer.”

Mr Arnault says the value of the Connected watch is in its mix “between heritage and avant-garde” — which was what attracted him to working at Tag Heuer. He asks: “How do we really respect the heritage and continue building on what made the brand? How do we make it modern and contemporary and not old-fashioned?”

The core business remains mechanical and he speaks warmly of the Heuer 02 movement combining quality and durability with ease of maintenance and an 80-hour power reserve. “We also have developments in the pipeline such as the carbon hairspring,” he says, referring to the component at the heart of mechanical watches.

Mr Arnault is keen to learn from others and Tag Heuer has poached high-profile figures from rivals. One is Edouard Mignon, who previously worked for Richemont’s watch innovation lab. Mr Arnault has also convinced Carole Forestier-Kasapi, Cartier’s highly-respected movement designer, to join Tag’s product team.

Beyond the launch of the Connected watch and its variants, Mr Arnault’s preoccupation is similar to the rest of the world: the effect of the coronavirus pandemic. “We were looking forward to this year’s Baselworld [show],” he says. “We believe that it is good for the industry to come together — the retailers, the journalists, the ecosystem around watches.”

He is uncertain about the future of LVMH’s Dubai watch event, the first of which happened in January. “Nothing has been decided. This year [the Watches & Wonders show] moved its date further into the year. It left a huge gap in January and so that was the opportunity to do LVMH Watch Week. Now of course, it is a different story.” With LVMH now having withdrawn from future Baselworld shows, Mr Arnault says the business is in discussions regarding exhibiting at next year’s Watches & Wonders.

If it does, it is likely that Mr Arnault’s youngest brother Jean — who is about to start a business degree at MIT — will be there, as he is already on an internship at Tag Heuer.

Mr Arnault says Jean has also developed an interest in watches: “He looks at blogs, follows all the auctions, loves vintage pieces and it is really great to share this passion with him.”

Given the intense scrutiny of the Arnault family, the younger members’ horological interest is fascinating.

While fashion is king at LVMH — Dior is perceived to be a cross between a religion and a French national monument for their father Bernard — taking an interest in all things horological may be an indication that timepieces look set to assume greater importance within the empire.