Luxury watches are stronger than the coronavirus! A look back at the watch industry in 2021, filled with "worry" and "hope."

Watch Journalist Yasuhito Shibuya's Useful Watch Industry Chat

What kind of year was 2021 for the watch industry?
While introducing the contents of the first media seminar held on December 17th by the Federation of the Swiss Watch Industry (FH), which represents the Swiss watch industry, I would like to summarize my thoughts on the watch industry in 2021 in terms of ``concerns'' and ``hopes.''

What is the Federation of the Swiss Watch Industry?

　I apologize for asking this out of the blue, but do any of you readers know about the Federation of the Swiss Watch Industry, abbreviated as FH? FH stands for "Federation de l'industrie horlogere Suisse." If you translate it directly from French, it means "Federation of the Swiss Watch Industry."

　Although it was established in 1982, its roots date back to the 19th century, the beginning of the Meiji period in Japan. It is an industry association for the watch industry, with over 90% of Swiss watch-related companies, or approximately 500 member companies, making it one of the largest exporters of the Swiss machinery industry. As such, it has close ties with the Swiss government.

　Currently headquartered in Switzerland, with branches in Hong Kong and Japan, the organization promotes the import of Swiss watches through its unique information dissemination, promotes the Swiss watch industry as a whole, and works to combat counterfeiting.

　On December 17, 2021, FH Tokyo held its first media seminar, as far as I know, at the Mandarin Oriental Hotel in Nihonbashi. Some media representatives who attended may have first learned about the FH organization from the explanation given by Ayako Nakano, Director of the FH Tokyo Center, which hosted the seminar.

　Furthermore, every month the FH publishes data based on government trade statistics, such as the value of Swiss watch exports and the number of exports by price and type. Since Swiss watch brands generally do not release production or shipment figures, this data is essential for someone like me to understand the trends in the "Swiss = global watch industry."

The COVID-19 pandemic has helped? Sales of Swiss luxury watches are booming in 2021

　At the seminar, Kyoko Maebayashi, who is in charge of presenting and analyzing these statistics at the FH Tokyo Center, reported on the following interesting current situation in the Swiss watch industry:

1. In 2020, Swiss watch exports fell sharply by 21.8% in value, but in 2021 they rebounded sharply and performed well. Despite a decline in the number of shipments, exports in value terms have recovered to the high level of 2019, which was pre-COVID-19. In other words, Swiss luxury watch exports are booming.

2. Hong Kong, which had always been the top exporter of Swiss watches until 2019, has fallen into decline, and estimates as of October 2021 show that the United States has jumped to the top, with the ranking now being the United States in first place, China in second place, and Hong Kong in third place (Japan remains in fourth place, the same as in 2019).

3. In Japan, exports from Switzerland to Japan recovered to the all-time high of 2019 as of October 2021. Moreover, luxury watches priced at 3 million yen or more saw a significant increase of 10.9% compared to 2019.

　In other words, in the Japanese watch market in 2021, sales of luxury watches over 3 million yen were higher than before the COVID-19 pandemic. The reason behind this is presumably that people whose assets increased due to the sudden rise in stock prices and other factors in 2020 caused by unprecedented monetary easing turned to watches as a result. In other words, rather than being a negative factor for Swiss luxury watches from the latter half of 2020 through the start of 2021, the COVID-19 pandemic was a positive factor, and in fact was a ally.

Is there a "decisive division" in the watch market?

　Needless to say, this situation is a boon for watch brands and specialty watch stores that have suffered due to the COVID-19 pandemic, which has led to people refraining from going out and the disappearance of inbound demand.

　However, if this situation is a positive one, there is also an unfavorable "dark side." This is my opinion. Data from FH Tokyo shows a significant decline in demand for watches priced at 300 million yen or less in both Switzerland and Japan. The drop in prices between 6 yen and 15 yen is particularly notable. This is the impression and concern I personally feel whenever I walk through the quiet watch section of a mass electronics retailer.

　Looking back, the COVID-19 pandemic has solidified the economic divide between the wealthy, who have been unilaterally benefiting from monetary easing, and ordinary people, whose disposable income is declining at an accelerating pace due to rising prices since the start of 2021.

　While consumption among the wealthy is booming, personal consumption in Japan as a whole shows no signs of growth. In fact, it is trending downwards. Some scholars point out that prices are rising despite stagnant incomes, and that so-called stagflation is beginning to occur. As a result, aren't there an increasing number of people who feel they have no time for watches? While there are people who actively purchase luxury watches, is it unfortunate that there are actually an increasing number of people who say, "I'm not interested in watches"?

　This trend has been happening in the automotive world for years. Sports cars, luxury sedans, and SUVs with sales prices in the tens of millions of yen are doing extremely well, and demand for automobiles is strong due to increased travel demand during the COVID-19 pandemic. However, behind the scenes, people are steadily moving away from cars. Cars used to be an aspirational item that every young man wanted to own. However, today, few young people have a particular interest or passion for cars. They are becoming merely a practical means of transportation.

　Currently, this role of "legs" is played by light vehicles. However, if the infrastructure for electric vehicles (EVs) is established in Japan in 10 years' time, the light vehicle market will likely shift to low-cost EVs, as in China.

　Moreover, behind the recent popularity of luxury watches is undoubtedly the boom in "watch speculation," which I have written about many times in this column. If things continue as they are, won't luxury watches become, like luxury sports cars, a "luxury item from another world" for the general public? It will be for people who are curious about the investment value of watches, but have no interest in the watches themselves.

　Some may argue that this is unlikely to happen, but in urban areas, cars are something to be shared and used only when necessary; they are no longer an object of passion to own. If this is happening to cars, it is not surprising that the same will happen to watches.

　These are the concerns I have about the watch industry in 2021.

　After all, in 2021, several television programs encouraged "watch speculation," and the results of overseas watch auctions were so outrageous that they raised concerns.

"Hope" is a "conscientious masterpiece watch"

　On the other hand, there was also a great "hope" in the watch industry in 2021 that laughed off my "concerns," which could only be described as delusional. That hope was the release of "affordable masterpieces" from various watch brands, offering previously unimaginable price-performance ratios that combine excellent mechanisms and high quality with affordable prices.

　I never expected that 2021 would see such a wide selection of new watches that I would "recommend without reservation."

　This is just my personal opinion, but I believe that watches have a special charm to humans that is different from other items. I believe that watches have an appeal that goes beyond practicality.

　And most of the new watches for 2021 have an overwhelming appeal that goes beyond practicality. If these watches continue to be made and their appeal is properly communicated, there is no way that people will ever stop buying watches.

　In 2022, following on from 2021, new watches that embody this "hope" will be released one after another by various companies. Of course, we want to convey their appeal to as many people as possible.

　Thank you for reading this sometimes too watch-industry and sometimes too niche column in 2021. I look forward to your continued support this year.