Has the COVID-19 pandemic been an ally for the watch industry? Total Swiss watch exports reach an all-time high in 2021!

Watch Journalist Yasuhito Shibuya's Useful Watch Industry Chat

The Federation of the Swiss Watch Industry (FH) announced in January 2022 that the Swiss watch industry's total export value for 2021 reached an all-time high, despite the COVID-1 pandemic. Why was this the case? Let's consider the reasons behind this and the future of the Swiss watch industry.

223 billion Swiss francs, exceeding 2014!

　The Swiss Watch Industry Federation (FH), a trade association for the Swiss watch industry, publishes monthly and annual figures for Swiss watch exports. The highest export figure to date, including not only wristwatches but all watch-related products, was 22.25 billion Swiss francs (approximately 2.78125 trillion yen, calculated at 1 Swiss franc = 125 yen, as of February 11, 2022), recorded in 2014.

　The Federation of the Swiss Watch Industry (FH) announced in January 2022 that the Swiss watch industry's total annual exports in 2021 reached a record high of 223 billion Swiss francs (2.7875 trillion yen, same as above). Because 2020 was down 21.8% from the previous year, the FH compared exports to the strong year of 2019. Compared to 2019's total annual exports of 21.7177 billion Swiss francs (2.7147125 trillion yen, same as above), 2021 represented growth of 2.7%. Moreover, it surpassed the previous record of 2014 by just 0.2%. In other words, the Swiss watch industry "overcame" the COVID-19 crisis in 2021, achieving a record high in annual total exports.

　But how did the Swiss watch industry achieve its highest annual total export value ever during this COVID-19 pandemic?

　This is not simply a case of "recovery" or "overcoming." I believe it is the result of a "luxury watch bubble" caused by abnormal monetary easing and "structural changes in the North American market."

The bubble of ultra-expensive luxury watches that "sell"

　First of all, what is the "luxury watch bubble"? It is a situation in which, while the tough situation continues in which watches in the hundreds of thousands of yen range that were popular "are not selling as expected," even complicated watches in the tens of millions of yen range that had not sold before are "selling."

　Compiling information from the watch industry and surrounding areas, it appears certain that this type of situation has been occurring in department stores and watch specialty stores across Japan since 2021. What's more, the buyers are not watch collectors or other groups who have previously purchased this type of watch.

　The reason these people buy ultra-expensive luxury watches is that they are looking to purchase them as assets, focusing on the "asset value of luxury watches." They want to convert the profits they made from the excess liquidity caused by global monetary easing and the abnormal stock market bubble into real assets and hold them before monetary tightening occurs and the bubble bursts. As a result, ultra-expensive luxury watches, which are produced in very limited numbers, are attracting attention.

　I have no intention of mocking this kind of consumption. Because luxury watches were originally owned by royalty and aristocrats, and they have developed because of patrons (customers) like royalty and aristocrats. Luxury watches are a culture, and culture costs money.

　As author Yasutaka Tsutsui pointed out in his essay "Yatsuatari Bunkaron" (1975, published by Kawade Shobo Shinsha, out of print), "art and culture are fat on society," and that is why they are so important. This does not mean that "because they are fat, they are unnecessary." Going to the extreme to create truly good things is essential for the development of manufacturing.

　However, what worries me is that some of the people who buy these watches do not seem to understand the "artistic value" or "cultural value" of watches, and clearly mistakenly see them as "items to make money from speculation." This could be unfortunate for watch brands, the people who make them, and the watches themselves.

　There is no doubt that the sale of extremely expensive watches, especially complicated ones, is a good thing for watch brands and watchmakers. However, I honestly worry about where these extremely expensive watches, especially complicated ones, purchased for the purpose of "profiting from investment," end up. I can't help but sincerely hope that they will be cherished and deserve their value.

The North American luxury watch market has finally "awakened"

　In addition to this "luxury watch bubble" occurring around the world, including in Japan, there is another reason why the Swiss watch industry was able to achieve its highest annual total export value ever: a "tectonic shift in the US watch market."

　America has always been one of the most important markets for the Swiss watch industry. Those who were around back then will know that it was the world's No. 1 market a dozen years ago. I remember that at the time, there was a special banner on the homepage of the now-defunct Baselworld show for American watchmakers. Data from 2005 published by the FH also showed that the American market was the world's No. 1 in terms of total export value.

　Total exports from Switzerland to the United States in 2021 were 378.8 million Swiss francs (38.485 billion yen, same as above), up 21.7% compared to 2019. For comparison, in 2005 it was 215.61 million Swiss francs (26.951 billion yen, same as above), and in 2010 it was 167.66 million Swiss francs (20.9575 billion yen, same as above). Although it had dropped once, the United States has regained its number one spot in the world for the first time in over a decade. And this is despite the fact that the country has the highest number of deaths in the world from COVID-19.

　Moreover, the basis for America's "reclaiming No. 1" is undoubtedly the most expensive category of watches, with exports from Switzerland worth over 3000 Swiss francs and actual retail prices of over 70 yen.

　In 2005, the American market was seen by the Swiss watch industry as a market where "quantity was the key to sales" and "a market where luxury goods did not sell at all."

　I remember an executive at a watch group whose main export market was the United States at the time explaining to me, "Affordable quartz watches are the best-selling items in America. As long as they're stamped 'Made in Swiss,' they'll sell." I also vividly recall Emmanuel Breguet, a science historian and seventh-generation member of the Breguet family who currently serves as Vice President of Breguet and Director of Historical Intellectual Property Management and Strategic Development, saying, "I believe that more education is necessary to succeed in the American market." That's how the American market was described at the time.

　However, if we look at online watch media and the success of Grand Seiko in the American market, it is clear that a luxury watch market, which was previously almost nonexistent, has now been established in America. In other words, a "tectonic shift" from low-priced quartz watches to high-end mechanical watches has occurred over the past decade or so.

The shift to luxury watches is a global phenomenon

　However, this tectonic shift is not unique to the United States. It can now be said to be a global phenomenon. The total annual export value of watches alone in 2021 was 212 billion Swiss francs (2.65 trillion yen, same as above), an increase of 3.5% compared to 2019. However, the number of annual exports fell by approximately 4.9 million units, or nearly a quarter, from 2019 to approximately 15.7 million units. In other words, the shift to luxury watches is progressing worldwide.

　The shift to luxury watches signifies the maturation of the watch market, and in a mature market, demand is as solid and stable as rock, although there may be some fluctuations.

　In the future, the world watch market will likely continue to be dominated by the United States and China, competing for the top spot, just as it is in the struggle for supremacy in international politics. However, if you add Hong Kong, the gateway, China's market share is about 1.5 times that of the United States. This does not change the fact that China remains the largest customer for the Swiss watch industry.

　Barring any unfortunate events such as international conflict, the total value of Swiss watch exports in 2022 will likely reach new highs in both the United States and China, continuing to break new records. Hopefully, this will not be due to speculative reasons, but rather to an increase in the number of people discovering the appeal of watches.