Both in Japan and around the world, there is an unprecedented boom in luxury watches, and sales are booming. But is this popularity really solid? In this article, I would like to discuss the "invisible crisis in Japan's watch industry," based on the contents of the "Media Seminar" held by the Federation of the Swiss Watch Industry (FH), the "2022 Wristwatch Consumer Awareness Survey" that was subsequently distributed to affiliated watch brands and other related parties, and my own on-site reporting.
(Article published on October 9, 2022)
Swiss watch exports to Japan hit record high!
At the end of September 2022, the Federation of the Swiss Watch Industry (FH) Tokyo Center (hereinafter referred to as FH) held a seminar for the media on the current state of Swiss watches in Japan.
The FH is an industry association that includes most Swiss watch-related companies, from watch brands to parts manufacturers. Since watch brands generally do not disclose information such as shipment figures, the industry-wide data released by the FH every month can be said to be the only public data related to Swiss watches.
And the most important fact mentioned at this FH media seminar was that the total value of Swiss watch exports to Japan in 2022 will significantly surpass 2021 and surely reach an all-time high. In other words, the official data fully supports the idea that the watch industry is currently experiencing an unprecedented boom.
http://www.fhs.jp/jpn/2022_11_statistics_october.html
My personal prediction is that we will probably see a double-digit increase. And this economic boom is not just limited to Japan. Exports from Switzerland to the world are also expected to hit an all-time high. In other words, the watch business is booming worldwide.
Sales have skyrocketed thanks to new customers!
Even so, the boom for some watch brands is extraordinary. According to an insider at one top watch brand, sales have now more than doubled compared to 2021. Furthermore, based on multiple interviews with watch specialists and department store watch buyers, the buyers are clearly different from previous customers. In other words, record sales are possible because new customers have emerged in the watch industry.
The biggest challenge in the watch industry has always been to "develop new customers." But now, with little effort, this "long-awaited new customer" situation, where people who had no interest in watches before are now buying watches, has been realized, although this may sound rude to watch brands. If you take it at face value, it seems like an unconditionally good thing.
However, FH's "2022 Consumer Awareness Survey on Wristwatches" contained some "shocking figures" about the Japanese watch market that cannot be overlooked.
Only a few people are buying it!
This is a "bubble of extremely expensive items" that is unique to Japan. And it is too extreme.
Data on watch exports released by the FH shows that, excluding the data for 2020, when lockdown measures in major cities led to the biggest decline since the Lehman Shock, and comparing the data for 2019 (before the COVID-19 pandemic) with the data for 2021 (after the COVID-19 pandemic), sales in the two largest markets for Swiss watches, the United States and China, are booming, just like in Japan.
However, there is a crucial difference between the US, China, and Japan. That is the growth rate by price range. According to the official FH report, watches are divided into five categories based on their factory price range.
①Less than 200 Swiss francs
②200 or more but less than 500 Swiss francs
③500 to less than 3000 Swiss francs
④ Between 5000 and 1 Swiss francs
⑤More than 1 Swiss francs.
First, we convert these amounts to a conservative rate of 1 Swiss franc = 120 yen. If we further convert this to product prices assuming that the factory ex-factory price is 65% of the product price, category ③ would be approximately 9 to 55 yen, ④ would be approximately 55 to 185 yen, and ⑤ would be over 185 yen (rounded to the nearest 1000 yen).
In the US and China, shipments in all price ranges (3, 4, and 5), which do not compete with smartwatches, have grown significantly by over 25%. But what about the Japanese market? 3 is down 40%, and 4 is down 10.8%. Only 5, "over approximately 185 million yen," has grown by 10%. In stark contrast to the US and China, where sales are growing on average, the Japanese Swiss watch market is seeing an increase in sales only of luxury watches in the ultra-high price range. In other words, the boom in Japan's luxury watches is entirely dependent on the high price range, with other price ranges actually shrinking.
