Japanese watch companies winding up for high-end fight

Seiko makes fewer than 100,000 Grand Seiko watches a year, with a main price range of US$5,000 (S$6,600) to US$15,000.
Seiko makes fewer than 100,000 Grand Seiko watches a year, with a main price range of US$5,000 (S$6,600) to US$15,000.PHOTO: BLOOMBERG

TOKYO • Watch out, Swiss makers. In a factory surrounded by snow-covered peaks, technicians in lab coats use tweezers to assemble tiny metal parts into self-winding watches.

Once they have been checked through microscopes for precision and packed in satin-lined boxes, the timepieces are shipped off to Rodeo Drive or Knightsbridge boutiques, where they will sell for thousands of dollars.

The factory is in Japan.

Forty years after nearly wiping out the Swiss watch industry with cheap quartz models, Japanese brands such as Seiko and Citizen are winding up for a fight at the high end of the market. New boutiques in Beverly Hills and London show off models such as a Grand Seiko with an eight-day power reserve - and a US$58,000 (S$76,000) tag.

"We won't see much growth in lower-end price points so it's only natural... to shift more towards mid-and high-end," Seiko Watch president Shuji Takahashi said.

The move shows how Apple has turned timekeeping upside down.

Only three years after entering the market, the tech giant has become the world's biggest watch seller, overtaking Rolex, forcing the industry to rethink strategy.

As Swiss brands add more affordable models, Seiko and Citizen want to tick in the premium segment.

The Japanese success in marketing quartz watches drove many Swiss makers of mechanical timepieces to their knees, turning Seiko into the industry's giant in the late 1970s.

But Japanese manufacturers missed out on the subsequent revival in demand for luxury mechanical watches, which attract buyers with the craftsmanship behind a product that runs without batteries.

Grand Seiko watches are known for their accuracy and have simpler dials and a more classic style than regular Seikos. The company makes fewer than 100,000 Grand Seikos a year, roughly equal to IWC's output, but well behind Rolex's 800,000.

"The Grand Seiko is a serious competitor" to brands such as Jaeger-LeCoultre and IWC, said James Dowling, co-author of The Best Of Time: Rolex Wristwatches. "It's starting to eat at their client base."

Seiko was founded in 1881 by Mr Kintaro Hattori, a watch repairman who at 21 began selling and fixing clocks. About a decade later, he built a factory in Tokyo. After recovering from bombings during World War II, the company pushed ahead in watchmaking and in 1969 introduced the battery-powered Seiko Quartz Astron, which started the quartz revolution.

Today, it is boosting production of its luxury products. Grand Seiko is doubling its main price range to US$5,000 to US$15,000.

It plans two more standalone boutiques for that brand soon, Mr Takahashi said after opening the world's first Grand Seiko boutique in November last year in California.

Seiko has some 80 boutiques around the world.

Citizen, too, has been moving upmarket. In 2016, it gained control of Switzerland's Frederique Constant, Alpina and DeMonaco - giving it control of brands with entry prices from about US$1,000 to more than US$10,000.

Citizen chief executive Toshio Tokura said in January that it is open to acquisitions to tap more luxury spending. "We're looking at the market and seeing how consumer taste is diversifying," he said. "One brand is not enough."

There is no shortage of struggling or up-for-sale Swiss brands. Breitling, known for aviation-themed timepieces, was sold to CVC Capital Partners last year.

Maurice Lacroix failed to find a buyer when it was put up for sale by owner DKSH.

In 2014, Citizen opened a flagship boutique in Times Square in New York, where it showcases new models such as last year's Billy Jean King commemorative watch.

Seiko, Citizen and Casio increased their share of the global timepiece market for the first time in a decade in 2016, to a combined 10.2 per cent, according to one estimate.

The push into higher price segments may not please all watch aficionados, said Mr Ariel Adams, who founded popular American website A Blog To Watch.

"They are actually alienating so many of the people that made Grand Seiko popular since they were beloved for their price, not their glitz," he noted. "They were for people who wanted a seriously conceived watch without Swiss pretentiousness."

The Swiss industry could benefit in another way. Just as the revival of Germany's luxury brand A. Lange & Sohne in the 1990s helped push high-end watchmakers like Patek Philippe and Vacheron Constantin to be more creative, Seiko is doing the same for the whole Swiss watch industry, which is dominated by Swatch, Richemont and Rolex.

"The Swiss need the competition," said Dowling.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on March 19, 2018, with the headline 'Japanese watch companies winding up for high-end fight'. Print Edition | Subscribe