FINANCIAL INSIDER: Japanese watchmakers close gap on the Swiss

The watch industry has long been dominated by Swiss watch brands, at least since the 17th and 18th centuries when the British were the horological kings.

However, in recent years, Japan has been taken more and more seriously as a significant country for watchmaking, both in terms of volume and, increasingly, quality.

Leading the charge are the three powerhouses of: Seiko Group Corporation, Casio Computer Co., and Citizen Watch Co.

In an exclusive deep-dive into global financial data from these three companies, as well as the equivalent financials from the three big Swiss publicly listed watchmakers — Swatch Group, Richemont, and LVMH — Watch Insider can reveal how the gap is narrowing between the two countries.

Whereas all three Swiss companies have seen a notable downturn in revenue since the post-Covid 2022 spike, the Japanese are faring much better. Indeed, in that time since 2022 — based on annual approximate exchange rates between the Yen and the Swiss franc (only Swatch Group reports its figures in CHF) —  Citizen’s timepiece sales are flat, Seiko’s are up 7%, and Casio’s are down 10%.

Meanwhile, Swatch Group’s are down 17%, Richemont’s are down 24% (albeit this doesn’t include its strongest brand Cartier, which is included as a jewellery maison rather than in their watch portfolio), and LVMH’s are down 8%.

This theme continues where operating profits in the companies’ watch divisions (including jewellery in the case of LVMH and Swatch Group) are concerned. Again, using the period from 2022 to now, LVMH’s operating profit is down 30%, Richemont’s is down 87%, while Swatch Group’s is down 80%.

In contrast, Citizen is up 15%, Seiko is up 85%, and Casio is only down 12%.

Does all this mean that we’re witnessing a fundamental power shift at the top of the watchmaking world? Almost definitely not. The raw numbers are still massively in favour of the Swiss. For instance, even in recent well-documented difficult times, Swatch Group’s timepiece division still turned over just under twice what the three Japanese companies’ equivalent categories combined made last financial year.

But it does suggest that Switzerland’s monopoly grip on the market has weakened and is continuing to weaken.

For years, brands like Citizen, Frederique Constant, Bulova, Seiko, Grand Seiko, and G-Shock have had to innovate and price their product offering in a way that’s often far more aggressive in order to be noticed. They can’t rely on hundreds of years of history and heritage, and so they focused on being the world’s most robust watch (G-Shock), or lead the world in proprietary solar movement technology (Citizen’s Eco-Drive), or be the only watchmaker in the world that has successfully commercialised and perfected Spring Drive technology (Grand Seiko).

This necessity to pedal at twice the pace to go at largely the same speed (or slower) than their Swiss counterparts over the years means that Japanese watchmakers will naturally have developed leanness and efficiencies that leave them perfectly placed to cope with the headwinds of high gold prices, a weak dollar and strong Swiss franc, war in the Middle East, war in Ukraine, unexpected tariffs, and a never-ending cycle of flat European economies that confront them today.

Richemont, LVMH, and Swatch Group — plus Rolex, Audemars Piguet, and Patek Philippe — still have a firm grip on the market on a macro level, but small percentages of massive numbers are still big numbers. 

There’s every reason to believe that the big three Swiss groups will respond to the narrowing gap of turnover and profit levels in recent years with greater creativity — the Royal Pop is a good recent example of this — and a stronger focus on getting back to basics and future-proofing their brands by making them as relevant as possible to Gen Z and Gen Alpha.

Meanwhile, the more that Japanese brands gobble up market share, the more that they should be taken even more seriously than they unquestionably are today.