Today, the Far East is the biggest producer and consumer of watches on the planet. This situation will remain for a long time to come, despite the abrupt fall in sales in Hong Kong we have seen in recent years. It’s not just a matter of economic recovery, which is now taking place, alongside the reabsorption of a big inventory backlog. We simply won’t see another China, at least not in the sense of a big emerging power and demographic giant, open to international trade, and with an appetite for watches. Neither India nor Brazil will take up the baton. The Far East will remain the Fat East as far as watchmakers are concerned.
It may be controversial to call it that, but the watch industry does seem to have an almost fetishistic obsession with Chinese watch customers. This obsession is fed by statistics. Let’s not forget that, today, the Hong Kong / China double act represent an outlet for Swiss watches worth 4 billion francs (compared with 1.5 billion in 2000), and that doesn’t take into account the purchases made by Chinese visitors abroad. The obsession is also fed by the obsession of the Chinese themselves for watches – watches as objects, as we explore in our just published Time.Business issue.
When researching our report on the Far East, we observed a number of phenomena that will have a profound
effect on the entire global watchmaking ecosystem, from the production of the entry-level watches
worn by the majority, to the consumption of luxury timepieces that grace the wrists of the privileged few.
So let’s begin with these latter. As we showed in a recent dossier, the Chinese middle classes are just as important to the future of Swiss watchmaking as their wealthier neighbours. All the more so since collectors – and this doesn’t just apply to China – are increasingly buying at auction, and thus circumventing the brands themselves. We went to talk to Phillips, Sotheby’s and Poly Auction, to try to understand this phenomenon. These high-profile sales, which seem to announce new records every month, are the trees that conceal the forest – the forest of online sales. But how are the brands supposed to find the right balance between physical and virtual? This problem directly affects the watch assemblers in Shenzhen, the “world’s watch factory”, which we went to visit. As orders began to fall, some of these behind-the-scenes outfits decided to launch their own brands, designed to attract online connoisseurs with reasonably-priced watches offered within a carefully curated digital environment, similar to what Daniel Wellington has done. Have you heard of Perry Ellis, Grayton or Avi-8? All of these brands, launched by subcontractors based in Shenzhen and Hong Kong, are hoping to seduce a younger generation. Prepare to witness an explosion in the entry-level segment.
But behind these new names, the entire production chain is being overhauled. Much faster reaction times will avert the phenomenon that has plagued the industry over the last three years – the accumulation of inventory and the consequent reduction in liquidity, which has led to bankruptcies in this rapidly changing market.
Finally, we could not go to the Far East without visiting Japan, and the country’s big three watchmakers: Casio, Seiko and Citizen. Each in its own way is focusing on a new objective: moving up-market, via the premium Grand Seiko models, the G-Shock, or, in the case of Citizen, buying out other watchmakers. The 35th anniversary of the G-Shock, an icon that changed the face of the watch industry and introduced a hundred million youngsters to the joys of wearing a watch, is featured on the cover of Time.Keeper. Feel free to peruse both our folios at your leisure. We trust you will find them interesting and instructive.