There are two watchmaking powers in the world today: the Swiss and the Japanese. One might think that the ongoing consolidation of the Swiss watch industry through mergers and acquisitions-and the growth of a few watchmaking powerhouses-would concern Japanese watchmakers. Wrong. From a competitive point of view, the top Japanese watch companies-which are themselves powerful conglomerates-seem unruffled by what’s happening in Europe.
The competitive challenge is greatest, not surprisingly, in Western Europe, especially Switzerland, where some watch companies allegedly demand that independent jewelers and watch retailers carry only Swiss brands or carry their entire watch package if they want to sell any of them. That’s leading Seiko, especially, to strengthen its portfolio with popular licensed brands or seek alliances with non-Japanese watch brands “to create a very strong range of product to offer retailers,” says Hiroshi Harigaya, executive vice president of Seiko Corp.
Outside Western Europe, though, “We don’t see much threat,” says Harigaya. He notes that the U.S. market is composed of many more distribution channels and watch retailers than any one watch supplier can influence. In Asia, Seiko is starting to challenge the Swiss head on in their traditional domain-the luxury watch market.
Citizen, meanwhile, is almost indifferent to what’s happening in the Swiss watch industry and the broader market. “Internationally, our strength is in the mid-price category, so we are not much concerned about this [activity in the luxury market],” says Akihiko Suzuki, general manager of the overseas trade division of Citizen Trading Co. In addition, Japanese watch officials note that they already run large vertical operations, including research and development and production facilities. Says one, “When the Swiss combine or have mergers, it doesn’t bother the Japanese watch industry-which already produces most of the world’s watches and movements.”
As for the effect that this consolidation has on the watch movement industry, “The strength of the Swiss industry is in their mechanical movements, not in quartz, though they provide those too,” says Katsuaki Noji, president of Citizen Trading Co. “Our power for developing new technology for quartz movements is bigger and much stronger than theirs. So we don’t feel any concern in that area.”
Still, there is “a positive impact” on business in the United States, at least, says Laurence Grunstein, president of Citizen Watch of America. “It’s a huge disadvantage” for retailers to deal with only one or two large multi-brand watch suppliers, because they can change the rules when they want, and the major retailers have to accept it. As for small independent retailers, they need a balanced portfolio of watch brands from various suppliers, not one or two.” So consolidation of European brands into a few companies actually benefits an independent watch brand supplier, he says.
But Citizen’s Noji does have some concerns about the effects of the ongoing consolidation of the Swiss and luxury watch industries into a few groups. “With so many brands from top to bottom, how can they adequately support the brand image or concept for each?” he asks.
“Also, we in Japan have a history of mass production, while the Swiss have a long history of watch craftsmanship by small independent companies. But if those small companies are acquired by larger ones which chase turnover or volume, then Swiss watches may lose some of the characteristics that make them special.”