“ . . . and the banker never wears a mack, in the pouring rain, very strange . . .”

—The Beatles, Penny Lane

Paul McCartney thought a banker in the rain without a raincoat was odd. How about a banker without a watch, isn’t that strange?

Will today’s cell phone carrying youth, future bankers and lawyers of the world, wear watches tomorrow? Will they collect Casio G-Shock cell phones like the G’zOne (above) instead of the latest Japan-only G-Shocks watches? A year ago a chorus of commentators sang of the watch’s demise because of a 4.9 percent decline in sales (to $7.6 billion) in the US market from 2001 to 2005. Much of the fall was attributed to young people preferring phones over watches.

In 2007 industry analysts are singing a different tune. Recent predictions look for a 10.6 percent increase in watch sales by 2010 to $9.5 billion. Officials with Seiko USA and Citizen of America think the upward trend to continue. What’s going on?

“I chuckle when I read, or hear someone say, the watch business is dead,” says Les Perry, executive vice president of Seiko Corp. of America, in a story published in the March 2007 issue of Jeweler’s Circular Keystone (JCK) magazine. “Just because people spend more on cell phones doesn’t mean they stop buying watches.” (Perry worked at Movado for 14 years, and before that at Macy’s, before joining Seiko Corp. in 2002.)

Change in the Weather

There were many dire forecasts in early 2006. Bloggers saw dark clouds gathering for the watch industry, writing stories with titles like Cellphones Crushing Watch Sales, posted Jan. 12, 2006. Business Week published a story July 12, 2006 entitled Time’s Up for Watch Sales in Japan.

Looks like they got it wrong. Watch sales were good in the second half of 2006. Many believe the trend will continue well into the future. Amazon.com announced in February watch sales in the fourth quarter of 2006 increased 171 percent year-over-year. Europastar.com put it this way, “Most brands and retailers feel that the surface of the market has barely been scratched and, if handled correctly, the United States market will be strong for decades to come.”

How can their predictions be so sunny?

Watch Buyers Aged 18-24 Years Old in America and Japan

There was a downturn in watch sales for the first half of this decade, attributed to cell phones and iPods with digital time readouts used by the young. But the majority of the fall in sales was for low-priced watches under $200 manufacturer’s suggested retail price. Quartz watches in the mid-price range of $200-$1,000 MSRP, fashion brands, and expensive mechanical watches all did well. Perry from Seiko commented on the trend in the JCK article.

Some suggest it isn’t handhelds affecting the $100-and-under sector, but young people buying more expensive watches. “Their values today call for something more stylish than an $80 basic watch, and they’re spending more on more sophisticated items,” Perry said.

The article quotes another executive as saying, “Fashion brands grab some of that. Parking attendants wear pricey sport watches. Even the kid delivering my newspaper wears a $700 watch—and I’m not kidding! There’s a growing need to be as leading edge as possible amongst their peers.”

Many college-aged people don’t wear a watch on a daily basis, but the situation changes when they enter the workforce, according to a survey conducted by the The Jewelry Consumer Opinion Council (JCOC) and published at professionaljeweler.com. “Viewing a watch as a professional necessity ranked highly with both the 18-24 year olds and the general group [24-59 year olds], with 71 percent of the 18-24 year olds and 70 percent of the general group believing that wearing a watch is more “professional” than using a cell phone or iPod to tell time.”

As for the situation in Japan, watch retailers are beginning to see blue skies, according to Timex’s research, quoted from the JCK story.

In Japan a few years ago, it seemed as if cell phones had watches on the run. “There was a sharp decline in the Japanese watch market that seemed to correlate with rising popularity of the Internet–cell phone system,” says Lou Galie, Timex senior vice president of research and development who tracks the worldwide watch market. “Many articles said cell phones would replace watches, especially for the younger generation.” That was then. “Today, Japan’s market is back to normal and growing,” says Galie. “Teenagers of five or six years ago, whom articles said would rather use their phone than a watch, now wear watches, and since the market is normal again, the generation behind them must also.” Galie believes the Japanese example holds a lesson for the U.S. market.

Mechanical Watches

It won’t surprise knowledgeable GMT+9.com readers that Swiss-made mechanical watches are on the radars of an increasing number of American buyers.

• Paul Ziff, President, Zenith North America: “Business is very good. We are riding the wave of the mechanical renaissance, which is still in its infancy.” — EuropaStar
• “Patek Philippe in the United States has never been stronger.” — EuropaStar
• Ron Jackson, President, Girard-Perregaux North America: “In general, the US is the best market in the world. The US market has 50% of the world’s billionaires, so there is ample wealth, but there are still a lot of people who are now discovering watches as a means of expression.” — EuropaStar
• According to the LGI Network, who works directly with brands and retailers in the United States, same store sales are up in every category except the lowest segment they track (US$150 - US$299.99) — EurpoaStar
• Two factors appear to explain the strong usage of mechanical movements within higher price ranges: consumer appeal and the higher price point brands that choose to exclusively market mechanical timepieces. — EurpoaStar

Seiko and Citizen’s principle competitors in the US, according to ZoomInfo.com, are Swatch Group Ltd., Timex Corp., Fossil, Bulova Corp., Montres Rolex S.A., and Movado Group. As for Casio Inc., a subsidiary of Casio Computer Co. Ltd. of Japan, listed as having just 350 employees in the US, it’s concentrating in the US on sales of electronics goods like digital cameras and cell phones, according to by ZoomInfo. Its main competitors are listed as Panasonic, Sanyo, and Sony Corp.

Conclusion

Forecast are sometimes wrong, but as of today, the future of the watch industry looks bright. American divisions of Seiko and Citizen (with competitor Bulova) are positioned as leaders in the low end of the middle price range, according to statistics from 2005 (see chart below). Is that a good US strategy, rather than offering things like Grand Seiko, Prospex models, The Citizen and Exceed? There is a lot of debate about this among Japanese watch enthusiasts. What do you think?

The history of Japanese horology is amazing, but the present is just as interesting and in the future incredible innovations are sure to be made. Just imagine watches Seiko, Citizen, and Casio will be making in 10 or 15 years! Kazuo Kashio, president of Casio Computer, outlined his company’s future in an interview in Las Vegas in January 2007 with timesonline.typepad.com.

“The potential of the digital watch is infinite,” Kashio said. “Soon the wrist will become a common site for internet devices, cameras, even video. We can put these into a timepiece — but our competence is that we can make it very compact.”

Although tomorrow’s bankers might never wear raincoats in the rain, and that would be strange, it seems predictable they will be wearing watches beneath blue suburban skies.

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This entry was posted on Tuesday, April 17th, 2007 at 11:10 am and is filed under Seiko. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.