At Citizen Watch Co.’s flagship store in Tokyo’s trendy Ginza district, it's high time that the company's products finally carry the cache of its pricier brethren. 

The store manager sounded giddy in touting the new high-end Citizen men’s wristwatch released last autumn.

“It is powered by light and is accurate to plus or minus of only 1 second per year,” said Yasuji Kodaira, head of Citizen Flagship Store Tokyo. “The model is priced at 800,000 yen ($7,480) per piece, but it is so much sought after that when we initially put it on sale, we had to ask our customers to wait several months for delivery.”

Kodaira noted that more than 20 years ago, Citizen’s workers were happy if any of the company's products selling for 50,000 yen had been purchased.

The prices of Citizen’s mainstay watches began to rise in the 2000s. While they used to cost between 30,000 yen and 40,000 yen, the price of a key model topped the 100,000-yen mark in 2004. A product that went on sale in 2011 carried a price tag of more than 300,000 yen.

The average unit price of all Citizen watches has risen 2.8-fold from 2001.

The situation is much the same with Seiko Holdings Corp.

The unit price of Seiko’s typical men’s watch rose from 80,000 yen for a “Brightz,” released in 2004, to 230,000 yen for an “Astron,” which is currently on sale.

The most expensive model in the women’s “Lukia” series cost only 50,000 yen in 2004, but the mainstay model in that line sold for 78,000 yen a piece in 2019.

Casio Computer Co.’s “G-Shock,” which first appeared in 1983, were priced between 10,000 yen and 20,000 yen and created a craze in the 1990s, mostly among young people in their teens and 20s. But some models under that brand carry price tags of more than 100,000 yen today.

The prices of watches made by Japanese manufacturers have been rising for a reason.

The world’s watch market was previously dominated by Swiss manufacturers, until the appearance of Seiko’s quartz watches changed the landscape.

Mechanical watches, the forte of Swiss makers, are driven by a spring and have metal parts for controlling the speeds of their hands. Quartz watches are powered by a battery and are controlled by a quartz crystal. The latter have higher precision, are more suited for mass production and are cheaper.

Seiko released the world’s first quartz wristwatch in 1969. Other Japanese watchmakers, including Citizen, followed suit and quartz watches took hold across the world.

The Swiss, for their part, came up with the “Swatch” in 1983. Quartz-driven and made of plastic, the Swatch was cheap but paid particular attention to design, and it became a big hit.

Earnings from the Swatch allowed the Swiss makers to preserve their watch industry and even go on to revive their mechanical watches, with their brand image of luxury and depth further refined.

In the meantime, Japanese watchmakers continued to face headwinds, including a price war with Chinese and other rivals, the collapse of Japan’s asset-inflated economic growth of the late 1980s, and the belief that cellphones could obviate the need for wristwatches.

Their businesses remained sluggish into the 2000s, and they all posted deficits and carried out large-scale reductions in their workforces.

TECHNOLOGICAL INNOVATIONS FOR SURVIVAL

For the sake of survival, the Japanese manufacturers pursued technological innovations of the sort they had made when they first brought quartz watches into the market.

Citizen in 1993 developed radio-controlled watches, which are designed to receive standard clock data from more than one radio tower and adjust the time automatically.

In 2012, Seiko released a GPS watch, which obtains position data and a time signal from satellites.

Other innovative watchmaking technologies came into existence, such as light power generation, which obviated the need for a battery, and the use of titanium, which is not easily processable, in the main body or the belt to reduce the product weight.

The introduction of those new technologies, which added value, pulled up the unit prices of watch products despite a continued price war.

A trend also took hold for viewing wristwatches as fashion items that make a difference. An increasing number of male customers became obsessed with watch products in the 2000s amid a vogue for fashion-conscious “choi waru oyaji” (slightly villainous, not-so-young men).

The demand also rose for making a statement with a wristwatch even while wearing a business suit. Watch prices rose, but demand continued.

Casio’s G-Shock, which created a global craze, saw 6 million shipments in fiscal 1997. But the fad was quick to pass, and sales dropped subsequently. Casio set its sights on durability, the starting point of the G-Shock, in hopes of bringing the product series back on its feet.

The company in 2018 released a model that is shaped almost like the initial G-Shock but is made of scratch-resistant stainless steel, instead of resin, for a unit price of 60,000 yen. It became popular among not only youths, but also with older members of the working adult population.

Other models of the G-Shock series costing 100,000 yen or so, which are vibration-resistant enough to be used by pilots and dustproof enough for use in deserts, are also growing in sales.

“Our technological advances have allowed our new models to be embraced by our customers,” said Hitoshi Maekawa, head of Casio’s watch products planning department. “They do understand why our unit prices are rising.”

Japanese watchmakers, which created a sensation in the world’s markets with their high-precision quartz watches, thus faced a subsequent price war but are now setting out on a path of adding higher and higher value. But the very market for watch products is growing ever smaller.

Figures of the Japan Clock & Watch Association show the volume of shipments by Japanese watchmakers both in the country and abroad combined dropped from 86.6 million units in 2004 to 66.2 million units in 2019.

Consumption remained lackluster following the global financial collapse of 2008. A later push came from binge-shopping sprees of Chinese and other inbound visitors until sometime around 2015, but that came to lose steam after 2016.

“With depopulation came a general trend for using finer products for a longer time,” said Toru Tsuchiya, a senior vice president with Seiko Watch Corp. “We could hardly hope for a growth in quantity any longer.”

ANOTHER POWERFUL RIVAL

The Japanese watchmakers are eager to introduce new technologies and raise the unit prices of their products partly because they believe doing so will allow them to achieve growth even in a mature market. Although the shipment volume fell, the shipment value rose from 142.8 billion yen in 2004 to 285.3 billion yen in 2019.

Cellphones are a nemesis of existing watchmakers, but they are not the only high-tech device. Smartwatches, or wristwatch-shaped computer devices that are marketed by Apple Inc. and other companies, are also formidable rivals.

The future spread of smartwatches costing several tens of thousands of yen a piece is expected to deal a blow to conventional watches in the same price range.

Citizen has projected that the market for watches in the unit price range of several hundreds of thousands of yen to several millions of yen will remain stable for several years to come. However, the market for cheaper products, costing several tens of thousands of yen or less, will likely shrink due to the impact of smartwatches.

Japanese watchmakers have key business arms apart from watch production, such as machine tools for Citizen, electronic parts for Seiko, and electronic dictionaries and calculators for Casio.

Watches nevertheless account for more than half of their sales, so it remains an important task for those companies to make their watchmaking businesses more profitable.

Standing in the way of Japanese watchmakers, which are going after higher unit prices, are their Swiss competitors with an established brand value.

“Japanese watches have nothing like the history of Swiss watches after all,” said an official of a Swiss watch brand. “The two are totally different things.”

The Japanese manufacturers are nevertheless setting out on their new brand strategies.

Starting in 2017, Seiko has differentiated its “Grand Seiko” luxury brand more clearly from its plain “Seiko” label.

The Grand Seiko’s mainstay models are priced between 300,000 yen and 600,000 yen. The most expensive product in the line, assembled manually by artisans, is sold at 20 million yen a piece.

“To raise our brand value, we have to communicate with our customers with something that goes beyond mere functionality,” Tsuchiya said. “Otherwise, they wouldn’t embrace our products.”

Citizen’s mainstay models are priced in the range of several hundreds of thousands of yen, but the company has also been expanding the lineup of more expensive products through the acquisition of Western brands.

“We still have room for raising our profit margin further by adding more value with our original technologies,” said Norio Takeuchi, Citizen’s managing director.

SHADOW OF THE CORONAVIRUS

The watch industry has been disrupted this year by the spread of the novel coronavirus.

An annual Baselworld international trade fair, initially scheduled for April, has been canceled. Closures of department stores have taken a global toll on sales. Watchmakers have posted drops in fiscal performance across the board for the term ending in March 2020.

Citizen posted a net loss, or a deficit, for the first time in seven years. Takeuchi, the managing director, expressed alarm during a news conference for releasing his company’s financial results.

“We need to put our watch business back on its feet both drastically and promptly,” he said.

Seiko has opened a boutique dedicated to its Grand Seiko brand, the first of its kind in Europe, at Paris’s Place Vendome, which is famously lined with luxury jewelry stores. The opening was initially scheduled for March but took place only in June.

Citizen and Casio also postponed the release dates of their new products that they initially planned to put on sale this past spring.

With the future appearing ever so uncertain, it remains to be seen if the technologies and brands of the Japanese watchmakers, which they have cultivated, will help them stage a comeback when the COVID-19 crisis finally ends.

For the moment, however, they are still biding their time.