Akio Naito: Seiko watches must go back to their roots to grow again

By his own estimate, Akio Naito’s rise to the presidency of Seiko Watch Corporation in April was unusual. “I joined Seiko as an in-house lawyer and knew next to nothing about watches,” he says, recalling his arrival in the Japanese company in 1984. “I’m a bit unique.

Equally unexpected is Naito’s outspoken assessment of his heritage. “Seiko has become a brand without a clear identity,” he says. “’Everything for everyone’ ended up being ‘everything for anyone’. It must be changed.

He has a point. On the brand’s UK website, a steel Seiko 5 Sports priced at £ 230 alongside a platinum Grand Seiko Spring Drive 8 Day ‘Mishaka’ set with diamonds at £ 176,120. Seiko’s international website lists other collections, such as Presage, Astron, and Lukia, as brands in their own right. Then there’s the Credor family of high-end dress watches, which don’t even bear the Seiko name.

Naito, 60, saw the problem with his own eyes when he moved to the United States in 2016. “When I went to America, the brand perception was really low,” he says. “Retailers told me there was a huge price difference and consumers wouldn’t appreciate it.

The problem was also internal. “The perception among our employees was that Grand Seiko didn’t have a strong feature like Richard Mille or Hublot,” he says. “It wasn’t catchy. Our own people have almost given up on promoting the brand.

Naito’s challenges are compounded by increased competition from Chinese watch brands, whose quality has improved, as well as the stronger yen.

Part of the solution, he says, will be restructuring. Grand Seiko, which watch enthusiasts call “the Japanese Rolex”, was introduced to the domestic market in 1960, but it was not launched globally until 2010.

In 2017, the company established the brand as an independent business with its own management. The following year, Naito became the Managing Director of Grand Seiko in the United States and hired people who felt deeply committed to the history and quality of the product.

The Grand Seiko Spring Drive 8 Day ‘Mishaka’ costs £ 176,120 © Seiko

He says the strategy is working, especially now that high-end retailers see Grand Seiko as a different brand. “Last year, in the overseas market, we increased sales of Grand Seiko by approximately 30% compared to the previous year. “

International growth remains a priority. “When I went to America, the biggest challenge was to turn around business overseas and, most importantly, the United States – our biggest market outside of Japan.”

He says that in the 1980s exports made up 70 percent of the business. Today, the proportion has reversed and 58 percent of the group’s net sales are made in its home market, Japan.

A report released in March by Seiko Holdings Group, the parent company of Seiko Watch, shows that exports to the United States represent only 7% of net sales, with Europe and Africa accounting for 9%.

Last year, watches accounted for 52% of the group’s net sales of 202.6 billion yen, or $ 960 million. Its other businesses include electronics, software, retail and sports timing.

For comparison, Omega, a competitor that is part of Swatch, made $ 1.9 billion in 2020, according to Morgan Stanley.

Naito appears to be the ideal man to implement international expansion. Besides the United States, where he was a Fulbright Fellow in the 1990s, he has lived in Australia. He is fluent in English and understands Western sensibilities.

But the legacy of being everything for all men is still a puzzle. “If we were a new business, it would be relatively easy to build a brand,” says Naito. “But, because we are 140 years old, we already have a solid foundation in terms of customers and perception.”

The solution? “We have to go back to our origins, clearly define who we are and communicate it,” he says. “I wouldn’t say it’s easy, but if we can do it, we’ll be a brand awake.”

“Our goal is [to] to create . . . emotional or social value ‘- Akio Naito at Seiko Museum Ginza © Christopher Jue

Position Grand Seiko as a luxury brand that “people fall in love with” and Seiko as a premium brand that offers “good quality and performance for the price you pay” will be essential, he says.

Whether this works will depend on Seiko’s ability to change current trends. The luxury sector is dominated by a few brands – Rolex accounts for 25%, according to Morgan Stanley – while sales of mid-range watches, where Seiko’s premium collection is located, are in decline.

In Switzerland, the volumes of watches with an export price of less than 500 Swiss francs ($ 540), or about half of the retail price, decreased by 7.5 million units between 2015 and 2019, or 27% of all Swiss watch exports. The Apple Watch, which costs from £ 199 and is said to sell around 34 million units per year, is believed to be responsible for the slowdown.

Naito will also need to find a way to bounce back from the pandemic. In Seiko’s latest set of annual accounts, at the end of March 2021, watch business was down 22.5% to 105 billion yen ($ 693 million). As the Swiss industry has recovered, Seiko’s dependence on the Japanese market has left it exposed to its continued bottlenecks.

In August, Seiko released its first quarter results which showed net sales of watches between April and June rose 89% from the same period in 2020. But, at 27.7 billion yen (250 million yen dollars), sales were still down from 33.9 billion yen in 2019. “We are recovering steadily but not to 2019 levels,” says Naito. “And it’s very difficult for us to predict what will happen even in the next few months.”

Some brands have increased their prices to differentiate themselves from the smartwatch market. Grand Seiko followed suit three years ago, but the move drew criticism from customers and retailers. “Our goal is to find out how we can create something other than function – emotional value or social value,” says Naito. “If we’re going to invest in something to create that value, then the price will have to be set accordingly. “

But, despite these challenges, Naito believes he has a significant advantage over the competition.

“There is something intriguing about Japan for non-Japanese people,” he says. “But even then, the perception of Japan differs considerably from generation to generation. The older generation thinks of electronics or automobiles, but the younger generation thinks of anime, ramen and sushi.

“Our brand is multi-faceted and if we can explain them, people will be intrigued.”

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About Robert L. Thomas

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