Despite the recession, foreign-made premium watch and clock brands continue to thrive. While the sales of other foreign-made premium brand products, such as bags and clothes, remain stationary, the sale of watches and clocks grows over 20% annually.
Foreign watch and clock companies are cheering while domestic companies are frowning at flagging local sales.
According to sales records from 2011, Switzerland takes 59% of the world’s watch and clock market. In reality, the quantity of watches produced in Switzerland is at a mere 3%. This signifies that most premium watches are produced in Switzerland.
In 2006, Korea signed a Free Trade Agreement (FTA) with the European Free Trade Association (EFTA) and removed tariffs on about 8,000 items, including watch movement (operating devices). Switzerland is also a member of the EFTA along with Norway, Iceland, and other countries.
Korea is the 11th nation in the world to import watches produced in Switzerland, but 5th in growth rate. Foreign premium watch companies are aggressively targeting the Korean market by investing the savings from the recent tariff lift into advertisements and promotional events.
On the other hand, domestic watch companies are encountering more difficulties. With the lack of technology and early tariff lift, they have fallen behind in the competition.
One CEO of a domestic watch production company said, “Compared to 10 years ago, 80% to 90% of the watchmakers and parts producers have now disappeared,” and appealed, “It has become difficult to endure against the aggressiveness of foreign companies.”
According to Korea Watch & Clock Industry Cooperative (KOWIC) on August 4, foreign-made watches take over 90% of the twenty trillion won watch & clock industry. Specifically, over 80% of the premium watch market is occupied by five foreign companies: Richemont Korea, Swatch Group Korea, Korea Rolex, M&B Inc., and Fossil Korea.
These brands have increased their sales prices by 4% to 10% annually, even after the announcement of the Korea-EU FTA in 2011. Really, the benefits from lifting the tariffs have disappeared.
Foreign brands have been criticized for not investing in the actual development of the watch and clock industry, even if they dominate the domestic watch market. The domestic watch industry has faced a serious crisis since the products began to be imported in full swing. Most watch producers and parts makers have gone out of business.
Watch jewelry professor Cho Seon-hyung of Dongseoul College pointed out, “The foreign premium watch import companies make tons of money, but fail to reinvest their earnings in the improvement of the watch and clock industry through manpower cultivation or equipment investment.” Also, these few dominant companies in the market cause increased consumer damage.
Executive Eirector of KOWIC, Kim Dae-boong, criticized the situation by saying, “These foreign watch companies dominate the domestic market and earn a tremendous income, but never have they contributed to industrial growth and development with some brands without any record of donation.”
Actually, foreign watch companies are required to pay a certain percentage of their revenues in order to help their mother country’s development of the watch and clock industry (to the Federation of the Swiss Watch Industry FH in case of Switzerland). In Japan, the Federation of Import Traders has built watchmaking schools to invest in nurturing specialized manpower.
Professor Cho explained, “As the watch and clock industry is not a declining one but of rather high value, the foreign companies’ positive attitudes toward investments, along with governmental support, are critically needed for the international competitiveness of domestic companies.”