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Harish Bhat | ‘We will see a boom in high-end watches over the next five years’

Harish Bhat | ‘We will see a boom in high-end watches over the next five years’
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First Published: Fri, Apr 29 2011. 02 18 PM IST
Updated: Fri, Apr 29 2011. 02 18 PM IST
Subsequent to the launch of a white paper on the Indian Time Wear Industry earlier this year by the All India Federation of Horological Industries (AIFHI), Mint spoke to Harish Bhat, chief operating officer—watches, Titan Industries Ltd, and secretary general, AIFHI. Bhat spoke about a variety of topics including the large potential for India in the global watch business, China’s head-start and some compelling numbers. Edited excerpts:
The white paper seems to focus on two issues: making the Indian market easier to operate in, and leveraging India’s manufacturing abilities. Which one, to you, is the easily addressable one? Especially, in the light of the government’s slow progress on the taxation front.
I think making the Indian market easier to operate in is the low-hanging fruit the industry can seize. A single measure such as the introduction of GST will make the market so much more navigable for organized players in wrist watches. In addition, rationalization of some duties (import and excise duties on high-value jewellery-like watches, far lower excise duties on economy watches) will also help expand this market greatly.
Having said that, the opportunity for creating a global manufacturing hub in India for watches and watch components is huge. China enjoys this position today, but its competitive advantage is getting fast eroded. This will require watches to be given priority under the government’s manufacturing policy, infusion of new technology, also the creation of hubs where manufacturing and ancillary units can come up in close proximity to each other.
It would appear that developing a watchmanufacturing base in India is something that the private sector can immediately work on. Where do you see potential here? Which element of the supply chain can India cater to quickly?
Yes, quite correct. The private sector can certainly work on creating a watch-manufacturing base in India. In Titan, we have, over the past two decades, created such a manufacturing base for our own needs, with Hosur being the epicentre. This profitable model is certainly replicable by other players as well, who currently import their requirements from China and the Far East.
I think manufacturing of watchcases and watch dials are two areas that can be quickly addressed in India. Other appearance parts and components, such as high-end leather bracelets, batteries and complex mechanical/automatic movements will require some more time, patience and technological collaboration.
How mature is the Chinese watch industry? They have companies such as Tianjin SeaGull which already have strong market shares. What should be the Indian strategy here?
The Chinese watch industry is far larger than its Indian counterpart. Their manufacturing units (perhaps more than 500 in number), located in and around Shenzen, form a thriving base that exports watches around the world. These are primarily low-end and mid-end watches, a large proportion being fashion brands.
Tianjin Sea-Gull is somewhat of an exception; it is one of two or three Chinese players who produce excellent mechanical and automatic movements with several interesting complications including a unique double tourbillon, which I was very impressed with when I visited their unit two years ago, and spoke to their movement developers.
One difference between how the Chinese and Indian markets have developed is the existence of large and powerful mainstream Indian brands such as Titan, Fastrack, Maxima, Sonata. China does not, to the best of my knowledge, have such large or monolithic brands that cut across the entire country. It is a far more fragmented market.
What support could be forthcoming from the government to help manufacturers?
Establishment of hubs for watch manufacturing, with easy availability of land and infrastructure (particularly electrical power), fiscal benefits for the first few years to help seed the watch manufacturing industry, and perhaps tempt units to relocate here, articulating a vision of making India the global hub for non-Swiss watches manufacturing by 2025.
Do you feel that the highend watch segment is unfairly targeted here in terms of taxation? Visavis automotive, for instance.
The high-end watches segment in India suffers from several handicaps. High import duties on high-value watches are one such unfair barrier. At AIFHI, we have requested the government that high-value jewellery watches should be subjected to lower import duties, along the lines of jewellery.
The absence of good premium retailing space for premium and luxury watches is yet another barrier.
We have already seen the highend auto business take off in India. Do you think there is an impending boom in highend watches too?
Yes, I am firmly convinced that we will see a boom in high-end watches over the next five years. The number of upper-middle class and upper class households in India is likely to quadruple over the next six years, and high-end fashion and luxury watches will, like other lifestyle accessories, hold great appeal to these consumers. I foresee the market for premium and luxury watches (i.e. watches priced above Rs 10,000) growing fivefold between 2011 and 2016.
We have seen this happen in China over the past decade, and it will soon happen in India too.
Besides taxes, there is also the issue of supply chain and retail points. How sophisticated is the local distribution setup? How can we bring back home the purchasing dollars that are currently running away to Singapore, Hong Kong and Dubai?
Premium and high-end watches are not just watches, they are delicious stories to be savoured, incredible feats of complex precision engineering to be lusted for and marvelled at. This can only happen if they are displayed and sold with the respect that they deserve. Permit me a brief analogy: I don’t think caviar and smoked salmon can be relished as they really should be, at small roadside food stalls— much as I love these wonderful stalls for their excellent cups of strong tea and hot pakodas to match. That’s the same for watches.
In the white paper you mention how the weights and measures Act is a problem for watch retailers. Can you explain how it affects your daytoday functioning?
Watches are not packaged commodities, and, therefore, should not be covered by such an Act at all in the first place— particularly the rules which deal with packaged goods. Consumers don’t buy watches in packed condition, unlike toothpaste or soap. They touch and feel the watches, even wear them, before they decide to buy them. Watches are displayed in the open, brightly lit counters within stores, and not locked away in boxes. Anything less will make the store consumer unfriendly. Therefore, our consistent view has been that various provisions of the weights and measures Act that apply to packaged commodities (such as the need for copious elements of information on the box, the way such information has to be presented, etc.) should not apply to watches, and an Indian high court has also upheld this view. The matter is now subjudice in the Supreme Court. Also, the application of this Act to watches leads eventually to higher excise duties, which is an unfair burden that the watch industry has requested the government to review favourably.
Is there a fear that if we don’t react quickly enough, India could miss the bus? I ask this not only from the perspective that China is now the market of choice for brands, but also from the perspective that watch penetration in India is still quite low and multipleownership is abysmal.
India can miss the bus on becoming a global watchmanufacturing hub if manufacturers shift from China to countries such as Vietnam, as China becomes increasingly expensive. We have to position India as the alternative to China very quickly.
Yes, watch penetration in India is less than 40%, and multiple watch ownership is less than 5%. However, we have seen good growth in the watches market over the past five years, and also an increase in the number of people owning multiple watches, particularly in metros.
We need to accelerate these positive trends, which will require sustained investment and smart marketing.
We are happy to see that there are more than 60 international brands selling in India today, and many of them are investing handsomely in marketing and retailing efforts here. Open any reputed weekly magazine in India, chances are (that) you will find at least two ads for wrist watches. This wasn’t the case five years ago. And if this continues, it will certainly make the market grow in strong double-digits.
Note: All pictures of timepieces courtesy respective manufacturers.
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First Published: Fri, Apr 29 2011. 02 18 PM IST