The future is expensive4 min read . Updated: 26 Jul 2012, 09:55 PM IST
The future is expensive
The Indian luxury watches industry has witnessed stellar growth in the past couple of years. If we look at the numbers, the market for expensive timepieces has grown at a steady rate of 20-30%, almost three times the pace of the overall time wear industry.
Indian consumers have seen a major shift in their mindset and attitudes over the last few years. “Wristwatches have made the shift from being mere timekeeping devices to a fashion accessory. A watch is seen by its wearer as a reflection of his/her personality, a style statement," according to the Whitepaper on Indian Time Wear Industry published in December 2010 jointly by The All India Federation of Horological Industries (AIFHI) and Technopak Advisors Pvt. Ltd.
The report goes on to say that watches play an important role for men which is equivalent to a jewellery item for women. “New age consumers aspire to buy different brands and upgrade to higher price segments," it says.
“Growth certainly has been more robust in the segment than any other retail category, keeping in mind that prices of luxury watches have increased around 10% in the past year or so," says Chandigarh-based Yashovardhan Saboo, founder of Kamla Dials and Devices Ltd (makers and exporters of dials) that runs Ethos Summit, a chain of luxury and premium watch stores.
Saboo also says that lot of people are discovering that buying watches in India is cheaper than buying watches elsewhere. This, he says, is because of the sharp decline in the value of rupee against the US dollar. The rupee has fallen more than 20% this year against the dollar and is one of the worst performers among major currencies. “That’s the reason brands are not able to force down the complete appreciation in prices. They are only increasing their prices here by 8-10%, while in other countries, they are increasing rates by around 20%. Which makes buying watches in India (in dollar terms) cheaper than anywhere else in the world," says Saboo.
As a result, almost 70% of Ethos buyers at the duty-free airports in Delhi and Bangalore are foreigners.
Another reason, say retailers, for the robust growth in India is the slowdown in China. Says Anil Madan, director, Johnson Watch Co. Pvt. Ltd, another chain of stores that sells luxury watches in Delhi and the NCR, “Because of the recent lag in China, companies are discovering that there is much greater scope here in India."
But there is still a lot to be done, say the retailers. For, as a part of the R10,000 crore luxury industry, the contribution of the luxury watches segment is a paltry 5%.
The next step
The next thing to do will be to make the shopping experience a better one, says Saboo. “We, as retailers, have to understand the legacy of the brand, know the why and how of a brand to help our customers choose a particular watch," he says, adding that “there has to be an emphasis on getting in touch with the customers over the Internet and providing post-sale services."
For Johnson, which has 12 points of sales in capital and NCR, it is more important to mark their presence in other parts of the country. “Pan-India presence is important. It’s logistically impossible to travel every time to Chennai, for example, to sell a watch to one of our clients."
But the sector is facing various challenges such as high import duties and varied taxation.
“We are eagerly waiting for the GST (goods and services tax) to kick in as soon as possible," says Saboo, adding “that would make life so much easier."
Also, there is a need for quality retail space. There are few malls and, therefore, their rentals are too steep, according to the retailers.
“To check that," he says, “we need to sit together and appoint someone who can ensure fair-pricing."
Taneja explains: “There is varied discount that retailers give in India, which is sometimes as much as 20%. (If you go to China, it is around 10% and in Hong Kong, it is only 6-7% and they wouldn’t go beyond that.) That leaves us with a margin of a mere 3-5%, which is not sustainable. We need to have at least 10-15% margin to stay afloat and do business properly."
The issues of foreign direct investment restrictions on single brand retail and the grey market are also areas of concern.
But despite the challenges, the retailers remain upbeat. The economic slowdown seems to have no effect on the demand for high-end timepieces. “It might eventually have some impact (even then, I am sure there will be factors to cushion the impact), but so far there seems to be none. In fact, it looks like it’s more on paper than anything else," says Saboo.
Growth in disposable incomes and rising number of high net-worth individuals coupled with growing brand awareness is also going to help the industry.
“What you will see next is the consolidation phase," says Saboo. “You will see lesser number of brands per store, but there will be more extensive range per brand. There will be lot many brands, greater visibility, lot of stores will be coming up and the weaker players will be weeded out."
In terms of trends, the retailers say unanimously, mechanical watches will rule. There is a shift to the classical design. Another trend will be growing demand for sporty and semi-formal watches and multiple ownership for various occasions. People will also start experimenting with the lesser-known brands. “All in all, we will be getting closer to the global urban trend," says Saboo.