For a multitude of reasons, not all of them bad, India is slowly fading away from the marketing lexicon of luxury watch brands. Not completely of course. Just a few years ago, especially before and just after the global financial services firm Lehman Brothers declared bankruptcy, it was impossible to talk to marketing and sales staff at watch brands without lengthy expositions on their hopes and plans for the Indian market. That optimism has been severely tempered by a number of market realities, local and global.

Recently, at the BaselWorld trade fair in Switzerland, Nicolas Beau, director of watchmaking at Chanel, narrated the story of a friend in the luxury industry who went to India on an exploratory trip. “The friend came back," Beau recalled, “and told me that they don’t need us in India. They don’t need our perfumes or clothing or jewellery or anything. They already have their own luxury."

Watches, in fact, were some of the few things that the indigenous Indian luxury market didn’t make with a certain Indian sensibility. Which is why brands like TAG Heuer S.A. came to India, spotted an opportunity and attacked it with gusto. Over the last decade or so, TAG Heuer—propelled by Shah Rukh Khan—became one of India’s strongest luxury brands.

In March 2014, when pessimism was beginning to kick into the global watch market, TAG Heuer reaffirmed that its plans for India were robust. There were announcements about the brand tripling its store count in 2015 to boost sales. But by December 2015 the scene had changed completely. The LVMH group of luxury brands had decided to shut down TAG Heuer operations in India. “By the end of December, LVMH will hand over distribution of Tag Heuer and Dior, its other watch brand, to a local company. The people cited above said sales at LVMH’s local watch division, LVMH Watch & Jewellery India, are sagging and the company sees its prospects further dimmed by the country’s tax structure," reported The Economic Times.

What changed in the space of a year and a half? People aware of LVMH’s decision, who requested anonymity, said part of TAG Heuer’s problems lay in the incentives offered to retailers. The visibility and sales success had come at the price of high promotional and distribution costs that left the brand with very thin margins. Ashok Goel, a luxury consultant and now a distribution partner for TAG Heuer in India, said that the main challenge now is rebuilding sustainable relationships with distributors: “We have to rebuild this market, maintain the brand’s credibility, all without taking the same route as before." Taxation remains the other perennial bugaboo. Indian watch retailers have spent years lobbying for the government to drop taxes on imported watches, taxes that are so high that they continue to drive buyers to Dubai, Hong Kong and London. This is not a new story or one limited to the watch industry. But the new anti-black money rules from the Modi government have added fuel to the fire. In December Mint reported that “The central government has made it a must to quote the permanent account number (PAN) for all transactions above 2 lakh in a bid to curb black money."

While almost nobody Mint spoke to disputes the ‘reform rationale’ behind the move, the impact on watch sales is crippling. Most high-end watch brands charge much more even for basic models. Retailers such as Yasho Saboo of Ethos Watch Studios believe that customers will eventually get used to this new normal of disclosure. But in the interim there is caution and reticence. Combine all these trends with the general malaise in global and local markets and you have a domestic luxury market going through considerable pain, especially in the case of foreign brands. Mitrajit Bhattacharya, a veteran of the watch industry and president of consulting firm The Horologists, says that overall the market is slow. “There is some traction in the sub-2 lakh segment," Bhattacharya said, “but even that mostly for gifting and special occasions."

Some brands like Seiko, which sit on or about the 2 lakh threshold, are buoyant. Taxation norms and a generally sluggish market is great news for such brands that sit somewhere between high-street and high-end brands. Others including TAG Heuer are specifically working on models priced just below the PAN threshold. (This may well be a good thing for the Indian market. Products and brands that straddle the gap between high-end and affordable segments help markets mature.)

Others seem to be re-evaluating their India strategy. Overall the global market for watches is in a funk. The value of Swiss watch exports for the quarter ending January 2016 fell by 7.9%, the first such fall since January 2009, when it plummeted 21.6%. In this environment, brands are wary of speculative investments and experiments. In much the same way that watches themselves have become sober and simple, business plans too have become conservative. Thus there will be little appetite to invest heavily in India, a market that remains speculative despite being open to business for two decades.

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