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Always The Right Time
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In 2010-11, Indians bought Rs 5,000 crore ($1 billion) worth of watches. Of that, luxury watches accounted for Rs 1,500 crore ($300 million). With 153,000 high net worth individuals (HNIs) — and the number is rising by the year — the market for luxury watches is expected to rise in coming years.
And one luxury watch is just not enough. According to ‘Top of the Pyramid', a Crisil Research-Kotak Wealth Management report, a typical Indian HNI owns 3-5 luxury watches. The most popular brands include Rolex, Omega, Rado, Cartier, Piaget, Breguet, Jaeger-LeCoulture (JLC) and Girard Perregaux. Almost 70 per cent of luxury watches are bought in Mumbai and Delhi though demand is beginning to pick up in Tier-2 cities as well.
"More people are buying more expensive watches," says V.D. Wadhwa, managing director of Timex Watches India, which retails Ferragamo and Versace watches. The company has already surpassed sales targets for the current fiscal. At present, high-end watches contribute
5 per cent to Timex India's annual revenues.
There are essentially two segments in luxury watches — classic and fashion. The growth in the latter segment, priced mostly below Rs 1 lakh, is faster. This is a great opportunity, more so as there are new collections every season.
Swatch Group India, which has brands across basic, fashion; mid; luxury (Rado, Longines); and prestige segments (Breguet, Omega, Jaquet Droz, etc.) has seen each segment grow consistently over the past three years.
The big driver for increase in sale of luxury watches in India is that prices here are now just 10 per cent more than the global prices as opposed to 30-40 per cent earlier. "This is primarily due to fall in excise duties over the years," explains Jay Makhijani, head of business development at Dia Jewellers, a watch and jewellery retail firm that houses brands such as Piaget, Chopard and Vacheron Constantin. This factor has led to many watch brands entering India. Vacheron Constantin has only 28 boutiques in the world, and one of them is in Delhi.
And the tags are getting fancier. Ethos Summit, a chain of luxury and premium watch stores, sold a watch for Rs 30 lakh recently. Chandigarh-based Yashovardhan Saboo, founder of Kamla Dials and Devices (makers and exporters of dials) that runs Ethos says close to 40 per cent of its revenues comes from watches priced at over Rs 2 lakh.
|OWNER'S PRIDE: Vacheron Constantin Quai de l'Ile (left), Breguet Haute Joaillerie Petite Fleur, and Chopard Xtravaganza|
Says Tarun Sharma, who became the India head of JLC, the premium watch brand owned and operated by the Richemont group, in 2007: "What has changed is that we are now selling more expensive pieces. In the past four years, we have seen a growth of 250 per cent in value, and 175 per cent in volume." Sharma says this year, an NRI bought a set of three Hybris Mechanica Grande Sonneries for Rs 12 crore. The watch sees only 30 pieces made globally. As of now, only high-end watch retailers keep JLC, but the company plans a standalone boutique by 2012.
In a way, the Indian luxury watch consumer is learning to buy a brand for what it offers. Says Dia Jewellers' Makhijani, "Most consumers have the money and want to know what they can buy in that range. They ask what can I buy in Rs 5 lakh?" This is different from western markets where people know their brand preferences.
To cash in on the boom in luxury watch sales, newer brands are making their presence now. Delhi-based Naynesh Pasari started Luxury Collections, a marketing and distribution company that brought the Ritmo Mvndo brand to India this year. "We will add two more brands within the next year," says Pasari, adding that the company will opt for private previews only for a select few luxury consumers.
Operating in the luxury watch market is not easy, since there are multiple brands looking to get a slice of the pie. And then there is the customer. "Some things do not change. Even when spending on high-end products, a consumer still bargains," says Vasant Nangia, managing director of Fossil Watches India. But that should not be much of a surprise considering that Indians are hardwired to bargain. Explains Wadhwa of Timex: "It is not a price-sensitive market but a discount-sensitive market. People still want discounts. They will go out of their way to ensure they are getting the best price, even if they are buying a Rs 5-lakh watch."
A part of the reason is that list prices in India are still higher than those in low-duty destinations such as Dubai and Singapore. So discounting and undercutting is common. In some cases, discounts could go up to even 25 per cent. Typically, retailer margins are in the 20-25 per cent range for luxury watches.
All said, the luxury watch market in India is on a high and likely to see many more big labels soon. Just wait and watch.
(This story was published in Businessworld Issue Dated 26-09-2011)