INDIA THE SLOW-MOVING GIANT

• Total Indian population: 1.34 billion (50% less than 25 years old)
• Indian watch market estimated at 1 billion dollars
• Luxury watch market estimated at 500 million dollars and growing at 20-25% annually in India
• Over 50 million watches sold every year in India (= average price 20 dollars)
• The Indian watch market has grown at a rate of over 9% for the past 10 years
• Market share by brand: Titan (50% in
value), Timex (20%), Swatch Group (14%), Casio (7%), Citizen (5%), LVMH (1.8%), Rolex (0.5%), others (1.7%)
• India is only ranked 26th in terms of exports for Swiss watch brands

One of the fastest growing economies with a large, young

population and a sizeable middle class, the south Asian power
has not held all its promises for the global watch industry.
hile India’s potential still makes it an attractive
destination, many hurdles remain for the subcontinent to
become a boon for international watch-makers, as it still
lags behind a number of smaller emerging countries… At
least for the time being.
Take a short walk around any big Indian city and one
thing is obvious: watches have become a common
fashion accessory for everyone. From working-class
neighbourhoods to posh clubs, restaurants and corporate
offices, almost every Indian flashes a timepiece on his or
her wrist. Long gone are the days when Hindustan
Machine Tools, better known as HMT, was the sole
player on the Indian market. Now a struggling relic of
Indian post-independence socialist times, the public
company started under the country’s first Prime Minister
Jawaharlal Nehru finally shut its doors for good a year
ago, leaving its vintage mechanical and automatic
models to nostalgic collectors. The first challenger to
break the monopoly was the Indian private group Titan,
which came along in the late 1980s and soon began
digging HMT’s grave. Titan, a subsidiary of the Tata
conglomerate, has thrived ever since and today
commands over 50% of the Indian market, estimated at
over 500 million dollars.
It is in the last 15 years, however, that the watch market
has witnessed formidable change. Sunil Karer, editor of
Watch Market Review, the first Indian horology
magazine, founded by his father in 1953, remembers
when India started to abandon its strict protectionist
policies. “Until the year 2000, watches were not allowed
to be imported into India. I organised an exhibition for
Swiss watches in India for eight years. We invited the
industry ministers and explained to them that they
shouldn’t ban them because they were not competing
with HMT at all. Then they allowed watches over 1000
dollars to be imported… slowly (with a heavy duty of 90
or 100%), we got watches off the restricted list”. India has
since opened its doors wide to Swiss, Japanese and
American watch companies who, along with Titan and its
various brands, have flooded the market.

A young population hungry for watches

India’s economic boom of the last decade has been
reflected in the watch industry, which can be divided into
three broad sectors: the mass-price market, the mid-price
market, and the premium price segment. While the mass-
price segment (watches under 1000 rupees) is the
biggest in terms of volume, it represents about 37% of
the total market in terms of value. The mid-price segment
represents approximately an equal share while the
premium segment takes about a quarter of the pie. The
rise of disposable income in India has boosted the
premium market in particular, especially in the “affordable
premium” bracket, which takes into account watches from
10,000 to 100,000 rupees. Online sales of watches are
also growing at a tremendous rate, keeping pace with
rapid internet penetration in India. It is growing at an
annual rate (CAGR) of 50%, mainly in the retailing of
watches under 50 000 rupees. Five major e-commerce
websites – Amazon India, Flipkart, Jabong, Myntra and
Snapdeal – have taken over the market these last few
years, together sharing over 90% of the total online
market.
A young population and rising disposable income are key
factors in the growth of the wristwatch market, especially
in the mid-price and affordable premium market. “People
who earn 50,000 rupees a month will be willing to spend
up to 10,000 on a watch on average,” says Vinay Kumar,
a salesman at Helios in New Delhi, a multi-brand chain of
stores owned by Titan. Although the Indian giant does
well, in particular in the more affordable watches (under
 5000 rupees), most young Indians who can afford it
prefer to go for international brands, which have become
a status symbol, as in many other emerging countries. In
that bracket, two American players have fared well in
India: Timex, the American giant, which has captured a
20% market share, and to a lesser extent Fossil, which
counts many brands under its umbrella in addition to its
own and has made a successful foray in what the
company likes to call the “bridge to luxury” segment.

“In the fashion

segment, Guess, Armani, Diesel and Tommy Hilfiger are
doing well, and in the technology market, Fossil is doing
well and Seiko and Casio are doing very well.”

In the busy commercial neighbourhood of Lajpat Nagar in

New Delhi, Dinesh Kumar has been running his store for
over 50 years. He started out selling HMT watches but
now offers many international brands, mostly in the
10,000 to 15,000-rupee bracket. “For about the last 15
years, young people have been treating watches as a
fashion statement. They buy watches as gifts, for their
girlfriends. 60% of my customers are after the brand and
the remaining 40% are after the technology,” says
Kumar. “In the fashion
segment, Guess, Armani, Diesel and Tommy Hilfiger are
doing well, and in the technology market, Fossil is doing
well and Seiko and Casio are doing very well,” he adds.

Casio and Seiko, full speed ahead

Seiko, which entered the market in 2007 and boasts an
annual growth rate of 25%, has so far made a successful
entry into India. Its watches are sold in 385 multi-brand
outlets and it has opened six exclusive boutiques in
several big metros around the country. Unsurprisingly,
the Japanese brand is targeting the 25-to-40 age group
in India, according to Seiko’s country president Niladri
Mazumber, who hopes to double the number of exclusive
boutiques in thecountry in the next year. The group,
which aims to compete
with Swatch Group brands Rado, Tissot and Omega, has
also entered the online market aggressively, opening a
“mini-site” on Amazon. According to Dinesh Kumar, it is
already offering stiff competition to the Swiss brands:
“A Rado automatic starts at 1.5 lakhs. If you purchase
a Seiko Astron you will get a lot more features like a
GPS, or solar for that price”. Casio, is slowly but surely
becoming a serious player in the game in India. The
Japanese electronic giant has captured 5 to 7% of the
watch market, depending on different estimates. The
brand enjoys good visibility, from malls to airports to local
wristwatch stores in Indian cities, and its reasonably
priced sporty G-Shock and Edifice model are highly
appreciated by a younger demographic. “They are my
best selling watches, with Titan in the lower price range,”
says Gaurav Kumar, who runs a small watch store in
south Delhi. This statement, echoed by Dinesh Kumar of
Mahindra Watch Company and many other retailers in
the Indian capital, explains why the company has
surpassed – in terms of market share – Citizen, another
well-established Japanese brand.

A difficult time for luxury brands

The Swiss watchmakers, traditionally associated with the
highest quality and luxury time-pieces have on the other
hand found it difficult to truly conquer the Indian market.
After a steady rise since 2005 (excluding a dip after the
2008 economic crash), sales have dropped since 2013.
The Swatch group still controls a sizeable portion of the
market (around 15%) with brands
like Swatch, Omega, Rado and Tissot, which have built a
reputation since entering the Indian market in 1998 and
are still selling relatively well. The higher-end brands, like
those of the LVMH group, are struggling a bit more. Anil
Madan, who owns six watch stores in Connaught Place,
New Delhi’s traditional commercial district in the centre of
the capital, maintains that some of its brands, in
particular TAG Heuer and Hublot, remain popular among
his customers. Nonetheless, despite an aggressive
marketing strategy – Bollywood superstar Shah Rukh
Khan, one of India’s most famous actors, has been the
brand ambassador of TAG Heuer for many years
– LVMH shut down its Indian operations last year and
now relies on a local partner for distribution in the
country.
“The luxury market has definitely slowed down in the past
few years,” explains Sunil Karer. “Because of all the duty
structures, premium watches are facing some problems.”
High taxation, which complicates business for many
Indian retailers, remains a huge impediment. Since
December 2015, the Indian government has made it
compulsory for buyers to give their Permanent Account
Number, or PAN, for any purchases above 200,000
rupees. A PAN number is the code that links every Indian
national to the Income Tax Department, and hence
exposes the purchase to taxation. This has pushed many
potential Indian buyers to go abroad for their watches,
particularly Dubai and Hong Kong, two destinations
Indians can fly to in a few hours, which were already
popular among luxury watch aficionados in the country.
“Most Indians nowadays are travelling a lot to Dubai and
Hong Kong. Dubai is a very strong base for watches and
it’s close to India. In Hong Kong there are Indians who
give you any brand you want at a very competitive price,”
confirms Sunil Karer.

Demonetisation: adding fuel to the fire

The brands that are faring the best, like Seiko for
example, are those that have priced their watches under
the dreaded 200,000 rupees limit. But late last year, the
Indian luxury market was dealt another sudden and
unexpected blow: on November 9th Prime Minister
Narendra Modi’s government announced the overnight
demonetisation of 500 and 1000 rupee bills, a draconian
economic measure aimed at curbing “black money” in
India, where cash transactions are the norm and tax
evasion rampant. As Indians were queuing up for hours
at a time in front of banks, the rich also refrained from
spending. “It has had an immediate impact on sales,”
admits Anil Madan. This setback is likely to have only a
short-term impact but has further dampened an already
fragile market.
Yashovardhan Saboo is the founder and CEO of Ethos,
India’s biggest luxury watch chain, which retails brands
such as Rolex, TAG Heuer, Breguet, Jaeger-
LeCoultre and, more recently, more niche horologists
like Corum and Favre-Leuba. When asked about the
state of the Indian market and its challenges, he gets
mildly irritated at having to state what has now become
the obvious for industry insiders. “I’ve said it before… the
market is not developed, duties are not ok, taxes are
high. There is nothing new about it.” He admits that this
has caused a lot of caution on the part of Indian buyers,
but maintains that if the Indian market is still finding its
feet, the brands that do persevere will eventually find a
huge payoff.

The Chinese mirage

There is another reason why this payoff has so far not
been the one expected by global watch companies who
have invested heavily in India. After the explosion of the
Chinese luxury market, it was easy to imagine a similar
scenario in India. The country, like its Chinese neighbour,
is also an Asian giant with a high growth rate, a very
large population and, above all, a booming middle class,
which has seen massive income growth in the last
decade. These striking similarities are however deceiving
and hide many important differences between the two
countries. First of all, the categorisation of what
constitutes “the middle class” is not the same in both
countries. Any Indian earning above 13,700 dollars a
year is counted in the middle class, while the threshold is
28,000 dollars for China, according to Credit Suisse.
Furthermore, despite its population of over 1.2 billion
people, only 3.2% of Indian citizens qualify as middle
class. In comparison, the Chinese middle class will be
represented by 76% of the population by 2022, according
to a 2013 McKinsey report. The growth for luxury
consumption, which many international watch brands fall
under, will therefore remain limited. This helps in
explaining why India is ranked only 26th worldwide in
terms of exports for Swiss watches, behind even
Thailand, and with a sales volume more than ten times
smaller than that of China, despite growing at a faster
pace than its Asian rival in the last few years. While
India’s evergrowing number of millionaires and
billionaires will always sustain a sizeable upper market, it
is the evolution of its middle class and its disposable
income which will truly define the future of the Indian
watch market and that of its major players.