Sunil Karer, the Managing Director and Joint Editor, Watch Market Review, has dedicated nearly a quarter of a century to the understanding of every segment and aspect of the watch, clock and allied businesses in India.
A globetrotter, he has travelled far and wide within and outside India in his quest for perceiving the horological market dynamics. He is a regular face at all the prominent global trade events such as BaselWorld and Geneva’s watch fairs, The Hong Kong Watch and Clock Exhibition and other annual events.
Sunhil Karer organized three Swiss Watch Exhibitions in between 1994-96 where the thousands of visitors could admire the products on display but could not officially purchase them in the market since at that time the import of watches was restricted. These Swiss Watch Exhibitions played their part in the removal of quantitative restrictions on the imports of watches in the late 1990s. He also organized the successful International Watch Exhibition in Mumbai in 2003 and 2004.
Foreign-born as well as Indian corporate heads seek his advice on a regular basis and Karer has been instrumental in emphasizing the need for introducing global practices and norms to the Indian horological trade and has helped the multinational companies that have entered India to attune themselves to the typical and unique nuances of the Indian trade and consumer. Simultaneously he urged local companies to think ‘global’.
Watch Market Review celebrated its 50th anniversary in 2004 and the publication is fearlessly committed to upholding, encouraging and highlighting every genuine and legal development in Indian and world watchmaking.
Karer, a connoisseur of luxurious timepieces and passionate about expensive cars and motorbikes, is regularly invited by different international organizations to speak on the Indian Watch Market.






Bangalore


India --- The billionaire economy
Those, who are aware of the tremendous potential represented by the Indian market, will hardly need a reminder of how exciting prospects for the watch business are looking in this part of the world - especially the ‘billionaire’ economy of India. India is one of the fastest growing economies of the world and one amongst the BRIC foursome (Brazil, Russia, India, China), referred to as the emerging superpowers of the future. The Asian Development Bank Annual Report states that out of the 20 future mega-cities of Asia, six will be from India. The Far Eastern Economic Review forecasts that out of the 11 mega-cities of the world, three would be from India.
After a fairly satisfactory performance in 2005, 2006 offers an opportunity for consolidating the gains of the last few years and laying the ground for accelerated growth in the medium to long term. The Indian economy has almost become immune to domestic calamities like insufficient monsoons, political change, flooding and other disturbances in major commercial centres, etc. The last couple of years have seen a revival in investment spending as capacities are being built up across many sectors. The manufacturing sector has reported robust growth figures over the last few years and the country looks all set to alter its manufacturing fortunes even further in future.
Many economists believe that the country has reached an inflection point where a 7 per cent GDP growth is the base. It is in this context that 2006 could become an important year in India’s economic history. The GDP can continue to grow at around 7 per cent per annum without any significant reform initiatives even in the face of domestic or overseas disturbances: the manufacturing sector will continue to do well as long as investment spending remains strong; factories are humming with activity as capacity utilization is close to 80% and more; the services sector can sustain growth at the current levels as most of the segments have built up strong competitive strengths; the economic outlook for the current year is stable, even if the rains were less than satisfactory; consumer spending is seeing no signs of a slowdown and good salary growth in the organized sector along with stable interest rates should keep the momentum going.

India’s growing economy
The annual policy statement of the Reserve Bank of India (RBI) pegged the Gross Domestic Product (GDP) growth rate for 2004-05 at a realistic 6.5-7% and the inflation forecast at 5%. This follows on the heels of the 8% plus GDP growth in the last fiscal 2003-04. Yet 2005 showcased India's strong economic fundamentals and resilience in withstanding the shocks of high global oil prices - ending up with an average inflation of about 4.7% in 2005, much lower than 2004's average of about 6%. A manufacturing revival has resulted in India's industrial output growing as compared to the previous fiscal year. The manufacturing sector grew by 7.2% whereas the general category grew by 6.9% as compared to the previous fiscal year. According to data released by the Central Statistical Organisation (CSO), capital goods grew at an accelerated pace of 12.7% and consumer goods by 11.6%. Non-durables posted a lower growth of 5.7% whereas basic goods grew 5.4%. The consuming middle class is estimated to be in the region of 300 million and foreign exchange reserves have crossed the $100 billion mark.
India has consolidated its position as the world's fourth largest economy in purchasing power parity (US$ 2,778 billion) behind the US, China and Japan. The Purchasing Power Parity (PPP) is arrived at by pricing all the goods and services at the US prices instead of converting rupees into dollars at foreign exchange rates:

United States: US$ 10,414 billion
China: US$ 5,792 billion
Japan: US$ 3,481 billion
India: US$ 2,778 billion

More than 58% of India's population is under 25 years of age and over 80% is under 45 years. By 2033, the active age group 25-45 years is expected to be around one third of the population. Over one million households earn the equivalent of $60,000 (in PPP terms) annually.
India is a founder member of the General Agreement on Tariffs and Trade (GATT) 1947 and its successor, the World Trade Organisation (WTO), which came into effect on January 1, 1995. India's participation in the WTO's rule based system in the governance of international trade ensures more stability and predictability, which ultimately leads to more trade and prosperity. India also automatically avails of MFN (Most Favoured Nation) and national treatment for its exports to all WTO Members.

The Indian Government
The Congress-led United Progressive Alliance (UPA) has assumed power and formed the new Government. Prime Minister Manmohan Singh and Finance Minister P. Chidambaram, the original architects of India's liberalization policies, have broadly outlined the new coalition Government's stance - known as the Common Minimum Programme (CMP) - on several issues.
Generally speaking, the UPA Government representatives have stated that Indian industry is expected to get a boost with measures facilitating Foreign Direct Investment, manufacturing, infrastructural upgrading and promise of a greater access to credit and institutional support from the Government. Needless to say, the Government wants India to compete globally as part of its target of 1% of global trade. In fact, investors within the services sector rank India as the fourth most attractive destination this year and the manufacturing investors ranked India amongst the top six preferred locations! The UPA plans to revive industrial growth and put it on a robust footing through continued deregulation and other policies.

Indian Watch Market --- on the Growth Curve
Following the liberalized export-import policies announced by the Indian Government, many international brands have become eager to grasp the plethora of opportunities afforded - some have already made inroads into the market.
The overall size of the Indian watch market is estimated to be around 40-45 million wristwatches with a double-digit annual growth of around 10%. However, the ‘organized’ segment accounts for 33% and the grey market accounts for the rest! It is estimated that 20-25 watches are sold for every 1,000 citizens. More than 90% of the watches sold in the country cost less than 20 euros. The major chunk of potential buyers for watches priced between 800-1,000 Euros could come from 100 million people (9% of the population) in the country. For watches priced at 2,000 euros onwards, 7 million Indians (0.5 per cent of the population) could be targeted. The annual market size of the Indian watch market is estimated to be around US$ 195 million.
The estimated demand for 2006-07 is as high as 70 million. The fact remains that India's penetration of watches is amongst the lowest in the world. Add to that an extraordinary cultural wealth and long-standing traditions of expertise in the field of gems and jewellery - particularly gemstones - and one can understand why so many watch companies are interested in establishing or reinforcing contacts with the distribution network and raising awareness amongst consumers.
India is one of the very few countries in the world with the capability of making all watch components right up to the finished piece. Over the last few decades, Indian horological manufacturers and makers of ancillary products such as watchcases, dials, bracelets and other components have created holistic industrial manufacturing capabilities. Regional pockets of strengths have developed in India in places such as Bangalore in Karnataka, Morbi and Rajkot in Gujarat and Northern India have developed specialty manufacturing core competencies.






Mumbai


India’s Watch Trade
India has more than 10,000 horological industry dealers. More than 100,000 people are directly or indirectly employed in the industry. The total investment in the ‘organized’ sector is US$ 218 million. The industry has the capabilities to cater to the gigantic consumer base of 1.2 billion. Out of a total demand of 30 million units, the ‘organized’ sector supplies only 14 million units (valued at US$ 203 million). The total number of watches imported legally is miniscule. Therein lies the opportunity for Hong Kong companies to enter the Indian market and woo the Indian consumers away from the illegal ‘unorganised’ sector (valued at US$ 232 million).

Huge potential in Indian consumer markets
The penetration of watches in India is low – just 25 watches per 1,000 people as compared to 250 in developed markets. This means that there is a latent market of ten times the present size – which on a population of 1.2 billion people would translate into 300 million watches! Indeed a great opportunity for Hong Kong’s international horological trade. There are several price points for watches in India - Low, Medium, High, Premium and Luxury – starting from US$ 8.7 right up to US$ 2,175 onwards. Around 70% of the watches sold in India have a price point of less than US$ 22.

Changing consumer mindsets
The Indian consumer has come a long way since the time when watch imports were banned. The improving mindsets of urban consumers can be attributed to affluence, global influence and exposure. The Indian consumer admired quality watches even when the government banned imports of watches. The consumer response during the three ‘Swiss Watch Exhibitions’ – 1994 to 1996 – organized by Watch Market Review played a significant role in opening the floodgates. The overwhelming response to these fairs got the decision makers thinking and in 1997, the Indian Government started the process of liberalization and allowing free import of watches.

Brand-conscious consumers
Today, the Indian consumer no longer sees a watch as a functional necessity. The Indian consumer is extremely brand conscious and sees it as a status symbol that showcases his distinctive personality. India’s population dispersion is very lucrative: more than 58% of India’s population is under 25 years of age (696 million) and over 80% under 45 years (960 million). Indian consumers have tremendous buying power: there are 60,000 billionaires, are 30 million millionaires and there is a 300 million strong middle class earning up to US$ 5,000 per annum.

According to the recent National Readership Survey Platinum Study, a total of 828,000 people out of 859,000 in the top six Indian cities – namely Mumbai, Delhi, Bangalore, Chennai, Pune and Ahmedabad - own branded watches! Rural consumers are waiting to be tapped since there is a huge potential as 600 million people do not wear watches.

Leading brands
In India, Titan Industries commands more than 50% of the ‘organized’ market. HMT has a substantial market share of around 10-15% due to its retail clout in urban and rural India built over four decades. Other brands such as Timex, Maxima, Citizen and other regional brands constitute the rest. The ‘unorganized’ sector is as large as the’ organized’ one.
Amongst the Swiss and other brands, which are already present in India, include the Swatch Group (Omega, Rado, Tissot, Swatch, Balmain, Blancpain). LVMH Group’s TAG Heuer and Dior are present whereas Zenith will be launching in 2006. The other brands are Piaget, Chopard, Vacheron Constantin, Corum, Baume & Mercier, Panerai, Maurice Lacroix, Cartier, Rolex, Titoni, Raymond Weil, Bucherer, Gucci, Esprit, Carerra, Breitling, Movado, Ebel, Giordano, Triumph, Beverley Hills Polo, Romanson, Chanel, Van Cleef & Arpels, Montblanc, Dunhill, Jaeger- LeCoultre, Bovet, Follie Follie amongst others. All the brands mentioned above are imported directly into India from abroad.

Duty structures
Even though duty structures in India are high, India’s whole-hearted co-operation and participation in the formalizing of the World Trade Organisation (WTO) norms will ensure rationalization of duty structure in India. There are two types of duties in India – Excise and Customs. In the basic excise duty structure, watches and clocks attract a duty of 16%. Basic Customs duties have been capped at 20%. The Landed Cost duty calculation – inclusive of landing charges, customs duties and countervailing duties - for a watch imported into Mumbai works out to around 50-57% over and above the CIF (Cost, Insurance, Freight) price! If you consider the variable costs – sales tax, octroi, administration costs, advertising costs, dealer-retailer margins – the landed cost works out to 88% over and above the CIF price.

Distribution structure
The Swatch Group has its own office in Delhi and it imports all the products directly. The LVMH Group also has its own office in Delhi and imports all the products directly. Piaget, Chopard and Vacheron Constantin are being imported by the distributor, Select Swiss Watches Pvt. Ltd., Mumbai. Corum is taken care of by the Singapore office. Baume & Mercier, Jaegre LeCoultre and Gucci are being imported by the Delhi-based Jot Impex Pvt. Ltd; Cartier is distributing directly from Dubai; Rolex sends the watches directly to a few top retailers in India; Raymond Weil, Titoni and Breitling are being imported by Dreamtime Watches, Bangalore; Giordano, Triumph and Beverley Hills Polo are being imported by Megan Impex, Mumbai; Romanson is being imported by Onax Sales, Delhi; Chanel and Van Cleef Arpels are sending the products directly to the showroom; Montblanc is being imported by Entrack Trading Pvt. Ltd., Rajkot, Gujarat; Dunhill is imported directly by the boutiques; Bovet is being imported by RPA Distributors Pvt. Ltd., Delhi; Movado and Ebel are imported by the Delhi-based Sun Glass Palace and Follie Follie is being looked after by Singapore-based L. S. Swisstime.

Watch Retailing
The retailing revolution in India will stimulate demand for watches. The situation has progressed from the days of the single watch retail outlets four decades back. In the 1980s, large number of sales and service centres emerged. In the 1990s, departmental stores and showrooms started displaying watches. In the new millennium, the mall revolution has ensured the use of modern retailing concepts such as shop-in-shops, exclusive corners and attractive display counters, etc. and chains of watch and clock retail stores have mushroomed in different cities and towns of the country. According to the global retail management consultancy firm KSA Technopak’s Retail Outlook, Indian retail is growing at 30-40% annually. It is estimated that India will have 2.5 million m2 of mall space by 2006. More than 200 malls with an area of 9,500 m2 and above will be operational in the country by 2006. In Mumbai, there is a potential supply of 608,000 m2 of malls. Nearly 37 malls are proposed to be operational in Mumbai by the year 2006.

Retailing will give a boost to Indian watch industry
According to M/s A. T. Kearney's Global Retail Development Index (Top 30 emerging markets), despite high taxes and heavy regulations on foreign direct investments, India holds substantial promise. In fact, India's new Finance Minister P. Chidambaram has gone on record stating that India can absorb US$ 12-15 billion FDI every year. M/s A. T. Kearney's research states that India's retail market is forecast to grow at 30% compounded annual growth rate over the next five years. Most consumer goods categories in India have shown a consistent double-digit growth over the last few years. The Indian retail market is estimated to be about US$ 200 billion, out of which modern retail constitutes around US$ 4 billion (Source: IRMC-ETHOS survey). India was ranked fifth globally amongst emerging destinations in the retail sector in 2003 rising one position over 2002 (GRDI-Global Retail Development Index, M/s A. T. Kearney).

At the end of 2003, there were 25 operational malls in India but the total number is expected to cross the century mark by 2005 and the double century by 2007. The revolution is sweeping even the Tier II cities and towns. The NCR region comprising Delhi-Noida-Faridabad-Gurgaon belt has already been crowned as the mall capital of the country - accounting for nearly 40% of mall space. In the south, the IT capital Bangalore is driving growth in mall space in the region - expecting to have a share of 10% over the next two years. Mumbai is expected to have around 5 million sq. ft. and Pune is also expected to take a large share of the mall investment pie. Aerens Gold Souk is planning specialized jewellery and watch malls in different cities – including Gurgaon and Mumbai in the next few months.

Conclusion
India is still considered to be a difficult to penetrate market. Some tips to remember …
The Indian market is extremely price-quality sensitive; it makes sense to enter the gigantic market in a phased manner; watch marketers have to use multimedia platforms to reach out to consumers; it is imperative to have the right local partners – dealers, distributors and retailers; it is vital to use leading watch trade journals to communicate the various schemes, new launches and events with a dealer-retailer base that is spread across vast geographic distances; the International Watch Exhibition is one of the best means to reach all the Indian dealers and retailers under a single roof. Several international brands have successfully found local partners by participating in such exhibitions.
All the top brands of the world have made India their home! Now is the time for the others to join the party or be left behind!


Watch Market Review is Asia’s oldest and most respected professional journal concerned exclusively with the watch and clock trade and its allied branches. Now in its 52nd year, it is a specialized trade magazine enjoying a wide domestic and international circulation. it is read by subscribers throughout India and also has a subscription base in Europe, USA, the Far East, the Middle East and Japan.
This monthly magazine offers its readers complete, in-depth reports, views, analyses, product launches, in short a global overview of the latest developments in the domestic and international trade and industry, thus acting as a link between manufacturers, distributors and retailers in India.
In addition, Watch Market Review organized, sponsored and promoted the Swiss Watch Exhibition that provided a forum for various international brands looking for a representation/base in India.
Watch Market Review is India’s only watch and clock business journal on the World Wide Web: http://www.watchmarketreview.com

Source: February - March 2006 Issue