High customs duties hindering growth of luxury watches in Indian market
July, 12th 2012
Olivier Bernheim, president and chief executive officer of Swiss luxury watchmaker Raymond Weil S.A., sports two watchesone on each wristto keep track of Indian and Swiss times when he is in India. Bernheim, son-in-law of the eponymous founder of Raymond Weil, joined the company in 1982. Bernheim spoke in an interview about the Indian market for luxury watches during one of his many visits to India. Edited excerpts:
What is it about the Indian market that has attracted you?
Well, what is sort of obvious is the size of the population, which is huge. Plus the enormous number of people who can afford to buy the watch; in proportion to the total population, it is low but when compared in proportion to a market like Europe, its huge. Even if 1-2% of this 1.2 billion population buys a luxury watch, its a big thing. Plus its a market where luxury has always played an important role.
How significant is the Indian market for Raymond Weil?
Of course, it is a growing market, but the market isnt growing at a pace at which it should be because of the high customs duties, which remain a barrier. Although the biggest growing market for our Swiss industry is China, we believe India is an emerging market. Today we have five stand-alone stores here and are opening another one in Borivali (Mumbai), which only shows how serious we are about this market. Also, we are profitable and have made huge investments in the country. (The five stores include one that opened in Kolkata on Wednesday and two that will be inaugurated in Mumbai later this week; the two other stores are located in Delhi and Chennai. The sixth one in Borivali is due to open in August.)
Currently, you are present in India though distributors and shop-in-shops. Do you plan a single brand entry in the near future?
We always collaborate with a local dealer for our stores and other than that we do shop-in-shops, distribution in that sense in India is one of the best in the world. India is a very brand-minded country...We have different dealers in every city since the watch distribution business in India is in the hands of different families. As for single-brand entry, we have no such plans; we want to continue working with family-owned franchisee businesses in India. To be able to reach our end-consumer, we should have the courage to handle things on our own, but right now we are happy working with our partners. We might consider it only if we have a mass business.
What investments have you already made in India?
Weve already made huge investments. Since we are a family owned business, we cannot give out investment numbers. The main reason for me being in India this week is that we are officially inaugurating more stores here, so the expansion is (on) fast-forward this year. So this shows how much we believe in the country and the growth of the country.
How does the consumption pattern in the Indian market differ from the West?
The Indian consumer broadly belongs to two broad categories. There is a sort of 50-60-year-old customer who is very informed. Then there are people who are in the 25-30 age bracket and are just beginning to understand luxury. They are also becoming a strong customer base for us.
Indians are watch collectors. The Chinese will only have one watchits a matter of use for thembut Indians love to collect watches, especially men. Men are very interested in watches. The Indian end-consumer is very trendy and owns multiple watches. Germans are very big on watches; Italians, too, are brand lovers and love to collect watches.
Will you continue investments in the Asian markets?
We will continue to make investments in America, China and India. America was one of our first markets and though we did see a dip in the demand in 2008-09, we are seeing the market and demand rebuilding itself. Lately we are also seeing demand coming in from Brazil; the consumers there are buying a bit more.
How have the weakening currency and import duties impacted your business in India?
We are not passing on the duty and the weak currency costs to the consumer, but it does put pressure on us and our dealers. So far we have taken the price absorption. We try to keep prices on par with the other markets. If we would have allowed the weakening rupee to impact the brand, we would have not been able to survive in this market. Most countries allow free trade, but in India the customs duties are as high as about 38-40%.
Would you consider your investments in India as a risk?
You cannot make an investment without presuming the growth of the market. Its a risk you have to take. But we are positive about our investments in this market for the future. We believe in this country.
How do you view the luxury real-estate infrastructure in India?
I was very surprised to see malls come up in the country. It is not part of the buying habit of India, but malls are now becoming the place to be in. We opened a store in Connaught Place (New Delhi) two years back, which we see as a high street; it is emblematic in New Delhi and is the heart of the country. The response has been great and we are opening another store in Borivali, in Mumbai, as a stand-alone.