The Hindu Business Line : The art of keeping value

V. SHIV Kumar says he prefers to err on the side of caution rather than over-distribute his brand. As Country Manager of crystal major Swarovski India's consumer goods business, he wants to make sure the brand's value isn't diluted in any way — a thought evident in the slow but steady way Swarovski has expanded in the country. That strategy won't change as the company has set itself a target of between 40 and 50 outlets in two years, from 31 now.

Brands such as Swarovski, which occupy what he calls the `new luxury market,' should neither have too many outlets, as watch companies do, nor too few, a feature of high-end luxury products. "We know that we have to be available at major centres. At the same time, consumers also have to reach us," he says.

Caution seems to have worked: "Unlike some brands that went on an expansion spree but had to close down many unviable units eventually," all 31 of Swarovski's outlets (11 exclusive shops, in addition to 20 points of sale) are commercially healthy, he declares.

After covering Mumbai, Delhi, Chennai, Kolkata, Hyderabad, Bangalore and Kochi through franchisees in each city, Swarovski has set its sights on Coimbatore, Ahmedabad and Lucknow.

With mass media spends insignificant, it wants its stores to disseminate branding messages, investing in upmarket outlets designed to "create the mood around the purchase" — significant to the décor category. The investments in each of them are so high that break-even could be three years away, though Swarovski hopes to grow 60 per cent for the second successive year in 2005.

Unlike premium brands that were searching for an elusive 300-million middle-class market in India, Shiv Kumar says he's more realistic about how many his "brand is talking to": 10 million-20 million. That space has come alive, he says, thanks to increasing personal disposable incomes and changing lifestyles.

"A lot of people are moving away from traditional jewellery and gifting options." The propensity to buy décor items is rising, with a growth in the culture of get-togethers.

Also, as in other products, the buyer profile has changed. Years ago, the age of a typical Swarovski customer was between 30 and 50; now it's 22 and above.

And this tribe of customers is driving the growth in the gifting segment. They have the money, are willing to spend, have more opportunities to gift, as also more options. They can choose anything from jewellery, tattoos, décor items and miniatures called `Crystal Moments.'

Although Swarovski has a price range of Rs 1,100 to Rs 2.5 lakh, a majority of the customers deal in the Rs 3,000-Rs 20,000 segment; the gifts segment is, on an average, between Rs 2,500 and Rs 10,000.

As a matter of strategy, the prices are unlikely to go up or down significantly. "We are clear that our positioning is `money for value.' Ours isn't a budget-end product."

However, changes in duty structures or exchange rates (because the company exports its wares from Austria) could push the costs up or down. And although the current budget has halved the countervailing duty (a parallel to excise) on jewellery, though adding a 2 per cent levy on its brand, and cut its custom duty, a strong euro against the rupee means there wouldn't be a significant reduction in costs. Anyway, jewellery accounts for barely a third of its sales.

Gifts are sought after by another segment: corporate. Shiv Kumar says corporate gifting is picking up, contributing a fourth of the segment's business, and in the process giving Swarovski an opportunity to reach a niche consumer base. For instance, Wills Lifestyle honoured its top customers by giving Swarovski's miniature wine bucket. "Such things are more effective than discounts," Shiv Kumar says. In another such opportunity, miniature microscopes were gifted to a group of scientists.

And with such gifts, there are no issues with size, colour or fit.

"We get hundreds of requests to associate with `free gift' offers but we have always turned them down. If we do participate, people will lose faith in the brand," he says, reiterating the `value' theme of the brand.

On the other hand, it is trying to strengthen the membership of the Swarovski Collector's Society, which now stands at 2,000. It wants to double it in two years, strengthening the affinity for the brand. Buying its products is not a prerequisite for membership but a "nominal" fee is. Members don't get discounts; they get exclusive previews to new launches, exclusive products and an in-house magazine.

The global parent is also toying with the idea of custom-made products. But with automated manufacturing, customisation will be expensive. Thus, it may apply only for big projects. But whenever it gets launched, it will be across countries, because that's the way "a brand keeps its value."

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