The Hindu Business Line : Luxury's travails

"There are local watch brands in India but they have a different price positioning. Tag Heuer will never take market share from a Titan. So why should it be taxed?"

Discussing the growth of Tag Heuer in India, its President and CEO, Jean-Christophe Babin says retail environment and high duties are challenges to be faced.

But some luxury goods brands also face some disappointment with the sales experience in India in the past few years. Comparisons were being made to China but the growth has not been replicated in India.

I think one of the key issues in India, but which is going to be fixed quickly, is the retailing environment. It is difficult to sell a luxury brand in a non-luxury environment. A boutique is not only a place to sell products, it's a brand experience, which is why luxury brands initially are getting into premium hotels, that is places where you can feel luxury. But now, with high-end malls coming up, there will be a proper luxury environment. So people, instead of buying abroad, will buy locally in India.

The second issue is high duties. Duties are so high that luxury brands are still hesitant to come to India as it is impossible today for a luxury brand to operate profitably, unless you sell at a higher price than abroad.

At Tag Heuer, when we entered five years ago, we said we will sell at the same price at which we sell in Dubai, and this is still the case. Obviously, this meant we pay for the taxes and don't charge them to the consumer, which also means we make no money. However, it is an investment for the future.

Duties on luxury goods should be brought down to normal levels. There are local watch brands in India but they have a different price positioning compared to Swiss luxury watch brands, so importing Tag Heuer will never take market share from a Titan. So why should it be taxed?

How important is the Indian market for you from the sales point of view? How do you see it developing?

India is very important from the sales point of view, so the question is not whether you will succeed in India or not, the question is you cannot not succeed in India. Sales-wise, India is beginning to be important for Tag Heuer. In terms of sales, this year India would be comparable to a country like France. But for sure, in ten years, it will be in the top five countries for Tag Heuer.

Profit-wise, the issue is with luxury taxes and duties and we take the full impact of that right now, but in ten years it won't be the case or otherwise in terms of company profit it would not be a very good development. But it's a bet we took, and eventually India will be aligned with the WTO tax regime.

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