Time check

One of the biggest questions that watchmakers have been grappling with is the relevance of the watch as a time-keeping instrument. With mobile phones becoming all pervasive in our lives, watch-makers are bracing themselves up to stay relevant in the business. So, from performing a time-keeping function, the time keepers are evolving as lifestyle accessories.

The All-India Federation of Horological Industries (AIFHI) and Technopak Advisors, which recently released a white paper on the Indian watch industry, make a strong pitch for opening up single brand retail. It also points to certain impediments that may mar the growth of the buoyant industry. These include the high duty on imported watches, the grey market and a taxation structure that could hinder the industry's growth.

"From being functional, watches are becoming more decorative. They have evolved as lifestyle accessories to be aspired for like any other product. The consumer does not see the watch merely as an instrument for keeping time; a watch is now considered a fashion accessory and a reflection of their personalities. Modern retail is a great enabler of impulse buys and what is needed is the right retail environment," observes Harish Bhat, CEO, Titan Watches, a key player in the Indian watch industry.

He points out that India's potential to grow its watch business is huge not just because of its captive demographic base but also its potential as a manufacturer of watches and watch components.

"We have huge potential considering that only 27 out of 100 people sport a watch on their wrists," he says, adding the industry would like the number to go up to 70-80 in the next couple of years.

Factors such as a growing economy, increasing consumerism, favourable demographics, a 300-million strong middle-class and more than a million high networth individuals hold out a lot of promise for the timewear industry in the near future.

"Last mile connectivity to the consumer is provided by the retailer. FDI restrictions are not allowing international brands to have complete control over retailing. Subsidiary companies cannot invest due to regulatory restrictions and this could be an impediment. Fresh money inflows in the market should lead to better distribution and marketing of brands," said Mr Yashovardhan Saboo, President, AIFHI, and CEO, KDDL Ltd, a watch retailer.

Currently, 51 per cent FDI is allowed in single brand retail and 100 per cent in cash-and-carry. It is banned in multi-brand retail.

Future Trends

Stating that the Rs 4,000-crore watch industry could grow to a whopping Rs 9,000-crore in three-five years, Arvind Singhal, Chairman, Technopak said, "The watch market in India is expected to grow between 10-15 per cent annually and a large chunk of the growth is likely to come from the youth and premium segment consumers."

By volume, the market is estimated at 460 lakh pieces annually and is divided into the mass, mid- and premium segments. The gender-wise split of sales in the fashion segment between men and women is 65:35.

The market pyramid is dominated by the mass segment and around 60 per cent of the market value is controlled by organised players such as Titan, Timex, Maxima, HMT and many Swiss, American and Japanese brands. The remaining 40 per cent is operated by the grey market players.

Emulating trends in most developed markets, the market is expected to resemble an inverted pyramid in the future, as the luxury and prestige watch segments grow faster. The white paper aims to provide the Government and other agencies a profound understanding of the market and use it as a basis for putting forth the industry's grievances and initiate changes in the policy framework so as to promote the legitimate and beneficial growth of the industry.

The white paper has also sought lowering of the import duty on luxury watches and rationalising the taxation structure.

The Technopak analysis estimates that if the duty and tax rates are rationalised, it would benefit the Government by increasing revenue by up to 140 per cent in the mid- to premium segment due to increased consumption, influx of more Indian and international players in the market and better tax compliance.

"The Government should totally remove excise duty in the sub-Rs 1,000 segment and reduce the duty in the mid-segment. Reduction will lead to increased penetration in the mass to mid-segment," says Singhal.

Employment generation

According to the report, there is an opportunity to generate additional total employment of around 80,000 people. It also says employment in watch retail could touch 2.15 lakh people in the next five years.

While Chinese manufacturing is slowly losing its shine due to increasing wages and pressures on its currency due to high exchange reserves, India could step in.

Niladri Mazumder, Head, Sales and Marketing, Seiko said, "India will be a key region for any watch brand. The country has a huge potential to manufacture watches as international brands are looking for an alternative to China owing to high wage costs."

Key impediments to the growth of the watch industry are:

High duties

Complex and varied taxation structure where tax is levied at multiple stages and authorities

Different rate of tax under the State Government ? VAT & Octroi fall under this category

Packaging regulations as per the Weight and Measurements Act which envelopes high incidence of taxation and operational difficulties

FDI restrictions are not allowing international brands to have complete control over retailing.

Organised retail in India at the nascent stage

The unorganised sector or grey market poses a big threat

Counterfeit products

Penetration and use of mobile phones for timekeeping

High rentals

Unavailability of skilled sales staff

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