The Hindu Business Line : `Imports, no threat for us'

TITAN Industries is now fighting competition both from international and Indian brands that are slowly but steadily creeping into the Indian watch market. In a discussion with Business Line, Mr Bhaskar Bhat, Managing Director, Titan Industries, and Mr Bijou Kurien, Chief Operating Officer, Watches division, share their views about the changing business dynamics, the impact of imported watches and its reaction to the tight competition.

Excerpts from the interview:

In the last three-four years, a number of foreign brands have entered the Indian market. Are they proving to be a threat to local watch manufacturers?

Imported products have made an impact only in the price range of Rs 2,500 and above. Earlier, when a person wanted to buy a foreign brand, he used to buy it abroad, or it was smuggled and sold through illegitimate channels. Today, these brands form a part of the legitimate counter sales. As a result, from zero, three years ago, their number has increased due to their availability.

If we look at some large retailers in the big cities, because of the number of international watches, there has certainly been a greater interest in that category of products. So, many people are coming in today wanting to buy a foreign brand. Some of them also end up buying Titan. Which is why our business in the more-than-Rs 2,500 range has really jumped.

But the total number of imported watches sold in the country is still insignificant. Of 2.5-crore-unit watch market, as estimated by us, the sale of all these brands (sold at over Rs 2,500), ranging from Citizen to Esprit to Swatch, Rado and Omega, all put together, is not more than 1.25 lakh pieces... Almost insignificant in terms of numbers.

However, in terms of value, we estimate that these would be roughly in the range of Rs 125 crore a year. In a market which is estimated at about 1,600 crore a year, or 7-8 per cent. So, while they might be insignificant in terms of numbers, they form about 7-8 per cent in terms of value.

But imports are certainly not a threat that they are made out to be. Titan's volumes in that range have been traditionally small. But in the last 18 months we have been introducing lot of products in that range and we have been growing in this segment. What I guess would have happened is that the Indian watch market itself would have expanded in that price bracket. This has been happening for the last couple of years. The greater-than-Rs 2,500 price bracket is the highest growth category, though it might be a small contributor to the total watch market. This segment is growing because of the interest that has been created by the international brands.

Second, the main plank of the watch market is in the less-than-Rs 1,000 price category. Effectively, about 70 per cent of our sales in the watch industry in India is in the latter category. None of these brands has a presence in this category. Only cheap Chinese watches are present in this bracket and they compete with the unorganised manufacturers, who are more expensive than them. So, the unorganised sector is getting hit from the bottom by Chinese products and at the top by the organised sector brands, such as Maxima and Sonata.

Mr Bijou Kurien, Chief Operating Officer, Watches division, Titan Industries.

How are you planning to face this slow, but steady, entry of imported watches into the Indian market?

Strategically, we had decided that in the relatively high end, there is a potential market. Till three years ago, we were the only players in this segment. Now for every segment to develop, ours' is a wait-and-watch. We know that foreign brands will not find it attractive to compete at the lower price points due to the duty structure, presence of such embedded brands as HMT and Timex, and the grey market. They would most likely come at the middlehigher-end luxury segments.

The entry of these brands would actually develop the market, at least by inducing consumers to pay a higher price for a watch. We expected them to promote the segment and that has actually happened. We have not invested in this segment in a big way but we have just made products available in this range. Today, this strategy is benefiting us to a large extent. Though they have got a large volume share, compared to what it was three years ago, our market share has not tightened. This is because people have begun to see value in a Titan watch. A similar foreign brand would be priced three-four times higher than a Titan. Typically, a Calvin Klein would be priced two times our steel collection.

Will not the foreign tag still lure customers?

What extraordinary premium would a customer pay for a foreign tag? Finally, the proof is in the numbers. Our market today is growing. Our per watch realisations are growing pretty decently. We see customers willing to pay higher prices for our brands. That is happening because foreign watches are very expensive. Titan is a much more easily available product and there are many more showrooms. Finally, the presence of a brand is not in the advertisement alone. It should come through the distribution network, the quality of the latter, the number of designs, the kind of advertising it does, the number of towns it goes into... That way we have a huge advantage from a consumer's point of view.

The number of outlets that stock imported watches is small, compared to Titan. That is where Titan has an advantage. We are planning to raise these barriers by increasing the number of outlets and our presence. We have never looked at our business from a competitor's point of view. We do what is good for our consumer and in the process, if we end up creating barriers, it works to our advantage. With the ability to understand the market, we get stronger.

Given that many of these brands are sold at subsidised prices in the Indian market just to push the brand, do you not think you might lose the pricing advantage?

Even if you look at the reduction in duties at a future date, many of the brands have kept their prices in line with the trends in Dubai and Singapore, both of which are duty free.

One of the risks they themselves know is that if they spend time, effort and money in the Indian market and sell it at prices which are far higher than Singapore or Dubai, somebody would just use the arbitrage and go abroad and buy it.

So, they have artificially kept their export prices to India low in order to maintain parity in retail prices. What is most likely to happen is that when you are a foreign brand, you have to also make sure that your overall price parity is maintained. When duties come down in India, they will just increase their prices in India and make sure that the parity in prices is maintained. Today when they are attempting to keep their prices low or at par, they are actually sacrificing, which they will not do in future.

Coming to the domestic market players, how has the business dynamics changed for them?

The organised sector has remained almost stagnant. While volumes have grown for Titan and Maxima, it has declined for HMT and remained stagnant for Timex. Our market share is actually growing because of the increased share that we cornered in the Rs1,000-2,000 range, which is the main strength for Titan plus a growing contribution from `Sonata', which is in the less-than-Rs 1,500 range. In the former range, we gained due to transfer of shares from some brands, such as HMT and to some extent, from Timex. Timex is concentrating less on that segment. In the less-than-Rs1,000 category, our brand `Sonata' has gained share from HMT and the unorganised sector.

How is the general business outlook for watches this year?

The general business confidence is much better, compared to last year. The wedding season this year is much better.

Every month we have been growing, compared to last year. Region wise, the North has been a bit sluggish and we believe that that region will continue to be bit of a problem even ahead. South has surprisingly done well this year, compared to last year. West has done much better compared to last year. East has been at the same level.

Send this article to Friends by E-Mail

Stories in this Section
Watches: Time to tap the potential

Watch out for competition

No titans here

`Imports, no threat for us'

World time slow too

Hughes Tele.com — Accept

Templeton MIP (Growth): Hold/Avoid fresh exposures

A spate of new offers

Canpremium: Book profits

Franklin Balanced Funds: Contrasting approaches

Expense ratio cuts