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In ten years India will be among our top three markets, says LVMH official.
One of the hottest trends in the luxury market is the shifting focus from soft luxury (leather accessories and apparel ) to hard luxury items such as watches and jewellery. The latter segment is also where high-end French brand Louis Vuitton Moet Hennessy (LVMH) hopes its growth will come from in India. The market is strong in the big cities but non-metro growth has been slow. In an interview with TOI-Crest, Franck Dardenne, general manager, LVMH watch and jewellery, India talks about why India is a strategic market for the maker of Tag Heuer, Dior and Zenith watches. Excerpts:
How big is the luxury watch market in India currently and how fast is it growing?
The luxury watch segment is at a nascent stage in India. There is, however, steady growth in sales for us. There is a need for us to first create awareness about the segment. Even for LVMH, growth is being driven by only the top seven cities (THE FOUR METROS AND.... ) despite our presence in over 27 cities.
Total imports of Swiss watches in India were up by only 5 per cent last year, which is meager compared to the 16 per cent increase worldwide. There has also been a change noticed in the demand for watches in various price segments. For instance, watches priced above Rs 5 lakh were driving growth until five years ago. But now they contribute to only 3% of the total category growth. Demand has picked up at lower price points from Rs 0. 5 lakh to Rs 5 lakh.
For LVMH, how important is the Indian market as compared to your markets overseas?
For us, India is clearly not the easiest market to be profitable in. The import duties are huge leading to high costs for us. We are investing more here instead of just looking for returns. So the investment to profit ratio is big. We are definitely looking at growth from this market, but sometimes it is more important to look at revenues instead of the profits. The cost incurred for a typical LVMH watch is significantly higher for India than in other foreign markets due to the excise duties. We cannot hike the end prices in parallel. But we are sure the government will look into this.
India opened its doors to 100% foreign direct investment in the single brand
retail sector late last year. Do you think independent entry into the market would prove to be a more successful model for you?
What is problematic for us is the 30 per cent sourcing clause from small and medium enterprises (SMEs). All our manufacturing is done outside India and we import 100 per cent of our products sold here. FDI does open a window of opportunity for us and we could look into it. But we do not want to lose our partners. Sometimes local partners are better as they know the market well. Definitely the new rules are a good signal.
So what is the biggest challenge you face in India currently?
The key challenge here, besides legislation, is infrastructure. We also need clarity on various rules. India still contributes a very small percentage of our total business. But in ten years India will be among our top three markets (currently, it's number 25). Our aim is to make it one of our major markets as it has a special status. For instance, we have Bollywood superstar Shah Rukh Khan as one of our brand ambassadors for Tag Heuer among all our other international ambassadors.
Despite being present in the country for long, you rank third after Omega and Rado.
We are working on being among the top two brands in the next three years. We are focusing on coming up with at least three big boutiques very soon.
You recently took over Italian jewellery brand Bulgari. When will we see the brand in India?
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