<div>F<em>or <strong>Jean-Christophe Babin</strong>, India is not a new territory. He has been touring the country for decades, since his first visit as a backpacker. In spite of the challenging economic conditions, his company, TAG Heuer, the Swiss maker of watches, chronographs and fashion accessories, expects to do better than last year. A part of the luxury goods group LVMH, TAG Heuer has over 90 outlets in India, selling watches starting from Rs 1.5 lakh. On a recent visit, the 53-year-old Frenchman had an extensive chat <strong>BW’s Venkatesha Babu</strong>. Edited excerpts:</em></div><div> </div><div><strong>Poor economic conditions usually have the least impact on two segments — those catering to the necessities and the luxury. Can the luxury market survive the slowdown? </strong></div><div>We are aware that several countries including the US and parts of Europe are facing challenges. But in 2011, we had our highest sales ever, with a double-digit growth. I expect this year to be better. Even in a so-called mature market like the US, the luxury watch segment is under-penetrated. There are many more people today who can afford a TAG, and our mission is to innovate in terms of products and reach out to them. Given the investments we’ve made in manufacturing and our aggressiveness in retailing, we will have a record year. It is not easy, but if we stick to our DNA, our fundamentals, we will do well. </div><div> </div><div><strong>How has the luxury market in India evolved over the last decade. How does it compare with China’s?</strong></div><div>India is an attractive market to be in. It is still not the biggest, but among the top 20 markets. Goldman Sachs, in a recent report, pointed out that there are 3-4 million Indians who can afford luxury. That is a lot. France, for instance, has just 3 million. China has about 5 million. But there are differences. In terms of those who can afford luxury products in India and China, the ratio might be a mere 1:2. But in terms of China’s actual market today, the ratio is more like 1:10. That means the Chinese market is 10 times larger than that of India. All the taxes on luxury watches in India are to protect the local players. It is wrong. We don’t compete with a Titan. Swiss luxury watches does not compete with domestic players. We are complementary to the Indian brands as we play in a different segment of the market. There is also the issue of retail footprint. On the policy front, can we have our own boutiques and retail experiences? Luxury is driven by direct retail. There aren’t enough luxury malls in India. In China, there are more such spaces.</div><div> </div><table width="200" cellspacing="9" cellpadding="9" border="0" align="right"><tbody><tr><td style="text-align: center; "><strong><span style="color: rgb(0, 51, 102); ">'THE 100 PER CENT OWNERSHIP IN SINGLE BRAND RETAIL WORKS WELL FOR GROCERY, NOT FOR LUXURY'</span></strong></td></tr></tbody></table><div>The segment we target is highly mobile, very aware, and because of the high taxes, sales in India are lower than what it can be. People buy a lot from abroad — from Dubai, Paris and New York. It is in the interest of the government to ensure more sales happen here; it will create jobs locally. For us, it does not matter where we sell because a TAG buyer will be a TAG buyer.</div><div> </div><div><strong>So are luxury products in India more expensive than elsewhere?</strong></div><div>Cannot speak for others, but TAG has taken a conscious strategy to sell at the same price as we do elsewhere, even it means absorbing huge costs and not being able to make much profits. But that is a choice we have made to grow in India and a signal of our long-term commitment to the consumers. Sooner or later, many of our hurdles will vanish.</div><div> </div><div><strong>But government already allows 100 per cent ownership in single brand retail</strong></div><div>Agreed. But, there is a complement to allowing 100 per cent ownership, that you have to source 30 per cent locally. That can work well for grocery, not for luxury. We are 100 per cent Swiss-made. Like all watchmakers, we do source some components, but most of the cost is Swiss. Unlike that of some fast-moving consumer goods, the luxury business is different.</div><div> </div><div><strong>What is TAG's India strategy?</strong></div><div>We continue to make high investments. In retailing, we work with the best multi-brand partners. We have the best brand ambassador in Shah Rukh Khan. The Carrera Monaco Grand Prix Chronograph was globally launched from India. We are committed to India and are here for the long run. </div><div> </div><div><strong>Amongst your portfolio, how do you pick and choose on what to launch? Don’t country-specific tastes vary?</strong></div><div>We don’t make products keeping a single country in mind. Yes, tastes vary sometimes. In some countries, such as Germany and China, the demand for mechanical watches is higher than quartz ones. Again, for instance, India is big on gold watches. When we have limited quantities, we examine key markets, decide where we have high potential and launch there before rolling out elsewhere. </div><div> </div><div><strong>Would you be launching eyewear or top-end mobiles in India? </strong></div><div>We are primarily in the watches business and that is where our attention will be. However, we will explore other categories that have consistency with our technology and design philosophy. We are selective. We won’t venture into 50 categories, but will be choosy on where we want to be in each market. Say at Rs 1.5 lakh for a watch, if someone cannot enter the brand, they may look at a Rs 30,000 eyewear. So we are aware that there may be some segments we want to address. The Indian luxury market is resilient and growing by the year. TAG’s goal is to be the No. 1 here.</div><div> </div><div>(This story was published in Businessworld Issue Dated 24-09-2012)</div>
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