With Habits Changing What Is The Future For Watches In India?
The business of watches has turned completely on its head and the prime driver has been changing lifestyles, especially with the adoption and growth of digital technology. Even before Apple watches were introduced on April 24, 2015 (just six years ago), watches as time keeping devices had become increasingly redundant with many users always carrying their mobile phones.
The industry developed over centuries with the first portable spring driven clocks being introduced in Europe in the 1600s and innovations and inventions drove it forward as wristwatches became not just technological marvels, but also practical devices to keep time. The market exploded in the 1960s when the Japanese introduced quartz watches democratizing time keeping by making it affordable for everybody. Caught napping, the Swiss watch industry was forced to play catch up and it was only when Nicholas Hayek introduced mass produced Swatch Watches in Switzerland, that they were able to finally fight back.
As the cost of the technology kept falling, especially with China and Thailand beginning to churn out watch movements, it has come to a point that some watches are sold by weight rather than by piece. The result of course is that practically everyone on the planet has a watch on the wrist with prices ranging from an unimaginable 1 US$ for a basic plastic watch, to the Patek Philippe Grandmaster Chime which sold for a staggering US$31.19 m in an auction in 2019.
Comic book buffs had always marveled at Dick Tracy’s wrist phones in the 1940s and 50s and the creation of such a device was the holy grail that manufacturers chased for a long time. When Apple was finally able to master the miniaturization of components especially the battery sufficiently to create a wrist device that could be used for both timekeeping as well as communication, it was clear that the watch industry would never be the same.
Growth of Swiss watches
The Swiss watch industry had always treated the business as something of a ‘jaagir’, a private estate, controlling it and setting standards for a long time. Even as late as 2019, the country exported CHF 19.957 bn worth timepieces (about US$ 21.7 bn) with a sales value of about US$ 50 bn. After a disastrous 2020, the Swiss Watch Federation (FH) reported exports to the value of CHF 20.384 bn in 2021 (Ytd November). But these growing numbers hid the reality of what was happening to the business (presently 1 CHF = Rs. 81.33).
According to a recent report by Statista.com, the sales value of Apple watches worldwide in 2019 comprised 15% of global watch sales. This in effect, was equal to the combined sales of the three largest Swiss Watch conglomerates Richemont, Swatch Group and Rolex which were 5% each. In the last 5 years, Swiss exports of low to mid-price watches below CHF 500 have been falling drastically and comparing 2021 (Ytd November) to 2019 figures dropped 33.1%. Exports of watches in the next price band of CHF 500-3000 were also lower by 2.3%.
Swiss Watch Exports were able to grow 9% globally, (Ytd November 2021 vs 2019) only because exports of watches over CHF 3000 increased by 16% in the same period.
Who drives this growth of Luxury Watches?
The trend clearly reflects changing habits. According to a survey conducted by Deloitte in 2021, the growth in the luxury watch segment comes interestingly enough from Millennials and Gen Z, not so much from baby boomers who probably already have luxury watches. The desire for technical watches and rarified brands drives younger people who probably also have digital watches and yet still want to invest in the stories of brand, heritage and technology. In fact, according to the Deloitte survey, 23 % of the people who are buying luxury watches also have digital watches.
What about India?
While Apple watches are at the top end of the digital price spectrum in India, according to a report by Counterpoint they are nowhere near the top 5 in volume terms which is made up by the local brands Noise, Boat, Fire Bolt, Realme and Amazefit in that order, These brands which are affordably priced from Rs. 2,000 to Rs. 10,000, together make up 75% of smartwatches leaving only 25% of the market for all the other brands including Apple, Samsung, One Plus and others.
According to the same report, the top five brands clocked phenomenal growths in shipments in Q3 2021 ranging from Noise (141% Quarter on Quarter), Boat (132% QoQ), Fire Bolt (334% QoQ), Realme (267% QoQ) and Amazefit (54% QoQ). Higher brands also joined in the party growing significantly in volume during this same period, Apple (289% QoQ) and Samsung 153% QoQ).
The value of Exports of Swiss Watches to India in 2021 (Ytd 30 Nov), was CHF 137.8 mn, i.e a sale value of around CHF 300 mn (USD 325 mn). Compare that to the sale of Smartwatches in 2020 which according to a Hindustan Times report was Rs. 3800 Cr, i.e circa US$ 510 mn. As we can see, the Smartwatch sector in India has dwarfed Swiss Watch imports including all the big brands like Rolex, Patek, Omega, Tissot, Tag Heuer and others by far. ( Reality check - Indian imports of Swiss Watches Ytd Nov 2021 of CHF 137.8 mn were just 0.044% of global Swiss exports, compared to China including Hong Kong, of CHF 4.683 bn which was 22.83%.
The way forward
Looking ahead traditional watches in India are going to continue to face an uphill task. While there is still some demand today for watches as a fashion accessory, the business is quickly transitioning to a digital market and as digital brands introduce longer battery lives and more fashion elements in addition to their plethora of health, communication and time keeping functions, they will eat further into the accessory segment as well.
With increasing spending power, China moved very fast into a high price market with over 67% purchases of watches over US$ 1,100. Even if not to the same scale, there is still a significant potential for the luxury segment to grow in India, especially as younger customers buy more and more into it. But this cannot happen with business being done as usual. The marketing and sales approach needs rebooting. With greater emphasis on omnichannel and digital sales, more focus on monobrand and specialist stores and much greater use of brand events and social media, brand stories need to be brought alive, to a segment which is aware and willing to spend.
It is not going to be an easy ride.
With over 30 years’ experience managing brands and businesses, the author has been consulting and revwriting on retail, ecommerce and marketing. He has been a commentator and columnist in leading publications.
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