New year's gift The finance minister has given the watch trade, especially the importers, something to cheer about. In the mini-budget, announced in the first week of January, the peak rate of customs duty has been reduced from 25 to 20 per cent.

The Special Additional Duty (SAD) of four per cent has also been withdrawn. It is jokingly said that SAD was the reason for sadness amongst importers and that its removal has spread happiness all around. The changes in the customs duty structure have been summarised in the table given below.

At landed cost, these measures would mean a saving of 11 to 13 per cent for the importers. There is speculation that the CVD may be reduced from the current 16 per cent to eight per cent in the final budget. With these measures in place, the feel-good factor of 2003 will be carried forward.

Foreign brands can use these savings to increase trade margins or pass on the benefits to the customer by reducing prices. They may also channel their savings into advertising and sales/ marketing promotions.

While none of the brands have as yet announced price reduction, dealers can expect push tactics like target-linked incentives, foreign tours, etc.

Retail Detail
With the expansion of large, organised retail chains, traditional watch retailers are feeling the heat. As watches occupy limited space while offering good profitability per square foot, the number of watch brands to be seen at large departmental stores seems to be on the rise. Of course, departmental stores suffer from space constraints and restricted variety. Watches that fall in the category of Rs 10,000 and above also face consumer resistance at such outlets since most buying is either for gifting or an impulse purchase. In this scenario, large format lifestyle stores that offer their customers watches, accessories, eyewear, jewellery, perfumes and so on have a good potential. Watches of Switzerland in Mumbai and Ethos in Chandigarh and Bangalore are instances of successful premium lifestyle retailing. The former completes three successful years in 2004. Impero in Hyderabad, meanwhile, is the latest entrant with an area of 10,000 sq ft.

Cashing in on the brand
In the last three to four years, many leading jewellers such as Danabhai and Popley in Mumbai, B C Sen in Kolkata, Hazoorilal in Delhi and Talwar in Chandigarh have included premium watches in their product portfolio. The response, reportedly, is very encouraging. This is hardly surprising considering that international watches and jewellery complement each other at the retail level. Most international fairs, such as the ones at Basel, Geneva and Hong Kong, include both. An opportunity, therefore, exists for traditional watch retailers to start retailing branded jewellery as well. Some of the reasons why this move might be successful are: In the last year alone, many brands have been launched in the 18-carat diamond-studded jewellery segment. Like watches, fine jewellery makes for fine gifts.

Marketers are using their creativity to demystify diamonds. The emphasis is slowly shifting from 'Diamonds are forever' to 'A diamond is for everyone', which incidentally is the tagline for D'damas.

Unlike watches, most branded jewellery provides the customer lifetime exchange and buyback offers. Most jewellery brands are being retailed in a manner that is akin to watch retail and make use of counters and a backdrop. The gross margins are comparable, sometimes even better than, watches. Support in terms of credit facility, exchange and buyback offers is extended to retailers so that their funds are not locked up in dead stocks.

Destination Dubai
The management of Cartier has decided to service the Indian market from its Dubai office. Previously, the Indian market came under the ambit of its subsidiary in Hong Kong. The brand will now deal directly with Indian retailers. This arrangement is similar to that adopted by other luxury brands such as Audemars Piguet, Rolex and Corum, who do not have any intermediary. Most industry observers feel that the Richemont group will eventually set up a subsidiary in India akin to the Swatch and LVMH groups.