Did you know that India is one of only four countries in the world with the capability of making all the components of watch analogue movements? Did you know that watch, clock and timepiece manufacturers, and makers of ancillary products such as cases, dials, bracelets and components have, over the last four decades, created an industrial base that employs an estimated 50,000 people and supports nearly 2 lakh others? That is not counting over 10,000 horological watch and clock dealers across the country. Today, the overall investment in watch manufacturing plants, machinery and infrastructure in the country is estimated at over Rs1,000 crore.
Watching the clock?
"This freeing of imports has caused foreign manufacturers to woo retailers and distributors with generous terms and consignment sales. As the availability of brands and the number of goods that a distributor or retailer might wish to stock increases, pressures on the deployment of available funds of a wider range of goods will also increase, causing a thinning of stock levels for individual brands," he says, adding that Titan is fully prepared to capitalise on the opportunities likely to emerge post-WTO.
Until now investments in manufacturing or assembly facilities have had to precede the introduction of new products. Obviously, things are set to change. "Liberalised imports will enable us to evaluate and exploit the potential for new product offerings through the direct imports route. This will help us identify where the competitive advantage lies, and, thus, also identify the most appropriate form of investment."
Time for a change
"Watches from Hong Kong and China already populate the low end of the watch market," explains Mr Bhat. "These watches have entered India in a clandestine fashion, in much the same manner in which cheap quartz analogue clocks, which dominate the low end of that market, entered through land routes."
Significantly lower effective costs of smuggled components means that this sector enjoys the advantage of zero taxes, no promotional costs and lower input costs. Smuggled watches account for between 50 and 75 per cent of annual sales in the country.
Time after time
Advice to the Indian government to have tighter controls along the grey markets' favoured entry points has not resulted in meaningful action. To make matters worse, exim policy changes, which lifted all quantitative restrictions on the import of watches, were introduced a full three years ahead of industry expectations. Naturally, the imports came in before manufacturers could implement programmes to confront them, and much before the liberalisation timetable agreed with other trading countries and the WTO.
This happened even as the industry was seeking relief from high excise duties and sales taxes (both of which are in many multiples of the taxes prevailing a decade ago). Domestic producers have been unable even to pass on excise increases to customers, and this has adversely affected the health of the industry.
The legitimate presence of foreign brands could encourage grey-market players who have legitimate cover to explain the otherwise embarrassing presence of imported goods. This market could become more active and the foreign brands that have been aiding and abetting this market could now nurture the channels through which such goods have entered. This could affect bigger brands.
"The Swiss have not had great success nor have the Japanese, who are yet to get their act together with Citizen and Casio. Seiko had to abort its entry," says Mr Bhat.
Things are so bad for the watch industry that Titan, HMT, Timex and Maxima are the only significant surviving Indian watch manufacturers. Of these, Timex and the state-owned HMT have been making losses.
The sales, marketing and services sections have already been restructured. "The object of this exercise is to significantly improve our revenue streams, build two distinct brands (Titan and Sonata), utilise our manufacturing facilities better, pursue new business opportunities by leveraging the power of our brands and our expertise in micro-precision engineering, and exploit our strengths in marketing, retailing and customer service. A separate supply chain and logistics function has been founded to leverage emerging opportunities in this field.
"We have been preparing for some time and have been measuring our performance very carefully in terms of market share, which has, in fact, increased. Recently, the organisation has been restructured, focusing on our thrust areas. Several cost-reduction initiatives are at an advanced stage. Titans extensive retail network is progressing with a planned expansion in un-represented areas. This will make our strongholds an impregnable fortress."
Several new products are being introduced. Advertising and promotional plans have been realigned to enhance customer expectations. Titan has tied up with suppliers in Hong Kong, China and South Korea for sourcing low-cost components.
No more Chinese torture
The company also intends to lobby the government to levy anti-dumping duties and strengthen the revenue intelligence machinery. This should check smuggling and detect under-invoicing and bring some much- needed relief to the watch industry.