TAG Heuer is a success story that speaks for itself. Within a span of 11 years, it has catapulted into a market leading position and has become an aspirational brand that Cricketers and Bollywood want to wear.
How has the luxury market evolved in the last 5-7 years globally? What are the major changes that you have observed in this space during this period?
Over the past 5 7 years, the watch market has grown at a pace of 20 to 25% every year in India and in two different phases. After the first phase of diversification from 2007 to 2011, there has been a consolidation in 2012 and in 2013. The top 3 players have strengthened their position after a phase of dispersion and many new brands have entered the Indian market. Another key change that has been observed is that more brands have now installed their own structure in India, while earlier they were expecting the Indian customers to buy abroad, or were entering the market with an “indirect” approach.
What has been your single biggest challenge being at the helm of affairs at LVMH Watches and Jewellery in India? How is it different from other Asian countries?
Indian market remains extremely difficult to forecast. In an economy that some describe as a gamble on the monsoon, the watch industry looks like a gamble on the festive season. If we want to compare to other Asian countries, we see two big levels of challenges. One is the lack of luxury retail space by which I do not mean that there are not enough malls. In India, there are even specialized luxury malls, but what is needed is malls that segregate enough luxury without cutting them from the brands which generate easy sales and traffic. Something like a middle class mall that develops their own sales in the long term while also providing room for developing the luxury market is something that is required. Second difficulty is related to the Customs duties and uncertainties of the regulations, which not only makes profitability difficult, but more directly, in an investment market as India, it limits the investments that could have been made to develop the market.
Tag Heuer has become one of the most visible luxury brands in the accessories space. How critical is the role of traditional media in promoting luxury brands? We also don’t see a lot of electronic media advertising. Any specific reasons for this?
Speaking for watches, the level of advertising is traditionally higher, compared to for, let’s say, fashion goods. Two needs are answered by traditional media; firstly is the need to create awareness, which is all the more efficient when, we have an eye catching visual like in the case of TAG Heuer with Shahrukh Khan. Second is to reassure the customer; where he will be convinced that the people around him recognize the watch he wants to buy and traditional media guarantees the awareness. Electronic media is used as well, but the visibility created through this channel is not much. Luxury brands like us do not generate visibility or presence by advertising on a hoarding in the centre of the city, but a targeted approach catering to a specific target audience is more effective. For example, in the case of TAG Heuer, it is the first Swiss watch brand to have a website, and is extensively promoted through blogs, where bloggers promote some part of our heritage.
How is LVMH doing in India? What price ranges are the Indian consumers most comfortable at and how is the revenue split amongst the different brands and jewellery?
We are doing extremely well in India and are receiving the dividends of having bet early on India. In 2002, LVMH W&J India Pvt ltd was created. Investments to build the brand and the market were huge as we wanted to offer to the Indian customer the same range as abroad, at the same level of price as abroad, and take a 100% clean route for import and all our operations. TAG Heuer is a success story that speaks for itself. Within a span of 11 years, it has catapulted into a market leading position and has become an aspirational brand that Cricketers and Bollywood want to wear.
Zenith is a relatively new brand in India and has been very recently introduced, but that too has been received enthusiastically, especially for its very high end watches. The brand has a history associated with India; we have the Mahatma’s watch, and our value proposition, together with a product which fits perfectly the market, and our interesting innovations explain our success.
Dior watches in India operate in a space where no other player competes with it and has created a special niche for itself in the hearts of the Indian females which can be clearly seen from the success of the Dior VIII series.
What are your expansion plans in 2013? How do you see the Indian luxury market evolving over the next 2 years?
We have already opened three TAG Heuer boutiques in 2013; two in Chennai and one in Borivili, in Mumbai. TAG Heuer has reached an awareness level and has created an appeal in the market which helps our partners do a profitable business at least in the metro cities. We try and create a Mono-Brand presence in the bigger cities to further enhance the image of the brand. We plan to open three more boutiques this year and another three, by next year. Additionally, we are also expanding our presence in multi-brand outlets and although we are being selective, we are also increasing our presence in tier 2 cities.
In the case of Dior and Zenith, the focus on key dealers will go on without any intention to increase the distribution. The number of retailers who sell very expensive time pieces is limited and therefore the expansion of these brands shall happen by adding additional value to the time pieces.
In the current market scenario where the sentiments are weak, how difficult is it for luxury brands to do business? What is your strategy in this market?
Luxury watches have been following the same trends as Luxury cars since the beginning of 2013 and have more or less seen similar results with difficult months in February and in March, which have been followed by signs of recovery. Our brands have done extremely well, but in a sluggish market, we cannot just sit back and be proud of the fact that we have gained market share. We try supporting our retailers in whatever means possible so that our cash generator brands like TAG Heuer can successfully tide over the temporary tough times.
How are you doing in the Jewellery space? Has the Indian market matured enough for people to move to branded jewellery?
In India, our focus has generally been on watches. A brand like Bulgari is more in demand by Indian customers abroad, and is even distributed on certain occasions by certain Indian groups. I will probably be in a better position to answer this in a few months time but what really matters at the end of the day is that we increase the desirability of our brands. Branded jewellery is still limited in India, but we can expect that Indian customers will follow international trends and soon adopt the concept of branded jewellery.
From a talent perspective, how do you deal with your requirements of Human capital? Is quality talent readily available to you or is it a challenge grooming talent to LVMH standards?
Quality talent is available in some support functions, but is difficult to find in retail and wholesale. There are also some highly critical positions in our industry; for example, the Head of TAG Heuer- After Sales, has been instrumental in the development of watch making skill all over the subcontinent! He has been training most of the watch makers in the repair centers of our dealers. Moreover, the retail sphere is still in a nascent phase in India, with limited number of professionals and a limited appeal to talented professionals, which is the reason we have to bet on potentials rather than capitalizing on tailor-made candidates.
Candidates also nowadays want to have a global exposure and want to experience the cultures and practices of the Western world and we are happy to provide that exposure. We also move our talent to different subsidiaries across the world to provide them with a global exposure.
Finally on an informal note, what does your average day look like? How is Franck Dardenne when he is not working?
I like spending time with my team and with my clients. With the team, I feel happy to see the energy and the will to make our brands successful. When not working, together with my wife, we are exploring India! From Hindi classes to meeting our friends and exploring the country, there are still a lot of places visit. India is so diverse and such a huge source of inspiration that we do not feel any boredom or lack of motivation even after 2 years.