EDITALK

Global Luxury Watch Market and What it Entails for India

In the past some years, across the world, a marked shift had been observed in the growing demand for high-end and luxury timepieces as well as other luxury goods, a reason which by itself was more than enough to push or perhaps even compel many renowned Swiss and other Global watch and other product brands, to start concentrating on turning out more such products and new and innovative models incorporated with a whole lot of enhanced functions and other alluring features for their rapidly growing consumers and audiences worldwide. However, the immediate past year 2024 did not conclude as several brands had hoped and expected, as the figures published by the sector's main conglomerates painted a picture of slowdown and a few signs of exhaustion, particularly during the final quarter of 2024. The weakening Asian market is one obvious cause leading to this development, but alongside has also been the end-consumers' unusual reactions to sharp price increases, which were striking. One widely reported reason is the higher cost of raw materials, but geopolitical uncertainty and runaway inflation in recent years have also contributed to the rise. The entry of new players into the fashion world at the bottom of the pyramid has forced everyone to move up the ladder, and to find what sets them apart. Ultra-fast fashion has made mid-market brands want to be perceived as more aspirational, and this movement in turn leads luxury brands to seek greater distance from new competitors. Authenticity comes at a price. Aspiration and distinction - which were an integral part of luxury brands' DNA until recently - are now taking on new dimensions thanks to phenomena such as ultra-fast fashion and "dupe" culture (low cost products that are inspired by or imitate luxury goods). The largest luxury goods conglomerate Louis Vuitton Moet Hennessey (LVMH) - owner of 75 brands including Christian Dior, Moёt & Chandon, Hennessy and Veuve Clicquot - presented quarterly results showing growth of only 3%, which is well below the 14% seen in 2023. In fashion, growth receded by 5% and in wines and spirits, it moved back by 7%. For Kering, the sector's second largest company - whose portfolio includes brands like Gucci, Balenciaga, Yyes Saint Laurent and Bottega Veneta - revenues retreated by 6% and 4% on a comparable basis. Likewise, Richemont reported a drop in the Asia Pacific region in its third quarter ended 31 December result, where sales contracted by 7%, largely the ramification, of an 18% decline in Mainland China, Hong Kong and Macau combined, while for the Swatch Group, its overall revenues for the year also fell by 14.6%, as organic growth slumped by 12.2% due to the prolonged slowdown of the watchmaking industry in China,, the watchmaking group's largest market. The list of such examples goes on even with legendary houses such as Burberry and Lanvin too, reporting similar figures. The results could be analysed in light of the last year’s growing panorama of global instability. 2024 saw intense geopolitical turmoil, with multiple serious open conflicts, burgeoning technological rivalries, and more than 70 elections around the world. This all brings with it a strong degree of economic uncertainty. However, we cannot forget that the luxury market has been very resilient in times of crisis. The sector’s post-Covid crash results were surprisingly good: digitalisation accelerated, and the buoyant behaviour of consumers with a desire to splurge – a phenomenon known as “revenge spending” – helped significantly. So, what might this change in consumption mean, and what lessons can we learn from it? There are several significant factors that may herald a transformation in the world of luxury, and companies' strategies will have to change if they indeed want to keep up. One of the decisive factors in such results is the fading notion of China being a place of unstoppable growth. In recent years, breaking into the Chinese market was the main ambition for these brands, their natural place of expansion and growth. Between 2009 and 2019, for instance, the LVMH group went from having 470 outlets in Asia to 1,453 (excluding Japan). The same is true for many others too. Collections and marketing strategies also shifted towards this market, targeting a growing and thriving middle class, which seemed to have no end in sight. However, the dragon economies are now showing definite signs of slowing down, and in the luxury sector, the drop in sales is becoming quite pronounced, thereby shaking-up and sending brands into a huddle. In the figures published by LVMH, a 16% drop in Asian sales (again, excluding Japan) is projected. This is especially pronounced in China, which previously accounted for 50% of the French group’s growth. Lack of consumer confidence and restrained spending on luxury goods may explain this new outlook. But if China is not what it used to be, where can luxury brands find new winning strategies? The strategy of the luxury groups has been based in recent years on an extraordinary rise in prices. The escalation has been unstoppable. Some of these products have also doubled in value on the second-hand market. The price of watches is another vivid example, with increases of more than 20%. It is natural for luxury brands to use price as a barrier to entry for more consumption and as a way of preserving its exclusivity. Additionally, luxury is no longer synonymous with brands. The new trend of quiet luxury shows a desire to distance oneself from flashy aggressiveness by avoiding or hiding any logo or characteristic detail that makes its brand obvious. Silent luxury potentially broadens the market to clients who, beyond products themselves, are also interested in their own wellbeing and a more relaxed way of life. However, there seem to be other reasons too for this striking price increase. The big question right now is, how far this price escalation will go. But having said all of this, and coming back to watches in particular, luxury brands have now found their winning strategies in India, as India is definitely the 'Go To' country and market now. India’s luxury landscape is at a crucial juncture. With a booming economy, the world’s largest population and a dynamic, youthful demographic, the country has been dubbed the next luxury hub, especially at a time when luxury consumption in China is declining as spending softens. So, is the centre of the world’s luxury market shifting from China to India, as a fast-growing appetite in goods such as high-end watches suggests? And, if so, how should brands approach and win over luxury clients in this market known for its millennial craftmanship and strong culture? The India luxury watch market is growing significantly, with increasing disposable incomes and a higher number of affluent consumers. According to India Brand Equity Foundation, UBS states that the affluent population in India is likely to double by 2028 to 88 Million, thereby increasing demand for luxury goods. Luxury watches are essentially an affluent status symbol of success and taste, hence quite in demand among India's affluent and aspirational buyers. The increasing demand for these prized possessions can be correlated with the country's exponentially rising economic affluence, whereby a lot of people are investing in high-quality, luxury items as an indicator of their growing success. This is due to the expansion of the middle class and also the growing wealthy population who can see beyond the mere ability of luxury watches to tell time. Luxury watches are prized for their prestige, which, in an age that measures material success by the accumulation of goods, is a great advantage for many. Along with an appreciation of the workmanship, luxury watches are seen by younger buyers as an investment, one that could retain their value or increase over time. IMARC Group provides an analysis of the key trends in each segment of the India luxury watch market, along with forecasts at the country and regional levels from 2025-2033. India's luxury goods market size reached US$ 7.7 Billion in ​2024​. Looking forward, IMARC Group expects the market to reach US$ 13.83 Billion by ​2033​, exhibiting a growth rate (CAGR) of 6.70% during ​2025-2033​. The market has been categorized based on type, end user and distribution channel. Analog quartz watches too have been in high demand in this market in more recent times due to their classic elegance, intricate craftsmanship, and vast demand among traditionalists and collectors. Hence, Global Luxury brands as well as India's own National Brands such as Titan, Maxima, Jaipur Watch Co, and Bangalore Watch Co, are now deep into presenting High-End and Luxury watches, having understood well the country's growing appetite for such products. And to all this, an added impetus has also come with the recent Union Budget by the Indian Finance Minister Mrs. Nirmala Sitharaman announcing a big relief in personal taxation for the country's middle class, which will leave even this segment with a lot more cash-on-hand to splurge on luxury watches. So, for the Indian Luxury Goods Market, it's an absolute 'WIN WIN' situation!

Hemal M. Kharod