Tuesday, June 8, 2010

LUXURY WATCHES - My articles in the Hindu Business Line


The Hindu Business Line
Mar 29th 2010

It's time for Tissot's first billion
Positioned as a leader in affordable luxury, this Swiss brand has managed to buck the worldwide slowdown in watch sales..
Pradipta K. Mohapatra
K. Rajeshwari
(The writer, a horologist, represented The Hindu Business Line at Baselworld. Prof. K. Rajeshwari is from the Chennai Business School.)
Like other illustrious watch brands from the Swiss and Japanese stables, Tissot is readying for the big league of being a billion-dollar watch brand
Creating a billion-dollar watch brand is not easy. That is why there are so few, four to be precise: Rolex, Swatch, Omega and Seiko. One can say with reasonable certainty that the next billion-dollar brand will be Tissot and that it will happen in 2010.
The year 2009 was brutal for the Swiss watch industry. Revenues dropped 21.3 per cent. The fall was sharpest in the $435–$2,600 category where turnover dropped by 30 per cent. It is believed that the world's largest selling brand Rolex, with revenues of over $3 billion, fell by 35 per cent. Omega, Longines, Rado, Seiko, Citizen and every other prominent brand lost revenue in 2009.
In a commendable feat, the only large watch company in the world that increased both volume sales and revenue was Tissot. Tissot's volume sales grew by 2 per cent to 2.21 million watches and its revenue by 4 per cent. What makes Tissot the growth engine that it is? At Baselworld last week, Francois Thiebaud, President of Tissot, and member of the Swatch group management board, spoke to Pradipta Mohapatra.
Steady growth
Tissot's growth to become the largest selling Swiss brand in the affordable luxury category is not a flash in the pan. The year 2009 was its 14 {+t} {+h} consecutive year of growth! In some ways, its growth philosophy seems to represent what Abraham Lincoln said, “I walk slowly but I walk forward – I can't remember even when I walked backward.”
Last year, Tissot emerged as the largest selling brand in its home market (2009 sales 1,52,000 numbers). It is also the largest selling Swiss watch brand in both China (2009 sales 2,00,000 pieces) and India (2009 estimated 30,000 pieces). In 2009, the average selling price of a Tissot watch was 430 Swiss francs (around Rs 18,300). At a volume of 2.21 million the revenue is pretty close to $1 billion, inches away from becoming a billion-dollar brand.
Throughout its long history of 157 years, Tissot has been known to be a great innovator. The first pocket watch with two time zones was introduced by Tissot in 1853. The first Formula One watch in 1916, first anti-magnetic watch in 1930, the first world time navigator watch in 1953 were all innovations from Tissot. Its line of T-Touch watches, introduced 11 years ago, has been seen as a technology marvel all these years.
Tissot also was a great innovator in materials of construction. It experimented with the first plastic case (which was later popularised by Swatch), rock, wood and pearl. Tissot also uses titanium extensively in its T-Touch range of watches.
Available at 16,000 retail distribution points in the world, Tissot's distribution spread is unmatched by any other Swiss watch company. The widest distribution for its position as a leader in affordable luxury is the hallmark of Tissot in every market that it enters. It has the largest number of retail outlets in China and has now penetrated beyond the Swiss boutiques in India. Tissot is the only brand that competes head-to-head with high-end Titan watches in India.
Product Positioning
Tissot has immense clarity in positioning of all its products. In a recent interview to Financial Times, London, Thiebaud described Seiko and Citizen as the two worldwide competing brands with Tissot. It is, therefore, not surprising that to remain competitive with the Japanese brands, 80 per cent of Tissot's products are quartz. Only 20 per cent form mechanical or automatic watches at the higher end of the market.
Low Cost
Tissot's worldwide motto is “best value for money”. It implies adherence to low costs. Tissot's statistics in some of the markets is remarkable.
In 2009, Tissot's sales in China was 500 million RMB. Its cost of promotion was a mere 10 million RMB. With advertising costs at 2 per cent, Tissot probably spends the least amount in promotion costs compared to industry peers.
However, Tissot operates through many low-cost promotion vehicles by supporting lesser known sports events such as the world championship of fencing, cycling, hockey and Moto GP. Tissot also uses local brand ambassadors. Its Chinese brand ambassador Barbie Xu has made a huge impact in the Asian region.
Finally, Tissot operates in 150 countries. Therefore, its dependence on markets such as the US was only 8 per cent in 2009. Therefore, while the US market went through a bloodbath in 2009, it barely had any impact on Tissot.
It is said that barely five years after incorporation, the Tissot founder's son, Charles Emile Tissot, left Switzerland for Russia and successfully sold Tissot ‘Savonnette' pocket watches across this huge and influential empire. Fiesty Frenchman Francois Thiebaud, sitting at the helm of affairs at Tissot for the last decade-and-a-half, is following Tissot's spirit.
It has taken planning, positioning, technology and distribution for Tissot to reach where it is today.
Only a billion-dollar revenue will be a fitting reward for Thiebaud.


The Hindu Business Line
Thursday March 25th 2010

Despite the times, Baselworld retains its shine

Luxury watchmakers, jewellers turn out in force at the annual event..

Pradipta K. Mohapatra
(The writer, a horologist, represented The Hindu Business Line at Baselworld. This article has been written with research support by Prof. K. Rajeswari of the Chennai Business School.)

Baselworld, the world's largest exhibition and trade fair devoted to watches and jewellery, opened last week in the backdrop of a tough year for the watch industry in Switzerland and across the globe.
In 2009 the Swiss watch industry witnessed a 22.3 per cent fall in revenue. Many global brands were brought to their knees with sales down about 35 per cent. Notwithstanding the sombre mood, the general attitude at the fair was that “the show must go on”.
The Basel fair's history goes back to 1917 when it was started by a Swiss exhibition authority called MUBA. It was in 1925 that watches were included in the fair and in 1931 that it became an exclusively Swiss watch show.
It was only in 1972 that France, Italy, Germany and the UK were roped in as exhibitors alongside Swiss watchmakers. In 1999, the exhibition was re-branded Baselworld and became a worldwide event for watches and jewellery.
Baselworld 2010, spread over six exhibition halls occupying some 1.6 lakh sq. mt of space, has over 2,100 exhibitors from 45 countries and was expected to draw over one lakh visitors.
Big and small Swiss watch brands have a presence at the show. Two iconic brands — Rolex and Patek Philippe — dominate the entrance to Hall 1 (called the Hall of Dreams). The largest portion of this hall is occupied by Swatch Group brands such as Omega, Longines, Tissot, Rado, Breguet, Blancpain, Certina, CK and Tiffany & Co.
Tiffany & Co is the latest acquisition of the Swatch Group and is overseen by Nyla Hayek. And what is the Swatch Founder and CEO, Nicolas Hayek, doing? Well, he has decided to personally oversee Jaquet Droz in addition to Breguet!
Only two non-Swiss companies have been given the privilege of exhibiting in Hall 1 — Seiko and Citizen. Quite an honour!
Shinji Hattori, CEO, Seiko, and great grandson of the Seiko founder, was personally present to speak to guests. He also released the Astron 40, a limited edition replica of Astron — the world's first quartz watch launched in 1969 — to commemorate 40 years of quartz technology.
Indian presence
India is a strong participant at Baselworld 2010 with 34 jewellery manufacturers exhibiting their products under the aegis of the Gems and Jewellery Export Promotion Council. Also visible are Indian retailers of Swiss watches, journalists and the media. For the first time, Indian television is represented by a three-member team from NDTV Good Times.
While India is still seen as a small market for Swiss watches, in 2009 sales grew at an annualised rate of 25 per cent valued at around $250 million.
Many analysts expect the Indian market to grow into a $1-billion market over the next 10 years.
Not surprisingly, Indian visitors are being given an effusive welcome at the show!
One also caught a glimpse of the Swiss caste system at play at the fair — the Indian, Chinese and Thai jewellery and watches manufacturers were dispatched to Hall 6, which is two tram stops away from the scene of action.
Hall 6 can be viewed as the Poor Man's Baselworld. None of the glitz of Hall 1 here, nor the customers! On the second day of the fair, the Indian exhibitors were still awaiting their first customer!
Banking on Asia
The Swiss watch industry suffered a major blow in 2009 with sales dropping by 22.3 per cent to 13.2 billion Swiss Francs (SFR). With the global sales volume dropping below the 2006 figures, Asia has emerged as the new saviour.
Clocking 6.3 billion SFR in 2009, the Asian market accounted for 48 per cent of the world market. The US, representing 11.1 per cent of the market, declined by 37.9 per cent.
Despite the fall, the Swiss watch industry valued at $12 billion remained at the number one position, followed by Hong Kong ($5.6 billion) and China ($2.5 billion), ahead of Japan. It may be noted that while the average price of watches exported from China is $2, the average price for a Swiss watch is a whopping $528. There was, of course, a silver lining for some individual Swiss manufacturers. Swatch group, the number one watch manufacturing group in the world, witnessed a revenue fall of only 6.1 per cent.
The recession has opened up opportunities for two other Swiss brands. Rolex, which has recorded a significant revenue drop because of its dependence on the American market, may find a new contender for the number one brand position in Omega. Tissot, another Swatch group brand, has emerged as the number one watchmaker in volume terms. It also posted a miraculous growth in revenue of 4 per cent — probably the only large watch brand that has shown a growth in revenue.

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