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India - The next Eldorado?

India The next Eldorado?

Could the permission for Swatch to start opening own-name stores in India pave the way for other watch brands as the country relaxes conditions for entry into monobrand retail?

For a number of years, luxury watchmakers have been piling into China, stocking shelves and opening up what they like to call “boutiques” even in unheard-of cities in the Middle Kingdom.

As a result of such huge investments, a number of brands and some of the world’s biggest watchmaking groups have become overly dependent on sales from China. So much so that even an upbeat announcement that Swatch was now piling into India  was overshadowed by a 5% drop in the parent company’s share price because of the devaluation of the Chinese yuan, which penalizes exporters to the country.

Could India be a source of salvation for struggling luxury groups and brands? With its affordable Swatch brand, the Swatch Group is uniquely positioned to set up in this market that is growing at around 15% year as far as the wristwatch industry in concerned (according to the Associated Chambers of Commerce & Industry of India). But setting up in India, particularly with the lucrative monobrand, wholly-owned store concept, is no easy task.

So-called 100% FDI (foreign direct investment) projects in India require express permission from the Indian government and are permissible only for single-brand retail. Theoretically, there is also a requirement that 30% of the value of goods must be sourced from India, although it has recently been suggested that the government is likely to review this condition. A recent authorization for furniture giant IKEA and now the agreement with Swatch seem to confirm such reports.

Whatever direction government policy takes, the interest and appetite of India’s growing consumer class for luxury watches is clear. For the first half of 2015 India ranked fifth in terms of visitors to WorldTempus after France, Switzerland, the United States and the United Kingdom.

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