2.

Description of industry

The watches category has witnessed a warm, single-digit compounded annual growth rate in
sales in the past four years. However, the introduction of technology, smart watches and other
disruptive trends, have revitalised the market, and has rekindled interest in watches as a fashion
statement. Even in the case of distribution, e-commerce is a significant new way in which the
consumers are buying watches. With this background, Titans watches business sought to
reinvent itself last year through directional shifts, wherever required, to develop an effective
portfolio of brands, channels and markets.

India is an under penetrated market for watches. Only 27% of Indians own a watch. The vast
proportion of Indian market is below Rs.500 by about 68%. The key players in the market are
Titan, HMT, and Timex. The Swiss watch industry remained mired in a difficult operating
environment, with the total exports from the country falling in succession to the previous year.
The situation in Asia remained tough too, and the Swiss watches market in the region witnessed
a heavy contraction, driven by the trends in Hong Kong. Experts in the sector have expressed
confidence that the market is recovering and that the worst is over.

Globally, watchmakers are coping up with the downturn by downsizing, inventory

streamlining, consolidation and retail restructuring. Product innovation is moving in tandem
with the latest technology, and globally, a ‘vintage-inspired trend is visible. Further,
contemporarily relevant customer groups like women, businessmen-on-the-move etc. are being
targeted. Placed as an accessory near to jewellery, the women’s watch segment is particularly
gaining focus.

2.1 Size of industry relative to economy

The last two years have been challenging for the 6500 crore Indian watch industry due to the
weak consumer sentiment and sluggish Indian economy. Watch category has lacked consumer
appeal as compared to apparel, mobile phones and other accessories. The industry has been
fighting for wallet share with these categories. Despite the sluggishness, the industry has grown
albeit modestly at the rate of 7 percent to 8 per cent. On the brighter side, the fashion and luxury
segments have registered a faster growth rate as compared to the mass segment.
According to the report prepared by Technopak for the All India Federation of Horological
Industries (AIFHI) the current total market size of the Industry is pegged at 6500 crores and is
poised to grow to `10,000 crores by the year 2017. The contribution of the branded segment
has grown successively over time and is currently estimated at 67 per cent of the total market.
The ratio of gents to ladies watches sold in India is 60: 40

2.2 The global market structure

As compared to other developed countries, the Indian Wrist watch market has grown slower.
In India, only 35 per cent of the populations own a watch. The number of persons owning
multiple watches is a miniscule 3.5 percent of the population. The future prospects for the
industry appear bright due to factors like the inherent strength of Indian economy, increasing
consumerism, favourable demographics and a strong middle class coupled with a million plus
High Net worth Individuals. Over the period, in urban markets, watches have graduated from
being time keeping devices to fashion accessories/lifestyle products. The process has also
begun in the rural markets. There are approximately 50,000 traditional watch outlets in India.
Modern retail has also contributed to the industry growth by giving the watch brands visibility
and reach. India’s ecosystem has seen a gradual transformation from a time keeping device to
a fashion accessory. This evolution has been ushered.by many factors such as changing
consumer dynamics, increase in disposable income, growth of organised retail, entry of
international brands, etc. However, the industry has not been able to achieve the scale or size
as per its true potential and is growing at a modest 8-10 per cent with the penetration levels of
just 32 per cent. The industry can grow at a much faster rate given the buoyant economy,
increasing incomes and low penetration base.