Sukanya Dutta Roy, MD (Consumer Goods Business), Swarovski India |

Adorning Indians with crystals isn’t an easy job. But that’s something Sukanya Dutta Roy, Managing Director (CGB), Swarovski India, thrives doing. In an exclusive interaction with The Dollar Business, Roy spoke about the country’s high tariff barriers and all that is to know about this sparkling business

Interview by Neha Dewan | June 2015 Issue | The Dollar Business

 

TDB: The luxury products market – be it for German cars, French wine or Italian leather bags – is booming in India. Given this, tell us how has Swarovski’s experience been in the country.

Sukanya Dutta Roy (SDR): The journey for Swarovski has been fantastic. We were one of the earliest entrants into the Indian market, coming in as early as 1994, when we had a joint venture agreement. Then in 2000, the company came in on its own, as a 100% subsidiary of the parent. So, our interactions with and investments in India have been quite long – almost 15 years now. When we came in, we realised it’s a medium-term market. We realised there were lots of growth opportunities, but it needs patience. It had its own special trademark challenges. The market was evolving. The country itself was evolving in terms of infrastructure and consumerism. We were prepared to work with it and we have done that. It has been a fantastic journey.

The initial challenge was the brand itself. Fixing the price points were a challenge, since very few luxury brands were available. At that time, there was no organised market for luxury items. We came in as one of the first entrants into the organised trade for luxury markets and fixed the prices for our products in the same range as they were available globally. I think the customers took some time to really understand and accept the availability of our products in their own market.

The journey from then to now has been quite a leap. Now, we have over 40 points of sale just as exclusive boutiques and over 20 points as shop in shops. So, in terms of distribution, we are quite well placed on a pan-India basis. We have covered most of the main cities in the country and have got acceptance in department stores. So, I think it has been a great journey, moving from the luxury hotel format that we started off with, to mainstream premium malls.

Our target profile has also evolved over the years. 20 years back, we used to predominantly focus on home décor and collectibles, which were priced at Rs.10,000 onwards. About 15 years back, the company got into fashion jewellery. That has opened up the doors for a much wider audience, which is young females, aged 25 and above. The width that we can attract now is higher, since the price points are Rs.3,000-4,000 onwards. Today, we have something for everyone who likes crystals.

 

 

TDB: How different is the Indian luxury product buyer from those in other countries? Do you think Indians still have a fetish for the ‘imported’ tag?

SDR: We get a mixed bag. We have the old money – they don’t need a brand showing upfront to give them their stature. We have the aspiring rich, who want the brand upfront. So, they want the blue box. They want the logo. They carry the bag.

In India, it is a mixed bag. Hence, it is interesting. We get people who buy just for the beauty of the product. It is the craftsmanship that attracts them. For them, it is not about the ‘imported’ tag. I think, we have moved a lot away from that ‘imported’ tag. Now, one can look and discern a brand and its history and heritage. That’s why, it takes more time for international brands to come and establish themselves here. Brands that have sustained and consistently performed in the market have evolved beyond the fact that they are imported and hence, must be good. They are good because of positioning, perception and more importantly, because the core product is good.

TDB: What percentage of your sales in India is accounted for by imported products and what percentage by those manufactured at your Pune plant?

SDR: 100% of our products sold in India are imported. The Pune plant is a special unit in the SEZ area, only for value addition as an intermitted process. So, there are no local transactions. The Pune factory is very specialised and does coating of pearls. All pearls that are required by Swarovski globally, in their various designs, as an end product, are coated in Pune.

The pearls come from Austria. We do value addition at Pune and send them back. The factory is exclusively set up for this. It does a particular process for all global products. Its production capacity is 100% for pearls. It is a raw material provider. It’s there in Pune, but is managed and controlled only for global production.

Currently, there are no plans for a local production setup. We believe India is a very important market that will grow. We are looking at it for design development, and innovation. We will see how production goes depending on how facilities in the country develop. It is something that we will consider, if we feel that the environment in the country is conducive to investment for production.

 

TDB: In India, the import duty on glass and crystal products seems to be a bit unjustified. While that for glass beads is 14.712%, the same for glass statues and figurines is 28.852%. Is this a big disabling factor for Swarovski?

SDR: It hurts! But the fact is that it was not hidden. So, one works it into one’s business plan. If it improves, it’ll be fantastic, if it doesn’t, then it is the law of the land and we will continue to follow it. Like most brands, we absorb a part of it, so that we achieve some parity in pricing. We make sure that we don’t pass on the entire burden to the consumer.

For collectibles, even VAT is very high. It’s 12% on crystal figuratives. So, it is a double whammy. When we do our pricing, we keep these factors in mind. If the duties are eased, we will pass on the benefits to the consumer. But at the moment, we manage it within a structure – absorb a bit and pass on the rest. Despite this, we are more or less in line with our international pricing.

 

 

TDB: Swarovski imports a lot of products from Austria, only to re-export them from India after value addition. Can you tell us a bit more about the value addition that you do in India?

SDR: Swarovski is a brand out of Austria. The core product of Swarovski – crystals – are made in Austria. This will not change, because this is the basic philosophy of the brand. What we do as a business is that we put together these crystals into finished products, be it a watch or a jewellery item, at our manufacturing facilities located in several countries. So, the factories that we have around the world are only for creating products by value addition.

In Pune, our pearls get coated. Since pearls are in different crystal colours, the Pune factory just colours them and sends them back to Austria. So, our core business, as a brand, sits in Austria.

We are a very niche and premium product. We are not going to rush into making our products in 20 locations. If demand increases, we will see how a particular production facility can be built into the overall change, in order to meet the demand. Our hub will always remain in Europe.

Our core focus is not to export and make money on trading. Our core focus is to make money as a retail brand. We might have requirements to increase production, but the location will be decided based on which country gives us the best return on investment.

Pune is a SEZ. Hence, when we bring in all these products, we don’t pay import duty. When we get the pearls in, we don’t pay import duty. We do value addition and send the same thing back. So, on paper, we have no exports. We just value add. We are not exporting. We don’t have an export turnover in the country. All we have in India is retail turnover.

TDB: What percentages of your sales are accounted for by your own online store, e-retailers and franchise stores? Which of these three platforms are you more bullish on going forward?

SDR: We are not available online at the moment in India, since we are a little skeptical of e-commerce here, particularly the communication part of it. We are only available in exclusive brick and mortar dealer boutiques and shop in shops. Maybe, in the future, we will go more aggressively with swarovski.com, which is our own company-owned e-commerce venture. It is not operational in India yet. We are looking at it and hopefully, we will be able to structure it soon. We will not go online with e-retailers at the moment. We will only have our own online web shop and our franchise stores.

At present, the e-commerce part is very small for us. It is available only in 12 countries, not because the channel does not have potential, but because we are preparing our back-end to get into it. Very soon, we should be able to leverage this opportunity. There is a lot of interest in online, especially in smaller cities. But we have not addressed it yet. Hopefully, by next year, we should be there. We know we are little late off the block on this, but the fact that our brand is so well known means we have to be very careful in deciding where we go. The biggest challenge has been to show consistency on a global platform and that can be possible only via our own internal website swarovski.com.

TDB: During his tour last year, your Executive Board Member Markus-Langes Swarovski had termed India as one the three most important markets. Are you looking at India as a global production hub as well?

SDR: We are investing to develop our design capabilities. Markus heads the B2B division that deals with Swarovski crystals that go into other products. So, they have a lot of collaborations with designers in different industries, such as interiors, weddings and garments etc. These are initiatives by Swarovski to develop the market for them as co-partners. We also have an exclusive India range. These are small initiatives that we are all plugging into. We want more engagement with the Indian consumer. In terms of innovation, we are looking at getting Swarovski crystals into various products. So, a lot of research is being done to figure out multiple uses for our crystals, because that’s what builds the market.

We do such product customisations only for main markets where we feel we have the potential to develop something unique and also make it a commercial success. The India collection is an example of this.

 

 

TDB: The government has been aggressively focusing on the ‘Make in India’ initiative. What policy changes would Swarovski like to see to shift more of its production to India?

SDR: The ‘Make in India’ initiative is very new. I don’t think anyone has really worked out the details of it yet as to what does it really mean. I think, its focus is really on employment generation and large labour intensive industries and infrastructure that can create jobs. Or is it ‘Make in India’ with a branding of India? Now, neither apply to Swarovski. Even if we make in India, it is the Swarovski brand that stays. Secondly, ours is a very niche industry. So, unless we have a clear idea as to how really does this policy benefit us, or what benefits are being offered, it would be too niche for us to explore.

TDB: Being a luxury product, advertising is a key aspect of your business. Tell us a bit about your advertising strategy.

SDR: We went big on advertising in FY2010. We stick to our niche. We have recently started focussing on billboards and airport advertising. We use more of traditional formats, supported by digital layouts and consumer engagement events.