Post GST, luxury watch brands willing to lower margins, offer discounts

At the multi-brand luxury store Ethos watch boutique at Seawood mall in Vashi, there is a 22 per cent discount on Beaume & Mercier time pieces, the steepest so far given by the retailer post GST.

This may just be the right time to buy a branded imported watch after GST at 28 per cent was slapped on luxury watches as discounts will be at their peak.

Distributors of watch brands are willing to give discounts up to 50 per cent to make sure consumer demand in this segment is not dampened and are willing to lower their margins by 8-10 per cent, while trying to keep prices intact.

“Omega is the highest selling watch brand at our store and after GST our discounts will continue at 20 per cent since we want to get rid of old inventory. This is the right time to buy luxury watches since GST has more than doubled from the earlier 12.5 per cent to 28 per cent. Maintaining a balance between increasing prices and giving discounts is a tight rope which retailers like us will be forced to undertake,’’ says Vikrant Mane, store executive at the Ethos watch boutique in Vashi.

For instance, the average price of a regular Omega model is at ₹1,53,000 and eroding its equity with high discounts is not a feasible proposition.

“We realise it is not easy to give massive discounts for luxury watch brands but we may not have an option and have been giving discounts in excess of 20 per cent,’’ he added.

Unlike the rest of the luxury segments, it is high-end watches which are facing the brunt of higher taxes post GST where margins of dealers and distributors are bound to get severely impacted.

“After demonetisation, GST is the next big hit for the luxury industry where distributors like us are going to lose margins between 8-10 per cent since taxes have more than doubled from 12.5 per cent to 28 per cent GST. This time around we want to keep consumer sentiment buoyant and have no option but to give discounts between 40 -50 per cent for our premium watch brands like Furla, Lamborghini and Steve Madden, which have prices going up to ₹1 lakh,’’ said Ujjval Saraf, Managing Director, Brandztorm Marketing, a distribution company of high-end fashion brands.

Even luxury based e-commerce sites like Darveys which sell watch brands like Gucci and Dior are willing to slash their margins by more than 10 per cent without undertaking any price cuts to protect the equity of such high-end watch brands. “It is tough for luxury brands to drop prices and in our case we will take a good 12-13 per cent drop in our margins, so that we do not have to increase prices,” said Nakul Bajaj, Founder, Darveys.com.