Ethos Share Price Jumps 105%. The luxury market has experienced a resurgence, with increased demand across segments such as watches, apparel, automobiles, jewelry, and high-end real estate. Amid this rise, a relatively lesser-known company is reaping significant rewards from the booming luxury sector. This under-the-radar player, Ethos, has carved out a strong niche, leveraging favorable market conditions and catering to affluent consumers seeking premium products and services.
Growing Population of Ultra-Rich in India
India’s ultra-wealthy population is expanding rapidly. The number of ultra-high-net-worth individuals (those with assets exceeding $30 million) is expected to surge by 58.4% over the next five years. Additionally, the high-net-worth population (those with assets over $1 million) is projected to double, reaching 1.65 million by 2027. This growth reflects the increasing concentration of wealth among India’s elite and highlights the country’s rising economic power.
India’s Economic Growth Fuels Luxury Demand
As the world’s fifth-largest economy, India’s wealth is growing rapidly, with projections for even more growth by 2030. Rising wealth is expanding the upper-middle class, driving significant demand for luxury goods, including watches. The premium watch market is expected to grow from ₹6,610 crore in FY20 to ₹11,890 crore by FY25, with a 12.5% compound annual growth rate (CAGR).
The International Monetary Fund (IMF) forecasts that India will be the only major economy to grow above 6% in 2024 and 2025, double the global average of 3.2%, and surpassing China’s growth rate. If this trend continues, India could emerge as the world’s third-largest economy by 2030, as the World Economic Forum projected.
- As India’s economy expands, its middle class and consumer spending also rise.
- Deloitte reports that one in four households currently falls into the upper-middle to high-income categories, a figure expected to double by 2030.
- This increase in wealth presents significant growth potential for luxury markets, including watches, jewelry, cars, and fashion.
- High-end watches, priced above ₹10 lakh, represent the fastest-growing segment, expected to more than double in value.
Premium Watches Outshine Mass Market
It is important to note that the smartwatch market is currently experiencing mixed fortunes. While sales of mass-market smartwatches have declined by nearly 28% and average selling prices have dropped, the demand for premium smartwatches, including luxury watches and advanced models from brands like Apple and Samsung, is thriving. Sales of premium smartwatches have grown by over 20% in the past year. This suggests that consumers are increasingly willing to pay more for a smartwatch that offers advanced features and higher quality.c
Source: Mint
Ethos: Leading the Luxury Watch Trend
In 2024, luxury watchmaker Franck Muller opened a boutique in India, aiming for a high-end market with watches averaging ₹700,000. This move reflects the growing demand for premium timepieces in India.
Ethos Ltd, India’s largest luxury watch retailer, has capitalized on the growing demand for high-end watches. The company, which went public in 2022, witnessed its stock value quadruple within two years, delivering an annual return of about 105% in just two years.
Ethos’s Strategy for Capturing the Luxury Watch Market
Ethos Ltd is set to surpass ₹1,000 crore in revenue by FY25, following its strong performance of ₹999 crore in the last fiscal year. However, this success wasn’t always guaranteed. Before the pandemic, the company struggled with sluggish growth and low profit margins, even facing losses in certain years. Ethos’s growth wasn’t just driven by market dynamics; strategic decisions transformed the company’s performance.
Here are the key factors behind Ethos’s turnaround:
1. Expansive Store Network
- Ethos has built a broad network of over 60 stores across metro cities and tier 2 and 3 locations, including Ethos and Ethos Summit outlets, and exclusive brand outlets.
- Luxury brands like Vacheron, JLL, and Panerai rely on retailers like Ethos, as opening their stores is expensive and inefficient. Ethos’s retail presence provides these brands with greater market access.
- Ethos benefits from its parent company, KDDL Ltd., leveraging long-standing relationships with luxury brands. This has helped Ethos secure exclusive deals and expand its offering to over 7,000 unique timepieces.
- Ethos now holds a 20% share of the organized luxury watch market and 13% overall watch market.
2. Strong Online Presence
- Ethos’s robust online platform showcases 5,000 to 7,000 SKUs, far beyond what a physical store can display, allowing customers to browse an extensive collection.
- An in-house digital team, including watch specialists and luxury consultants, provides personalized online assistance, making shopping as engaging as in-store visits.
- Ethos’s omnichannel strategy has significantly expanded its reach, particularly in smaller towns. Online sales now contribute 30% of total billings.
3. Certified Pre-Owned Luxury Watch Market
- Ethos entered the Certified Pre-Owned (CPO) market in 2019, offering a platform for customers to sell or buy pre-owned luxury watches with guaranteed authenticity, certification, and a two-year warranty.
- This innovative move, supported by a dedicated CPO lounge and an online platform, contributed ₹50 crore in revenue in the last fiscal year, accounting for 5% of total sales.
4. Customer Loyalty and Insights
- Ethos’s flagship membership program, Club Echo, has been running for 14 years and provides valuable insights into customer preferences while encouraging repeat business.
- This loyalty program helps Ethos reduce costs and maintain direct customer communication, ensuring strong relationships and market leadership.
What Lies Ahead for Ethos?
Ethos has executed a series of strategic moves, and the results are reflected in its financial performance. In FY20, the company’s net profit margin was just 2%, but by FY24, it had risen to 8.3%. This is more than just growth—it represents a transformation driven by the key strategies previously outlined.
Expanding Beyond Watches
Ethos is not limiting its growth to watches alone. Recently, it entered the luxury luggage market through an exclusive partnership with LVMH’s Rimowa, opening its first store in 2023. It is also exploring the high-end jewellery sector, forming partnerships with brands such as Messika and Bvlgari.
Although these ventures are still in their early stages, the company is optimistic about future growth. Global luxury brands like Tiffany & Co. and Cartier have already recognized the potential in India’s market. They are expanding their presence, creating a favorable environment for Ethos to establish a foothold.
If Ethos can capture just 5% of this ₹8,000 crore luxury market by FY28, it could add around ₹400 crore to its revenue. With continued growth in its core watch sector and new ventures in jewelry and luxury goods, Ethos could reach a revenue target of ₹2,200 crore by FY28, with a net profit approaching ₹180 crore—effectively doubling its current figures.
Challenges and Risks
- Dependence on Mall Traffic: A significant portion of Ethos’s sales come from stores in premium malls, which can be risky. If a mall struggles to attract visitors or new openings are delayed, it could impact Ethos’s sales.
- High Working Capital Needs: Ethos’s business model requires substantial cash investment, particularly in inventory. In FY24, the company held ₹439 crore in inventory, 44% of its sales value. As Ethos expands into new categories like jewelry and luxury travel bags, managing working capital becomes more complex and could strain its finances.
- Adapting to Consumer Preferences: The luxury market is dynamic and requires constant innovation. To remain competitive, Ethos must stay in tune with changing consumer tastes; failure could weaken its market position.
Source: Mint
Conclusion
In conclusion, the luxury market’s rapid expansion is fueled by rising wealth, changing post-pandemic consumer preferences, and the global accessibility of premium brands through e-commerce. The growing demand for exclusivity and quality is further boosted by sustainability-conscious buyers, who value ethical practices in luxury goods production. As affluent consumers seek high-end experiences, the luxury sector may be poised for sustained growth driven by these evolving market dynamics.
*Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as recommendation or investment advice by Research & Ranking. We will not be liable for any losses that may occur. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
FAQ
What is Ethos, and why has its share price surged?
Ethos is a luxury watch retailer in India that has seen its share price skyrocket by over 105%. This surge is primarily driven by the growing demand for luxury goods in India, particularly among the country’s burgeoning High-Net-Worth Individuals (HNIs). As the number of HNIs in India continues to rise, so does their spending on luxury items like premium watches.
How is the luxury watch market in India performing?
The luxury watch market in India is experiencing robust growth, fueled by the increasing affluence of the Indian population. More and more Indians seek luxury timepieces as status symbols and investments. This trend has benefited companies like Ethos, which offers a wide range of luxury watch brands to cater to the diverse tastes of Indian consumers.
What is the outlook for the HNI population in India?
The HNI population in India is expected to double in the next five years. This growth is driven by economic growth, rising incomes, and entrepreneurial activity. The increase in HNIs will further fuel the demand for luxury goods, including luxury watches.
What are the challenges for Ethos in the future?
Challenges include intense competition from both domestic and international players, the potential for economic downturns, and the need to adapt to changing consumer preferences. However, Ethos also has significant opportunities to expand its business, such as entering new markets, introducing new product lines, and strengthening its online presence.
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I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
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