Christabelle Noronha and Shubha Madhukar talk to Titan managing director Bhaskar Bhat about the excitement of rolling out new brands and the challenges in the retail space.
How has the year 07-08 been? Are you satisfied with the company’s performance?
Fortunately, the watch business has more than made up for it, through extraordinary product innovations. The new products introduced last year have been able to gear up and accelerate the growth rate and the profitability of the watch business. The jewellery business has also grown but what we are looking at is margins; and when price of gold rises, percentage margins actually take a dip.
Titan is a unique company. At the core we have two businesses which are diametrically opposite.
Watches, the older business, has high margins but is relatively small in size. Jewellery has low margins but sales are huge; the division is operating in a market that is about 30 times the size of the watch market.
In watches, we do 10 million pieces in a year with an average ticket size of Rs1,250. In jewellery, we sell to about 700,000 customers a year and the average ticket size is Rs25,000. We need to grow the sales of watches and grow the margins in the jewellery business.
Apart from these, we chose to scale up our new business Eye+ more than was originally planned and therefore ended with a lower bottom line.
How is Titan’s overseas business faring?
How is Titan’s move to sell high-end foreign watch brands working out? Is this undermining its own products?
Not at all. It is another option where there is a huge opportunity. It is just that we have to craft the product and business model to suit that market. In the jewellery segment, we have Tanishq and GoldPlus which operate on completely different business models. For instance, GoldPlus operates in small towns where Tanishq does not and vice versa. The product line is different too.
GoldPlus designs are very local, we cater to the local market. The brand is not on national television, we promote it to rural and semi-urban consumers who come to buy gold jewellery as an investment. Sonata, our mass market watch brand, has been going to small towns.
It’s been a year since Titan Eye+ was launched. How is the business faring?
Our house brands are Titan Eye+ and Dash; other than those we have various other brands — Gucci, Espirit, Armani, Mont Blanc, etc. We sell contact lenses and sunglasses — Fastrack and other brands. Our Eye+ range begins at Rs300 for a frame and Rs200 for the lens, so the glasses start at as low as Rs500. The store stocks range from Rs500-25,000.
The stores also offer zero error eye check-ups. We have invested in the best equipment in the world and we have an optometrist (trained by Shankar Nethralaya of Chennai) in the store who is fully trained.
The main platform is one of style; we have very good designs. We sell on the basis of styles that are very smart. As of now we are only present in Chennai, Bangalore and Hyderabad. In the next fiscal year, we will open 70 more stores.
Titan was one of the early entrants into the retail industry. How have things changed from those early days? What are the lessons you have learnt?
Retailing costs have severely spiralled now because of real estate costs. Since the opportunities in retail have blossomed now, retention of personnel is a challenge. This is a bigger challenge for us as eyewear and jewellery segment requires salespersons with expert knowledge. Employee costs have also gone up as we need very strong training back-up. Once a person with expert knowledge leaves, there is a strain on the system.
On the other hand, the positive side is that because people are used to the new retailing culture, walk-ins are also very high. People now want to buy from a good retail store.
Also, the watch business has moved away from the watch retailer to showrooms and large format stores. Several watch retailers have upgraded and are now selling high end brands. Watch retailing has completely changed. Even in jewellery, retailers have realised that there is a national format rather than the local format, and they are getting professional.
Some of the jewellers such as the Alappat and Alukkas of southern India have gone beyond their town to more parts of the same city and to more parts of their state and some, even to other states. Malabar Gold, a Kerala jeweller now also present in Karnataka and Andhra Pradesh, has Sania Mirza as their brand ambassador.
Ten years after we started the jewellery business, people realised it is a good market to enter. But these ten years have allowed us to build a brand and a network. In eyewear, though we have entered the market first, others may follow suit and we may not have the same window of time to build that competitive advantage, because retail is the buzzword now.
Is Titan looking at exploring synergies with the other retailing companies of the Group?
For the last one year we have examined the Taj group’s processes and worked closely with them to understand their systems of customer engagement, their training methods and measurement methods. For them, consumer experience is the most important element of value addition. We don’t want to learn from just retailers. We want to learn from those who do it best.
What are some of the challenges the company faces and what would be your prescription?
The current challenge is to establish the eyewear business. At this time next year, I should be saying that we are the number one eyewear business in the country doing about Rs50 crore business.
The third area of focus is attracting and retaining talent. This is a constant challenge. People want to hire from the best companies like ours so that they have readymade sales staff. It is a threat — the attrition rate is 11.5 per cent — but we have to deal with it.
Which is the most exciting business in your opinion?
These are all taking shape and require greater attention, plus there is the excitement of seeing something new coming up. Watches and jewellery are exciting from the point of view of bottom line generation; they are the breadwinners and therefore one has to keep an eye on them all the time.
* In July 2008, Tanishq launched its first store in the US in Woodfield Mall in Schaumburg, Illinois