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After seeing slowdown in sales of its diamond jewellery line for several months, Titan Company Ltd has said its sales is growing considerably in the second quarter.
The company, which sells diamond jewellery through its retail store Tanishq, also said it is planning a new collection priced below Rs 50,000 to cash in on a surge in diamond sales during the festive season.
"We are focusing on the sale of diamonds and our target is to achieve about 25%-30% growth, but the first quarter was much lower. The second quarter has been better and in the range of our target. We hope the third quarter will climb further," C K Venkataraman, CEO of the jewellery division told Business Standard.
The diamond jewellery business is more profitable by value for any jeweller as the value of each piece of jewellery beats its counterpart in gold. Also, profit margins on diamond jewellery is estimated to be about 2.5 times higher than that of gold. Hence, even a small uptick in diamond jewellery sales translates to a much larger profit for the jeweller than gold which relies on volumes.
In 2012-13, Titan's jewellery sales touched Rs 8,108 crore, of which diamond jewellery accounted for 30%. It aims to take its total jewellery sales to over Rs 10,000 crore in 2013-14.
Sources say a 15% discount scheme offered by Tanishq on its diamond jewellery line in August was lapped up well by customers, leading to the increase in sales volumes.
“Unfortunately in India, diamonds are not seen as an investment like gold. But fortunately, Tanishq’s target audience will take to good deals on diamonds more easily than the average consumer, says analyst Abneesh Roy of Edelweiss Securities. “India is very sensitive to price points. Using affordability to target consumers may work very well, especially among urban Indian women.”
The company also said it plans to cash in on a typical increase of diamond jewellery sales during Diwali and is planning a range of limited-period offers to increase sales during the festive season. A new "Diwali" range of diamond jewellery with pendants, rings and earrings is being slated for launch during the festive season and is priced below Rs 50,000.
However, analysts say the company will have to continue this focus on the sales of diamond jewellery over an extended period to reap the benefits of their efforts as diamond jewellery is yet to gain significant traction in India, unlike in Western countries.
The first quarter of this fiscal saw consumers thronging Tanishq stores to buy more gold jewellery due to low gold prices. However, the diamond segment took a hit, accounting for only 16% of total jewellery sales. The company's aim has been to increase its share of diamond sales to 40% of its total jewellery sales. It has even managed to shore it up to 30% of its sales but over the last few months gold jewellery has stolen the limelight at its stores.
"In the first quarter, the gold segment just shot up. As it is diamond sales have been a challenge in the industry for the last seven-eight months as it is a very discretionary category, a postponable one," Venkataraman said.
Though the purchase of gold jewellery is always seen as an investment by Indians, diamond jewellery has been less accepted due to the perception that its resale value is low. Besides, the value of gold has appreciated at a rapid pace over time, but consumers remain apprehensive that the value of diamonds do not appreciate as much.
"We are pushing diamond jewellery growth and there are many initiatives underway. Over the next five months, we hope to create a very, very strong pull for diamond jewellery and actually help push our gross margins and hit our earnings targets for the year," Venkataraman had said during the company’s first-quarter results.
