Titan Industries is exploring new opportunities to become a lifestyle company and not just a successful watch maker
When Titan Industries adopted ‘Be More’ as its brand philosophy in 2008, it was not simply reflecting the aspiration of the new age consumers — who wish to make most of their lives — it was perhaps quietly stating an impending shift in its overall corporate strategy. By then, Titan Industries was actively exploring new opportunities to become a lifestyle company and not just a successful watch maker.
Today, the Rs 6,000-crore-plus company has a presence in the watch, jewellery and eyewear sectors, as well as precision engineering for aerospace and automobile. The thrust of its new corporate strategy is to get into new categories every second year and try and gain leadership in that market. It would also help the company derisk its portfolio — reduce dependence on watches and jewellery that contribute over 95 per cent to its turnover.
So Titan has moved into eyewear products, it is experimenting with non-leather bags, belts and other accessories, looking at pens, steel and even silver jewellery. Don’t be surprised if it steps into the perfume market — though no decision has been taken on that yet — the ultimate in lifestyle retailing.
Titan also wants to get into silver watches and jewellery and is working to perfect a technology that will ensure the silver does not get tarnished, without which entering this sector could prove disastrous.
The company is taking a bigger gamble in the watch space — it has started retailing competing brands at its new chain, Helios. It stocks over 30 international brands including Movado, Fossil and Seiko, ranging from Rs 15,000 to Rs 2 lakh a piece. The logic? There is hardly any pan-India multi-brand retail chain for watches and so Titan can fill a clear gap in the market.
The plan for Helios is ambitious — Titan wants to control at least 30 per cent of what is a Rs 300-crore market for high-end watches. The important thing is that this market is growing fast and should touch the magic figure of Rs 1,000 crore in the next two to three years. It is also planning to expand the Helios chain quickly — to over 50 stores by the end of the year compared to a handful currently. These stores will not have more than 15 per cent of their space earmarked for Titan brands.
Says Bhaskar Bhat, the soft spoken managing director of Titan Industries, and the mastermind of the new strategy, “We want to be a lifestyle retail chain controlling the entire lifecycle of our brands. Look at Gucci, Dior or Fossil — these are well known fashion brands that straddle various categories — from watches, perfumes and ready-to-wear to leather accessories and footwear. We will get into different lifestyle categories and be the segment leader.”
Bhat’s optimism is not unfounded: Titan has handled its earlier diversifications with great panache.
Titan’s watch division was launched in 1987, Tanishq jewellry in 1996, and the eyewear division in 2007. At the time of launch it was the third watch company in the country after HMT and Allwyn. Its joint venture with Timex, which lasted for over a decade, helped the Bangalore-headquartered company set up a strong distribution network across India, something which has remained its strong point even to this day.
Indeed, from day one it had a winning combination — good quality and design, a wide range in price backed by aggressive marketing and an enviable retail network. Such hard sell, that too in a “functional” product category like watches, was never tried in the country. That is why for close to a decade after its launch, Titan remained synonymous with watches in India. Today, the Tata group company hawks watches that range from the highly affordable Rs 299 for a Sonata, meant for the mass market, to the nearly Rs 1 lakh for the top-of-the-line gold engraved Nebula watches for consumers with a taste for the finer things in life.
In 1995, Titan set out to change the rules of the game in yet another product category. For the middle-class Indian woman who was never really sure of the quality of gold that the neighbourhood jeweller offered, Tanishq offered an attractive alternative — the gold standard so to speak. It created a modern retail chain to sell jewellery — again something unheard of in India. And it manufactured standardised but an exquisite range of designs that caught the imagination of the modern Indian women.
Of course, the move was not without hiccups. Tanishq actually started its innings as an exporter of jewellery but that business remained a non-starter. It was only then that the company decided to launch Tanishq in India. Tanishq made its foray into branded jewellery in India with 18K gold advertising it as the ‘international standard.’ This was perceived as “less pure” by the Indian market dominated by 22K gold jewellery. The company was quick to learn its lesson and today Tanishq is India’s largest jewellery brand in 22K gold and is also the fastest growing in the category, according to some estimates. “The migration of consumers from traditional and small jewellers to Tanishq is based on the trust of the Tata brand,” said Bhat in a recent interview to Business Standard.
Cool and calculating
As they say, there is a method in the madness. Titan is painstakingly choosing new categories. For one, it is looking at categories where there is no large organised player. For another, it should be an area with a technology gap it can fill. And of course, it should be an area where it can scale up quickly and assume pole position. So, while it is looking at the market for pens, the question ranking the company is how to become the leader in a jiffy, given that it is a low margin business and choc a block with players both organised and unorganised.
The company has already taken a plunge into eyewear through its Titan Eye+ outlets that offer lenses, frames as well as free testing of eyes by experienced optometrists. It hopes to increase the eye care chain from 160 outlets currently to at least 260 over the next 12 months.
Buoyed by the response in the eyewear business — it has already sold over one million frames — Titan is toying with the idea of setting up a manufacturing plant for frames with a capacity to produce between 0.5 million and 1 million every year. To ensure that customers get the kind of quality they associate with the Tata brand, Titan has been manufacturing lenses in house — about 80 per cent of the sales are in-house products — while it also offers competing brands such as Essilor and Nikon.
Bhat and his team want the business to hit the Rs 200-crore mark by next year and go on to contribute around 10 per cent to the company’s revenue in the short to medium term. That is substantial considering that the total size of this market at the price point it operates is not more that Rs 1,000 crore. Which also means the slant towards jewellery — which currently contributes 70 per cent to the overall turnover — will go down to 65 per cent in the same period.
Titan is also working on other fronts to improve stickiness. For instance, the company has not only created its own pool of qualified optometrists to serve eyewear customers, it also sends them to a 90-day training programme with Sankara Nethralaya, a not-for-profit charitable eye hospital in Chennai, so that they are equipped to deal with the medical needs of the customers. That is something you might not get in your neighbourhood optical store. More importantly, it has the latest machines for eye testing at its disposal — again something that may not be available with your friendly neighbourhood doctor.
That’s not all. For the fashion conscious, each outlet also offers the services of a style consultant who helps customers make up their minds about the kind of frames and colours that would get them in the groove. If you thought all this would be heavy on your pocket, you are in for a surprise: You can step out with a frame and a lens for less than Rs 1,000, which might be slightly higher than your neighbourhood store, but assures you quality.
Another largely unorganised market that has caught Titan’s fancy is non-leather bags, wallets and belts which it hawks under the fastrack brand, which already has a range of watches and sunglasses at an average price of Rs 500, making it an easy pick for the target demographic of 15-25-year SEC A, B audience for whom looking good is high on the agenda. Now Titan is pushing the new products at fastrack stores across the country to see the response.
No longer a cakewalk
But is Titan’s quest to find new categories and concentrate management time in them impacting its existing businesses? Take Tanishq. Detractors say with gold prices shooting up, margins are getting squeezed in this business and will obviously impact demand. They argue that much of the growth in Titan’s turnover is not a reflection of any ‘real’ growth but only the sharp hike in gold prices. Titan, for instance, expects to see a 40 per cent growth in its revenue from jewellery this year; when adjusted against the rise in gold prices the actual increase in revenue will be to the tune of 15 per cent. And the company agrees that growth in the next financial year will slow down to about 30-35 per cent.
Some experts also warn against unrelated diversification. “Why is the company moving into unrelated areas like bags, spectacles frames, lenses?” asks the CEO of a leading retail chain who spoke off the record. “It has to decide whether it is a retail company selling all kinds of products or a watch and jewellery manufacturer and retailer. Or else it will end up spreading itself too thin.”
But Bhat and his team have worked out a plan which will help increase margins rather than just push revenues. For instance, in jewellery, the company is pushing diamond-studded jewellery rather than gold. The reason is simple: the margins on these products are a staggering three to four times more than that of gold jewellery. So, over the next one year or so, Titan wants at least 40 per cent of its jewellery turnover to come from diamond compared to 27 per cent currently. That would more than make up for any slowdown in the growth in revenues.
What Titan is banking on is its ability to buy diamond in bulk at a hefty discount — which could be anything between 15 per cent and 20 per cent — compared to a small jeweller. Also, it can reduce costs by scaling up production at its manufacturing facility, much like an assembly line at, say, an electronics or automobile plant. This gives it an edge compared to the family jeweller whose products are mostly handmade, and therefore, time consuming.
This is one part of its jewellery strategy. The other is to expand at the lower end of the market through its chain of Gold Plus stores. Titan has located these stores in cities and towns where there are no Tanishq retail outlets and they cater to the more investment minded small town buyer. The innovations to address this market are simple but effective: the making charges in these stores are 40 per cent lower than at Tanishq and the designs cater to the local tastes. Plans are on the anvil to double the number of Gold Plus stores from 29 to over 50 over the next few months.
But many of Titan’s competitors say that Titan’s Helios business model is a recipe for disaster and large brands like the Swatch group have made up their minds to stay away from these stores. “We see a clear conflict of interest. We do not see any reason why they (Titan) will push competing watch brands that might be in the same price range as a Titan. As a watch brand we do not feel comfortable sleeping with the enemy,” says a senior executive with a leading international watch brand that has decided to keep clear.
Bhat has a different take. He says Titan has gone into the business because of the promise of higher margins. With margins of 30 per cent to 35 per cent in retailing, Helios may turn out to be the more profitable part of the watch business than manufacturing. “If you think you are just a category player then of course it will look like Helios conflicts with Titan, but if you are an industry player who wants to expand the size of the watch business then the answer is no,” Bhat says. He agrees there are serious apprehensions among some international watch brands with whom he is trying to tie up. So he is going all out to convince them that “Helios stores will run at arm’s length from Titan’s”.
Needless to say, Bhat has his task cut out: transforming Titan into the country’s only multi-brand lifestyle retailer from a manufacturer-marketer. Bhat says he is ready for the long haul.
| Accessories can make or break Accessorisation, say experts, is important for an accessory brand looking to wow today’s have-it-flaunt-it generation. Since its launch, Fastrack has targeted the young community of consumers who are defined by their campus lives and specific dress codes. So, watches, sunglasses and costume jewellery have been the key platforms for differentiation. Of course, the accessories market is still very small — not more than Rs 3,000 crore, according to Bhat — and it is highly unorganised with only a handful of branded players. While the youth have more buying power than ever before they have limited choice in terms of quality products. That is the vacuum which Titan wants to fill. That is why Bhat has pitched the tent early — he hopes to get 25 per cent share of this market in the next few months. |
The company is leveraging the strength of its design centre (which it had set up initially to design watches) which is researching the needs of the youth and designing products accordingly. And taking a leaf from its watch pricing strategy, it is offering products like bags from the affordable Rs 500 to the slightly expensive Rs 1,900 range. It has consciously avoided the leather market which has many established players.
