The Timex Group, one of the world’s largest watch makers, set up operations in India in 1992. Over the years the market has evolved and a number of players, both national and international, have rolled out aggressively. Timex India is now catching up and looks ready to provide some strong competition. Kapil Kapoor, Timex Group’s recently-appointed chief operating officer, and VD Wadhwa, Timex India’s managing director, discuss the company’s plans with Amit Ranjan Rai.
What are the challenges that Timex has faced in India?
Kapoor: You must be aware of the legacy that we had a joint venture with Titan. When we broke out of that joint venture, we were losing a lot of money because our business was predominantly focused on manufacturing. Titan was handling our distribution. We had the big task of putting up a whole distribution structure ahead of us — something that we did in the next few years. All this came at a huge cost. The industry dynamics were changing fast too. We not only had to re-engineer the complete supply chain, but also shut down our existing fabrication unit and set up a new manufacturing unit. It was a difficult process to get our supply chain in order.
Having got there, we found that we have been positioned at the wrong end of the market. The offerings we had were not appropriate. So a lot of effort was put in designing new products and migrating the brand to where it belongs, which is at slightly higher price points.
The next challenge was about the market. The multi-brand environment in which we operated treated us in a particular way. A lot of the watch industry was veering towards branded stores with an environment that was much more upgraded. The challenge for us was how to upgrade the environment we were largely present in. We decided to build a concept where we can house a number of brands and provide the consumer an exciting shopping experience.
Unlike other players who wanted to do mono brand stores, we said it’s not fair to offer a single brand to the consumer. We thus decided to go for unique multi-brand stores where Timex is positioned as the anchor brand and which offer several other brands as well. These Timex stores are called Time Factory, and today their number has grown to 70 in the country.
VD Wadhwa: As Kapoor says, we were at the wrong end of the market selling watches at lower price points. The challenge was to change the entire product line, the imagery of the brand, driving a solid marketing programme, and then moving from integrated manufacturing to more of an assembly model. These were some of the things that we did in the last several years and the efforts put in are now showing results. When we look back, many people predicted — both outsiders and within the company — that Timex in India will not last for two years. Today, we have wiped out all our losses.
How is the company doing?
Wadhwa: Our net sales for the quarter ended June 2010 grew 45 per cent, while profits grew 107 per cent over the corresponding period. The company declared a profit of Rs 5 crore in the last quarter as compared to the corresponding quarter last year. This is the fourth year in a row when we are on the profit track. We are going on a high-growth trajectory and planning to double our revenue in the coming year. We are right now working on a strategic plan as to what we need to do in terms of channel segmentation and what international brands can be introduced to the Indian market. We are connecting with the global design centre in Milan to develop world class watches. Timex India is taking advantage of the entire supply chain expertise that exists in different parts of the world. We are trying to integrate much more with the Timex organisation worldwide and leverage the strength at a global level.
What is your market share in India?
Wadhwa: The segment in which we operate, our current market share is 21 per cent. We are not operating in all the price points; we operate between Rs 500 and Rs 5,000. Our average selling price is about Rs 2,400. Otherwise, there is a lot of market above Rs 5,000 and below Rs 500.
How is the company planning to expand its retail footprint? Some years ago, it operated mainly through mom and pop outlets.
Kapoor: We are looking at three kinds of store formats. One is our Time Factory multi-brand stores; two, a smaller format version of Time Factory; and three, kiosks at malls. Timex has been positioned as the anchor brand at all these stores.
Wadhwa: Roughly about 40 per cent of the expansion that we are planning is through the kiosk format because of the high cost of retail property, particularly in malls. The watch category doesn’t require 700 to 800 square feet of space. A maximum of 300 square feet is good enough for a product like ours. We will be looking at 400 to 500 such kiosk stores. Our experience is that the kiosk format is much more cost-effective in malls. They are easy to roll out, and on a per square foot gross margin basis you almost get the same result what you get by putting a 1,000-square feet store. In addition, we are always on the lookout for spaces, be it malls or high street environments where strategically there is good business opportunity. Currently, we have Time Factory stores in 33 cities.
Are you also looking to expand to Tier II and III markets?
Wadhwa: We are focusing on both sides — the top six cities as well the smaller ones. Right now, we are trying to understand the markets suitable for our products. In Tier II and III cities, our experience has been good. One of our best-performing retail stores in Bhubaneswar, not in Delhi and Mumbai. The aspiration levels of people have grown much higher in these cities. Our Surat, Jaipur and Rajkot stores too are doing quite well. So there is a great future in Tier II and III cities.
For the past couple of years, Timex has been low on promotions.
Kapoor: If you look at it, it was a major exercise to reposition the brand from where it was, to be positioned as a good sporty brand in the mind of the consumer. To get there, we had to tell the story the right way because, as I said, going back to the joint venture days, there was a certain legacy in the mind of the consumer. To migrate it up in terms of the right attributes with which the consumer should associate with our brand, we attempted to link it to the right sports personalities. We tried to do ground-level sports activation because it was both innovative and sporty and that’s what you wanted the brand to be known for. So we did some unique things in the game of cricket which everyone knows is religion here. It would be difficult to find brands here that have not been associated with cricket. We said we are an international brand and we should communicate that, but still be sporty in our sex appeal. So we got Bret Lee as our brand ambassador who was not Indian, but whose appeal was very popular in India. We worked with him very effectively to do brand support and brand endorsements.
In the past few years, if you have seen us a bit low key, it was also because we have realised that the economy was going through a bit of a slowdown — you want to sometimes save your ammunition for when the economy picks up again. And now that it is ready to pick up, we are reviewing our plans, and Wadhwa has got some aggressive plans with his team to increase the activation in the market and have a lot of promotions to reinforce the brand.
Wadhwa: We plan to increase our entire communication budget to connect more with consumers. Though we have got fantastic products, international heritage and a portfolio of brands, a strong distribution channel with a solid team, the only missing link in our entire strategy is the consumer-connect. We need to speak much, speak louder and speak more often. On the media side , we are thinking of doubling our ad-spend from the current levels. Definitely, before the festival season you will see a TV campaign.
Timex is moving up the price ladder in India. What is the reason?
Kapoor: We have tried to create a sweet spot where our brand can sit and where we can offer the consumer a certain product that no other brand can. What is unique about Timex? It is the only global brand with a strong supply chain and manufacturing facility in India. That gives us a unique advantage, where we can leverage our global technology, through the global design centre in Milan, to be able to bring to the consumer watches at the best possible price. That sweet point is between Rs 1,000 and Rs 5,000 — the price points at which we offer the consumers the right technology and quality. We offer the consumers differentiated products at a really good value for money.
Why has the company brought in a lot of luxury brands into the portfolio?
Kapoor: A certain brand can only straddle certain price points which are relatively narrow. As Wadhwa said, we are 21 per cent of the segment that we participate in. But that segment is only a part of the market. There are other segments where we don’t participate. For us to become one of the larger watch players of the market, we need to start participating in the different segments of the market. There is a consumer for high-end luxury watches, and we need to participate in that segment. So we are getting brands that effectively serve those consumers’ needs. As a marketplace, a lot of people believe that China has had its day and the time for India has really come now. In all areas of business, India is really getting exciting. The overall industrial activity is going up, and retail activity is going up. At this stage it’s really the place where the consumers are most confident.
