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On the fast track

Surajeet Das Gupta / New Delhi April 04, 2011, 0:36 IST

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
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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

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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
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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.

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