You had a disappointing first quarter. Is sentiment still weak?
The reason for firstquarter decline was not just due to weak consumer sentiment alone, but on account of the withdrawal of the Golden Harvest scheme, which had a bigger impact on sales. Usually, the first quarter sees a strong rural wedding season. But this year, it was not as strong as it used to be. So, that had an impact on sales in our jewellery and watch businesses.
What kind of disruptions have you seen from ecommerce players?
Also, ecommerce has created some shopping behaviour where many consumers now research and select products on ecommerce sites and then go to physical stores where they compare prices before they make their purchases. There is a new phenomenon that we call ‘snacking’ and which means customers satisfy themselves by buying low ticket value items on the net. Several of them don’t actually make the trip to the retail outlet. So, there are a lot of transactions happening sitting at home and this new trend of snacking has also impacted our sales. The deep discounting by ecommerce players is a big issue to the brickandmortar players. But, I think that the discounting model will not last very long because they are investing their equity money in discounting. There is increasing evidence that they are reducing the discounting levels. However, we have to watch the developments during this festive season.
Is ‘snacking’ an emerging trend or a temporary phenomenon?
I think it is a temporary phenomenon. Actually, ‘snacking’ has alerted retailers to ecommerce and to build their online businesses – not necessarily as a business for selling alone, but for a whole new experience. So, if the webexperience of a brand is similar to its ontheground experience, one can create a seamless touch with the consumers. But, if the store experience is far superior and webexperience is not so, you have lost the customers. Not only do they stop coming to the stores, they will even shift to other categories.
With changing consumer behaviours, how is Titan building its digital strategy?
We have a separate digital function now and have created a digital vertical or rather a horizontal that provides services to divisions. It is headed by a Chief Digital Officer, whose responsibility is to digitalise the company from within and bring in operational efficiencies as also to bring all divisions and functions under a digital map. We are working on improving customer experience and enabling transactions through ecommerce. We have not only created a digital team, but are also making investments continuously. So, 18 months from now, we will be a very different, digitallyenabled company than we are today. The key point now is if you are not digital or not in the social networking space in a very smart way, you will lose the customer forever. If the young don’t see you as digitallysavvy, you are even out of their considerations. So, our digital strategy is wellplanned and is shaping up well. Our own ecommerce sales are booming though the base is very small now.
What kind of investments are you making in your digitalisation programme?
We will continue to increase our investments in technology going forward. If you slightly change the mix of your spend from 99:1 (brand vs. technology) to 97:3, the amount of benefits your get on digital space for that three per cent is very large. So, it will be more of reallocating our spend. However, the website creation and the backend IT infrastructure are very important for ecommerce play.
We may invest at least Rs.810 crore a year in technology over the next 23 years.
Would you continue to increase retail stores amid the increasing propensity to buy online among consumers?
Yes, we will continue to expand the network and the plan is intact. Overall, we plan to add 160200 stores across watches and accessories, jewellery and eyewear categories during this year. As of March this year, we had over 1,200 stores. Actually, our eyewear division, which is now a Rs.360 crore plus business, has an aggressive growth plan. The division has over 350 stores, but this platform can scale up to 5001000 stores over a period. The division has devised a strong business plan.
What are the emerging opportunities in the watch segment?
The interesting aspect of the watch business is it is the only category that does not have any pricing problem. What we have started to witness in this segment is ‘premiumisation’. We are seeing very strong price increases as the customers are willing to pay the premium for the value they get. Also, the definition of value to the Indian upper middle class has changed. Customers say “I am willing to spend Rs.50,000, but you give me a product worth that money.”
So, what is your premiumisation strategy all about?
Watches have got design, brand image and now technology. So the major task for us as is to drive excitement in this category and draw consumers by offering products with all three flavours. Actually, technology is slowly creeping into this segment and watchmakers are aware of that. The launch of the smart watch by Apple and other global technology majors has created a new wave of excitement in the watches
and wearable segments. As good watchmakers we want to stick to the knitting, but also realize that we have to have our own smart watches. So, we will also be introducing our own smart watch or techenabled products in the next 12 months. But, we have not given any name to that product.
How strong are your R &D capabilities?
We have quite a strong R & D base. Our Edge watch was has been hallmark of our R & D and innovation. We also have Innovation School of Management, which teaches the process of innovation to the people in the company. The call we took was to build partnerships with academic institutions. We have been developing a lot of technologies out of our tieup with IITM Research Park. We have stepped up our engagement with IITM apart from our own work. This is part of our mission to embrace new technologies which we intend to strengthen through partnerships. The areas under focus include wearable and smart technologies.
How are your new businesses such as fragrances doing?
Fragrances, launched a couple of years ago, is doing very well. Of course, it’s at Rs.2530 crore level, but holds huge future growth potential. We want to rapidly grow this business. We need to expand the network, advertise more and create strong demand and that is waiting to happen. A new set of products will start coming out over the next 36 months. In fragrances, our pricing is very friendly. We actually found a gap in the fragrances market and are devising strategy accordingly. In the subRs.2,000 (100ml) category, there is a big gap. Our products are priced below Rs.2,000 level. So, our opportunity is in the market development.