'Online sales will contribute 5% of our turnover in five years'

From watches to jewellery, precision engineering to hand-woven sarees, Titan Company has traversed into segments that have been highly unorganised for the past three decades. In conversation with Mahesh Kulkarni of DH, Bhaskar Bhat, the company’s Managing Director, explains how he intends to take the company to the next level with an ambitious turnover of Rs 32,000 crore in the next five years.

The past year has been tough for many sectors including consumer durables. How did you manage to perform better?

The last year was very exciting for us because a number of events occurred during the period. It started with the introduction of excise duty of 1% on jewellery. The entire industry went on strike and we closed our stores for 43 days. Although markets recovered during the Deepavali season, the Demonetisation hit us. It was a see-saw year for us. Eventually, we were benefited by the demonetisation as there was a huge surge in sales during the initial days. The demonetisation hit the unorganised players very badly. For us, we reaped the benefit during the second half of the third quarter and the fourth quarter, as we witnessed an unprecedented surge in sales owing to the economy getting formalised as a result of demonetisation. We saw 55% growth in jewellery sales, and overall, the topline grew by 13%, and bottomline saw a healthy growth too.

Your margins were under pressure last year?

Yes, post tax, margins were hit. On a pre-tax basis, if you see, it was better. We offered discounts to push our sales. We downsized staff through a VRS scheme, for which we had to make a provision of Rs 100 crore and 280 people accepted it. This affected our margin to an extent.

What were the major initiatives during the year?

Last year, the biggest story in Titan was initiating five major business exercises. We acquired online jewellery firm CaratLane, the Montblanc joint venture took off, we launched Favre Leuba watches after acquiring it earlier. We also launched a new category — Taneira sarees — and subsidiarised precision engineering division into a separate company. All these five decisions were crowded in one single year.

When do you see these initiatives contributing to your sales?

It will take between three and five years. Taneira may take a long time as it is still at the experiment stage. We have opened only two stores in Bengaluru and may add at least one more city during this year. At the end of FY18, we will take a decision to scale up depending on the response. As of now, we have got a very encouraging response, but it is not enough to scale it up.

Last year, Titan acquired CaratLane. What will be your digital strategy going forward?

We have started a separate digital division headed by a chief digital officer. CaratLane continues to be a separate entity within the jewellery division of Titan. We will integrate it with Tanishq going forward. It has a customer-base of its own and capabilities in the online space, which is different from Tanishq. CaratLane customers are online and it sells jewellery for daily wear with a standard ticket size of Rs 15,000, compared to Rs 75,000 and above for Tanishq jewellery. It will continue to target younger audiences, whereas Tanishq is a hardcore brick and mortar brand focused on customers walking into the stores to buy jewellery. Mobile phone has become a medium to discover prices and buy online. A customer has chosen to be on his mobile to browse. So, we provide them the best browsing experience and leave it to them where they want to buy. Online and offline has to be seamless and it is very challenging.

How big is your online sales currently, and how is it growing?

Currently, online sales of Titan are in the order of Rs 150 crore or just about 1% of the total sales of Rs 13,000 crore. It is growing in the range of 60% annually. I think, it will keep growing in that range until the sales touch 5% of our total turnover, which will happen in the next five years. It will be more challenging to achieve this target as our overall sales will also grow. In the next five years, our total turnover is expected to grow two and a half times to touch Rs 32,000 crore from the current level. Of this, online sales will be about 5%. Currently, our products are sold on Flipkart and Myntra, besides our own omni channel.

How will you achieve this growth?

Each of our categories will grow, except in watches, where we have a very high market share. We already have 65% market share in watches. Tanishq is about 2.5% now, it will go up to 10%. Any brand should achieve 10% market share. But, it is such a large market and most of it is unorganised. Of the Rs 32,000 crore turnover, Tanishq will have 70% share. We will grow faster than watches in this category. In addition, we will also be adding new businesses.