Swarna Ganesh has attended over 100 weddings in his hometown Erode in Tamil Nadu

in the past year. He is a little anxious about the weight he has gained, but Ganesh isn't
really complaining.
As the franchisee of Titan Industries' Gold Plus chain of jewellery stores, the weddings
have meant brisk business - the Erode store earned Rs 25 crore (Rs 250 million) last
year with every sign of doing as well this year, too.
So much so that the Bangalore-based Titan has stepped up its focus on the lower-end
jewellery brand: it has rolled out eight Gold Plus showrooms in the past six months,
with another 18 slated to open later this year.
That's an indication of the new focus at the Rs 1,483-crore (Rs 14.83 billion) (2005-06
sales) Titan. Managing director Bhaskar Bhat sums it up: "If one can be smart at
managing costs, the opportunity to make money at the lower end is huge."
Accordingly, for the next few years, Titan will be setting its sights firmly on the lower
end of the market, both in jewellery and watches. Over the next five years, Gold Plus will
account for a third of Titan's jewellery sales, from less than 5 per cent currently.
Jewellery sales, coming almost entirely from the Tanishq brand, are tipped to touch Rs
1,200 crore (Rs 12 billion) in 2006-07 and should grow to Rs around Rs 3,500 crore (Rs
35 billion) by 2011-12. The contribution from low-end watches to total revenues from
watches, too, is tipped to go up to 40 per cent, from around 25 per cent at present.
The purity plank
Of course, that's easier said than done. Consumers from the B and C income groups
react to different triggers, have different tastes and need to be communicated with
differently.
Then, a significant chunk of Gold Plus's target customer group comprises people who
are investing in the yellow metal rather than buying it for immediate use - this includes
people saving for their weddings, or those putting aside a little something for their
daughters' trousseaus.
As L R Natarajan, vice president in charge of the Gold Plus business, points out, "There
are customers who start buying for their daughters' marriages even if the child is barely
six." Over 40 per cent of the estimated annual gold purchases of Rs 70,000 crore (Rs
700 billion) (industry-wide) is accounted for by this group.
For such customers, purity of the gold is more important than the variety of designs and
quality of workmanship (important issues with the SEC A).
Which is why Gold Plus is continuously educating would-be buyers on the need to buy
the real thing - it has even installed carat meters in all its outlets. Purity is the dominant
theme of its media campaigns and also the audio-visual shows and question-answer
sessions that it organises at street corners.
Equally important is the Tata tag. Gold Plus and Tanishq are two distinct entities - there
are no obvious signs to connect the lower-end range with the older, more upscale
jewellery brand. Instead, the Tata name is flaunted conspicuously on all Gold Plus
hoardings and shopfronts - research by the company showed this was more widely
recognised and trusted, in any case.
Bonding with the buyer
To make customers feel comfortable, the Gold Plus stores have been designed to look
traditional - either homelike or resembling temples. Explains R Sharad, head, retail and
marketing, Gold Plus, "Many of these buyers are accustomed to buying jewellery from
local goldsmiths or family jewellers, so we need to make them feel at home."
The price points are low so as to bring in the footfalls: customers can buy as little as one
gramme of gold. Exchange of old gold for new - a popular practice in South India - is
permitted at just 2 per cent charge, compared with the market rate of 6-8 per cent.
"We also make sure that we constantly bring in new designs because customers are
demanding and preferences vary from community to community," observes Sharad.
Unlike the Tanishq stores, which are a mix of company-owned and franchises, the Gold
Plus chain is entirely franchisee-driven. The logic: jewellery is a localised business and
in smaller towns especially, the store manager needs to have local contacts and be a
trusted individual so as to be able to inspire confidence in customers.
"The franchisee is the face of the brand in every town and is key to the success of the
model," declares Natarajan. Potential franchisees - typically, the most prominent
jewellers in the area - are decided on the basis of their network and their potential
business worth. (They also have to be capable of investing Rs 50 lakh (Rs 5 million) in
the new venture).
Even the options Gold Plus extends to its customers - programmes like chit funds and
savings schemes (where money saved with the company earns interest, which is later
used to buy jewellery) - are more typical of traditional jewellers than corporate
organisations.
The emphasis on local involvement is also why Titan is convinced that the direct
approach in marketing will benefit Gold Plus the most. The store manager keeps track of
weddings and other social events by networking with local priests.
He then sends a congratulatory card and token gift well in advance to the families
concerned. Should they then shop for appropriately large sums at the Gold Plus outlet,
the company sponsors banners at the wedding, and another round of gifts follows. And
since the manager is invited to the wedding, it gives him an opportunity to network
further
with potential buyers.
Of course, more conventional approaches are being followed as well, including
hoardings, wall paintings and event sponsorships. Titan is also stepping up its
advertising and promotion activities; apart from advertising on local cable channels, it is
also experimenting with FM radio channels. But Sharad believes that here too, the local
flavour - rangoli and cooking competitions - work best.
Watch this space
If Titan is trying to cash in on the craze for jewellery, it is equally determined not to miss
out on the opportunity in the lower end of the watches space.
Consider some numbers first. The total watches market is about 36 million units and is
worth Rs 2,200 crore (Rs 22 billion) (industry estimates). Of this, the Rs 300-1,000
price band is noteworthy. It accounts for 45 per cent value share and 16 million units in
terms of volume, and is growing at 6-7 per cent a year.
Now, Titan is already a significant player in this segment. With 600 models, Titan's
Sonata is already India's biggest watch brand, selling around 4.6 million units a year.
But Titan believes it should now tap the potential for bringing in new buyers - primarily,
people who don't already own watches.
Says Sonata Business Head C Srinivasan, "In the next two to three years, we will focus
on the sub-Rs 500 category by launching a range of products." At present, there are 40
variants in this category.
Srinivasan believes that total Sonata volumes could more than double to 10 million units
in three years, which will also help increase the company's share of the Rs 300-1,000
segment.
The pull factor
Most of this volume growth will come from the lower price points. Come April and a
watch priced Rs 275-295 will be on store shelves, which is about Rs 100 less than the
present Titan starting price point. A sizeable chunk of the market (around 30 per cent)
is accounted for by watches under Rs 250 - mostly Chinese imports or smuggled ware.
The Rs 275 pricing, then, is significant - it is just a small leap from a grey market
product to a genuine branded watch, complete with guarantee. "As aspirations grow,
there are many buyers, especially those on the borderline, whom we can draw in on the
strength of the Sonata brand and the Tata pedigree," agrees Srinivasan.
Batting for the brand
Like Gold Plus, Sonata's marketing needs are quite distinct from its parent brand.
Hence the company's choice of cricketer Mahendra Singh Dhoni as mascot, a present-
day icon of small town boy made big. (Compare that with the brand ambassadors of
Titan's premium range xylys: international celebrities like Carlos Moya and Saira
Mohan.)
Titan believes bringing Dhoni on board has paid off: in the past year, sales have increase
13-14 per cent, even as the category has grown at a slower pace.
Cost side story
The key to operating profitably at the lower end of the market is, of course, keeping costs
under control. Which is why Titan plans to outsource 75-80 per cent of its production,
from virtually nothing at present.
Srinivasan says the biggest savings in costs will come from outsourcing, re-engineering
products and through better prices from vendors as volumes rise. Besides, the company
doesn't intend to add too much to distribution: 12,000 outlets in 2,600 cities is
sufficient, it believes.
Instead, money will be spent on improving in-store visibility for the Sonata brand -
better shelves, lighting and more point of sale displays.
"Although we will be selling incrementally more volumes at the lower end, we hope to
sustain margins at current levels of 20 per cent at the operating level, because we expect
costs to stay flat," says Srinivasan.
Growing the market
In the short to medium term, Titan's game plan is to gain share from the competition,
both from branded players like Maxima, as also the regional players. Maxima's volumes
are less than half of that of Titan (according to Titan management estimates), but it is
nonetheless a competitor.
In the long term the plan is to get in new buyers, which is possible because penetration
of watches in India is still low at around 20 per cent. But that would call for a fair
amount of investment. Explains Srinivasan, "We need to educate people about the
usefulness of a watch and convince them that they need one."
Srinivasan has been touring the countryside and has initiated pilot projects in places like
Aligarh in Uttar Pradesh and Vellore in Tamil Nadu. His learnings: aspirations of rural
folk are high; they are aware of the benefits of education and are willing to spend on it.
So they will spend on watches, too, if it is within their reach.
Swarna Ganesh would say this is time well spent.