Titan Embraces Online Retailing, Expands Jewellery

Titan Business of Gold RetailingTitan is India’s leading specialty retailer with >1000 exclusive stores with more than 1.45m sq ft retail space and distribution reach of >11,000 multi-brand outlets. It is India’s largest (and the world’s fifth largest) watch maker with ~25 / 45% volume / value shares. Over the past decade, Titan has emerged as India’s leading jewellery retailer through its brands – Tanishq, Gold Plus, and Zoya. It has forayed into eyewear retail as well as B2B precision engineering.

The online channel is fairly small (~Rs600-700m, largely watches) but fast growing. The company wants to ensure that this remains an alternate channel of sales and is not perceived as a discount channel – may be a bit of a challenge currently?

Titan expects to add ~30 jewelry stores or 90-100K sq ft in FY15. The aggregate is similar to FY14, but going forward, we expect higher share of franchisees (L2/L3) as the company enters smaller cities (last year had a fair share of L1 stores). Thus, capex / inventory increase on books could be relatively lower. Mgmt indicated that sales contribution between L1/L2/L3 would be still fairly similar (note – company owned or L1 stores would be 1/4th of the total number of stores).

Competition remains fairly high – besides an increased focus on wedding jewelry (Titan’s share has historically been lower vs. peers), there are initiatives to drive sales of working woman/ everyday wear brand, Mia (it is doing well and the company is planning to open a number of standalone stores/ shop-in-shops going forward) & to some extent, fashion jewelry, Ivy, may help.

Golden Harvest advance scheme remains suspended (from April 20th) as mgmt awaits clarity on the new Company Act guidelines. We’re a bit concerned about it, given it has been a good customer acquisition strategy (besides aids cash flows) & with substantial upselling during redemption, it contributed ~20% of sales. That said, the impact could be lower if all competitors may also need to discontinue such schemes if the final MOCA terms make it unviable. Mgmt expects more clarity in the coming weeks.