Today's SNAP is about the interesting turnaround story of Tanishq, which was close to being shut down by Titan. This piece was possible only because of the must-read book: ‘Titan: Inside India’s most successful consumer brand’ written by Vinay Kamath.
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Titan, probably the most popular Indian lifestyle company is worth close to 19 billion $ in market capitalization. The company which started with producing and retailing watches, has forayed into jewellery (Tanishq), eyewear (Eyeplus), sarees (Taneira), perfume (Skinn) and a lot of other lifestyle products (Fastrack) as well. Today, it’s the crown jewel of the Tata business empire generating close to 2.8 billion $ in revenues through 1700+ stores across the country.
But Titan would not have scaled such heights without Tanishq, its jewellery business. Today, Tanishq accounts for close to 80% of Titan’s revenues and profits. Things were not all that rosy in 1996 when Tanishq was first started. Sales were low, losses were mounting, and Titan was considering shutting Tanishq down. But, then, a couple of crucial changes saved Tanishq.
Setting up a new business
Started in 1984, Titan had managed to get a lion’s share of the Indian watch market by mid 90s. As a logical next step, it started looking at other relevant industries to expand. Indian households hold close to 1 trillion $ worth of gold in the form of jewellery which is equivalent to 11% of the total global deposits. Titan decided to tap into this huge love for gold jewellery and launched a brand called Tanishq.
Till then, Gold jewellery was a highly unorganized business sector where families bought from their trusted local jewelers. There was not a lot of focus of variety in designs. Tanishq decided to challenge this status quo by using 18 carats gold jewellery instead of the more popular and common 22 carats gold jewellery. The 18-carats gold, though lesser pure, allows creating better designs, lesser expensive and scratch proof jewellery.
The first Tanishq store was opened in Chennai in 1996. Tanishq kept pushing the 18 carat products but the sales were low. Titan kept adding more stores, but things didn’t change. Very soon, they realized their mistake. Gold jewellery in India was not just an ornament. Instead, it was considered an asset: a store of value and wealth. Hence, Indians always preferred the purer 22 carats over the 18 carats products.
Despite that, Titan didn’t give up. They hoped that they would be able to make Indians fall in love with the 18 carat products. Till 2001, Titan tried absorbing Tanishq’s losses which had mounted to 150 crores INR in the past 5 years. The constant erosion of money impacted Titan’s stock badly which hit lows of 2 Rs in 2001. The Tatas have had enough of it and couldn’t let the company continue losing money.
Turning things around
In the year 2002, McKinsey was engaged by Titan to run a study of Tanishq. After McKinsey’s presentation to the board, Ratan Tata left the decision with Late Xerxes Desai, then CEO of Titan. Xerxes decided to continue with the jewellery business but introduced a slew of changes. The first thing that he did was to accept and correct the mistake of selling 18 carat jewellery. They quickly introduced the 22 carat jewellery in all their stores. This helped Tanishq gain more traction in the market.
But they had another major hurdle to cross. Most of the Indians preferred to buy gold jewellery from their trusted and known local jewellers. They didn’t trust other players because of the fear of getting impure gold. To tackle this, Titan introduced a major innovation which changed its fortunes forever. They introduced a device called Karatmeter in all the stores. It was a gold purity testing device imported from Germany at a cost of 10 lacs INR per piece.
The Karatmeter campaign
Armed with the Karatmeters, Tanishq ran an ad campaign (video below) where it offered its customers to bring their old jewellery and get its purity tested for free in their stores. This campaign received a huge response from the customers and the stores started getting a footfall. At the same time, there was a lot of resentment from thousands of local jewellers. But Tanishq stayed put.
This campaign opened doors to a lot of new customers who had never been to Tanishq. They got to experience the service and product variety of Tanishq. But the overall experience was a sad one for the customers. Almost 60%of the jewellery tested in the Karatmeters came out to be less pure than what the local jewellers had promised the customers. This hurt the trust that these local jewellers enjoyed.
But wait, the sales at Tanishq were still not going up despite of getting so much of footfall. Jacob Kurien, then COO tried to dig deeper by talking to some customers. And he realized that all Tanishq did was make the customers feel bad. They were making the customer aware of the problem but were not solving it for them.
After a lot of internal deliberation, Tanishq added a solution to problem by introducing ‘Impure to Pure scheme’. If a customer brought jewellery which was lower than 22 carats but higher than 19 carats pure, he/she could exchange it with Tanishq’s 22 carat jewellery by just paying for the making charges. For purity below 19 carats, the customer would need to pay out the difference as well. This scheme worked wonders for Tanishq. A lot of stores started doing almost 1 crore INR in daily sales. In the process, Tanishq created a large customer base who trusted the brand now. And after that there was no stopping Tanishq.
Rise from Ashes
Tanishq sales kept rising YOY and soon it surpassed the revenues of the watch division. In the coming years, Tanishq expanded its portfolio by adding sub brands: Mia for working women, Rivah for wedding jewellery and Raga – watch designed as a jewellery product. Later in 2016, they also acquired Caratlane, an ecommerce platform for jewellery. A loss-making entity till 2003, Tanishq today clocks close to 16000 crores INR (2.2 billion $) annual revenues, which account for 80% of Titan’s total revenues. Even the stock has given phenomenal returns (41% CAGR) rising from Rs 3 in 2003 to Rs 1465 at present. And that’s how Tanishq survived and thrived despite all odds against them.
That’s all for today. See you all in the next post 😊 Don’t miss the like button and do share if you liked the story !!
1) Titan: Inside India’s most successful consumer brand by Vinay Kamath