By Shane McGinley
Titan is aiming to replicate its success in India and achieve big growth in the Gulf this year.
Titan Industries, part of India's Tata Group and the fifth largest watch manufacturer in the world, is aiming to replicate its success in India and achieve big growth in the Gulf this year.
The luxury market has suffered badly in the global recession, says Bhaskar Bhat, managing director of Titan Industries, the world's fifth largest watch manufacturer. But last year he managed to increase his company's profits by 41 percent to $127.4m.
At the same time, the World Gold Council (WGC) says global demand for gold has dropped 34 percent, but Bhat's 505 jewellery stores in India - the world's largest gold market - have managed to increase gold sales by 22 percent.
So how has the Bangalore-based company managed to achieve these economic feats? Basic economic principles, says Bhat.
"The lesson is to spread your risk across segments, across geographies and across price points," he offers.
In terms of segments, Titan has over 1,200 different styles and the latest offering from its design department is Edge: the world's slimmest watch at a wafer-thin 3.5mm.
In its geographical markets, the luxury market has been affected in the Gulf, with growth down in Dubai and the UAE in general. However, Bhat points out that Titan's experience in India has shown that it is the larger cities that have been hardest hit by the downturn, while the smaller cities have still shown some growth. In the Gulf, for example, he maintains sales have done very well in Saudi Arabia, Qatar, Oman, Kuwait and Bahrain.
"We are in all the GCC countries, have been there for more than 15 years, are among the top five brands, and have overtaken many of the Japanese brands," says Bhat. "In volume we do about 450,000 watches [a year] in these markets".
There is a lot of competition in the GCC watch market, with as many as 250 players and Titan holding around a five percent share. However, the Titan brand has enjoyed impressive growth rates of close to 30 percent in the region over the last five years. While the UAE market has fallen flat, the watchmaker's markets in Saudi Arabia and Qatar have been enjoying growth of more than 40 percent, even in 2009.
The company is best known in the Indian market for its mass market brands, but in the Gulf this year Bhat is aiming to move up the price scale and attract more of the big Gulf spenders.
"Qatar has shown us the way that it is possible. In the last three years, we have moved from 21,000 watches to 64,000 watches per annum and Qatar is a small market."
Watches were previously seen as gift items, but research has shown that this is no longer the case and, as a result, Bhat has amended Titan's retail strategy."The watch has become a lifestyle accessory. It is not just for timekeeping anymore," says Bhat. Therefore Titan has changed its retail focus away from traditional standalone watch retailers, towards large scale fashion and lifestyle retailers.
"It is now department stores primarily," adds Bhat. "Watches are increasingly positioned as lifestyle products. Therefore, they physically need to be rubbing shoulders with other lifestyle categories such as perfumes and shoes."
In terms of design, Bhat has observed a number of trends emerging among Gulf buyers. Large watches appear to be the fashion of the moment and are proving very popular. The Middle East was previously fascinated with the ‘gold look', but this is also decreasing, he observes, as white gold and steel becomes more popular - not that India will ever kick the habit.
"The Indian gold jewellery market is the biggest in the world, we are the number one player in India, and have the largest network in 120 outlets," asserts Bhat.
"Indians will not compromise on the amount of gold they will buy for an occasion, for a wedding of their daughter for example. Gold is not like watches or pens or mobile phones. It is more deeply embedded in India than any other category."
Over three quarters of the gold market is jewellery buying and the price should therefore be determined by demand and if global demand is going then the price should come down too eventually, believes Bhat.
"This is a simple thing... [but] somebody has complicated the whole thing by talking about the price of the dollar and that people are buying gold. Somewhere the commodity has to be consumed."
The WGC also reported that it had observed a move towards gem-set gold jewellery, which Bhat describes as a blessing in disguise as diamond-set jewellery is much more profitable and has a higher margin, especially with the price of diamonds dropping.
Outside the jewellery and watches markets, Titan has begun extending its brand into other areas, such as eyewear.
"It is a very underpenetrated market," says Bhat. "We have always entered categories where there is poor consumer service or it is not organised. Jewellery was disorganised before we came, and the watches [business] was rampant with smuggling and poor customer service."
The Gulf is a market in which Titan is aiming for more penetration in 2010; Bhat is aiming to achieve growth of 10 to 15 percent this year and 20 to 30 percent in 2011.
Titan's parent company is Tata Group - one of India's largest and most respected business names - but Bhat believes it is the firm's retail experience in India which will give it the edge.
India is a massive market, with 26 states, many religions, 24 officially recognised languages, over 100 newspapers and more than 200 TV channels. And amid all this, Titan has still managed to become one of the biggest retailers in the country.
"I think we can crack the Middle East," says Bhat. And if it's really all about timing, you are inclined to believe him.