An evening with Mr. Ajoy Chawla: Transforming India’s jewelry value chain, The Tanishq way

On October 1, we had a fascinating webinar by Mr. Ajoy Chawla, CEO of Titan’s jewelry division which includes brands like Tanishq, Mia, Zoya and CaratLane. Titan’s jewelry division has a presence in 200 towns with more than 450 retail outlets and an outsourcing network that stretches across the country.

An engineer by training, Mr. Chawla went on to do his MBA at IIM Calcutta and the prestigious Advanced Management Program at Harvard in 2010. He joined the Tata Administrative Service in 1990 and since then has been with the Tatas. Mr. Chawla was earlier associated with the Strategy and Business Think tank for the Tatas and was responsible for incubating new businesses. Mr. Chawla has also been associated with Titan’s watch business. During his long career with the Tatas, Mr. Chawla has led large and diverse teams and acted as mentor for many managers within the Tata group.

For those who missed the webinar, here is the recording link:
https://www.youtube.com/watch?v=Lu2x3RUDKY4

India’s jewelry market

The jewelry market in India is large but fragmented and unorganized. The size of the market is estimated to be Rs 350,000 crores ($40 bn) with 300,000 retailers and 4 million karigars. Even though 9 out of 10 diamonds in the world are polished in India, the market penetration is still low at about 15%. (Diamonds are mined across the world. They are traded primarily in Antwerp and Israel.) Gold is linked to tradition and festivals. Jewelry is seen as an investment. Though it is a craft led value chain, the karigars have been exploited. At the same time, industry practices are opaque, and the customers are not sure of the purity of the gold they buy. A Bureau of Indian Standards (BIS) survey in Delhi in 2018, revealed that 80% of consumers get only 84.5% value of the money they paid for the gold.

Transforming the value chain

Titan has transformed the industry value chain as shown in the table below.

Early campaign: Tanishq promises

The price of gold is determined by purity, caratage and making charges. Tanishq offers customers the best value when they are exchanging the gold. In the unorganized outlets, customers often get low rates when they exchange gold. Titan has been fair and transparent in this regard, and this has created a competitive advantage. See the video:
https://www.youtube.com/watch?v=eO1ZfwJkVaE

While hallmarking was recently introduced, Titan has been practicing it for 25 years. Hallmarking is the accurate determination and official recording of the proportionate content of precious metal in precious metal articles. Hallmarks serve as a guarantee of purity or fineness of precious metal articles. Hallmarking attempts to protect the public against adulteration.

From investment to adornment led by design

Titan has positioned jewelry as a fashion product which evokes strong emotions. Design is a key pillar for Titan. Every year, Titan introduces 5-6 major collections (which are marketed aggressively) and 10-15 minor collections. Titan has a large design studio. Targeting the youth with lightweight ornaments (14 carats) has been an important strategy.

Titan understands that women are moving ahead faster than society. It is important to understand what the modern Indian woman is trying to express. In many of the campaigns, the woman is the protagonist who is taking along the family/society towards her perspective.

Mia is targeted at the self-expressive modern woman.

The Niloufer Collection brings out the emotions associated with the modern Indian young woman:
https://www.youtube.com/watch?v=vtjbBOtPrlw

Another interesting campaign which again brings out the emotions of a woman is Tanishq Engagement rings:
https://www.youtube.com/watch?v=fYSC8P9n8Hc

Utsah is another eye catching campaign
https://www.youtube.com/watch?v=KzVQ_nY2M9k

Some interesting campaigns to expand the market Moods of the earth.

The campaign is inspired by fascinating terrains, blushing blooms, serene snow, lush evergreens

Products/ campaigns for local festivals

Titan has positioned itself as India’s first national local jeweler.

Celebrating special days

Titan has campaigns around special days.

Rivaah: The brides of Patna
Karwachouth @ Indore

Customer engagement

Titan also takes customers on factory visits to help them understand how jewelry is made. The company also invites customers to walk on the ramp and display new arrivals.

Digital transformation

The pandemic has accelerated Titan’s digital transformation. Indeed, the company has led the way for the industry and for the Tata group when it comes to the use of digital technologies. Initiatives include remote shopping, endless aisle (in-store kiosks which allow customers to browse and order products that are not available in the store), phygital (physical + digital) journeys and new age CRM.

Titan has completely reimagined the customer journey. Consider an example. Roshni and her mother-in-law visit a store in Bangalore to buy jewelry for Roshni’s daughter’s wedding. The salesperson Lakshmi shows her collection but feels the need for the involvement of a regional wedding expert. She video calls her Bhubaneswar colleague, Kamal who builds rapport with Roshni’s family in Odiya. She shows them the complete range and accessories. Roshni selects what she needs from the Bhubaneswar store. Finally, the jewelry arrives in Electronic City, Bangalore. Today, video shopping, endless aisles and other digital initiatives generate about 14% of Tanishq’s business through omnichannel marketing (Rs 250 crores per month).

Digital also facilitates personalization. This has led to customized orders of some 160,817 units and revenue of Rs 1547 crores in the current year.

During the Q&A session, explained the digitalization journey of Titan in more detail. Influencing customers through digital marketing and search engine optimization is quite common today. Titan also has a very good website which attracts 2.5 million unique customers every month. To engage customers, Titan uses live chats. The chat may start with a bot, but it is quickly handed over to a human agent. Then there is collaborative selling which has already been covered. The whole idea is omnichannel integration that enables customers to choose the channel they want when they buy jewelry. Technologies like video call shopping and virtual remote rooms facilitate remote purchases. At the back end, Titan uses digital certification, digital accounts for the golden harvest program (smaller monthly payments to buy gold on maturity) and remote KYC. Summing up, Mr. Chawla mentioned that digital technologies are available for any company today. The trick is to customize them so that employees and customers can be nudged to embrace them and use them to their advantage.

Manufacturing

Titan has transformed an unorganized and inhuman value chain. As mentioned earlier, karigars have been traditionally exploited in the industry. They work in inhuman, overcrowded and polluted settings. Not only has Titan provided them a more human and ergonomic environment with no pollution, but it has also trained them intensively. Some 14,000 karigars are part of the Titan jewelry ecosystem. The company has also taken care of their Covid vaccination.

Responsible sourcing

Titan uses the 4 P framework:

People: Focus on safety and health
Process: Standardized operations
Place: Proper working environment
Planet: No harm to nature

While tying up with partners, Titan insists that the karigars must be brought under one roof and good working conditions be provided to them. Integrity, consistency in the way gold purity is declared and being on top of the basics are other important criteria while selecting partners. Titan has transformed a craft driven industry into one led by engineering. Many of the conventional manual processes have been automated.

Leading the customer:

The campaign aims at encouraging customers to celebrate the festival of life.

Summary

Mr. Chawla concluded his session with the key takeaways.

• Titan has thought about the end-to-end industry ecosystem rather than just its own market.
• The company has focused more on customers and understanding their needs, stated and unstated rather than competitors. It is important to build trust and that takes time. There are many touchpoints and trust must be built with the customers at each point.
• What is needed is a focus on each customer, that is an N=1 approach.
• Titan has believed in developing an authentic point of view that is consistent with what the company actually is. Titan has understood that the future emerges from our imagination. Only imagination limits our dreams. We must dream big.
• Leading requires courage and commitment. Titan has broken many traditional rules and gone against the norms of the industry.

As Sudhakar added, some 5000 years back, ornaments became popular in the Indus valley. If it was adornment by chance then, what Titan has attempted to do in recent years, is to encourage adornment by desire. With energy, foresight and determination, Titan has tried to encourage adornment and self-expression in a modern format with a completely transformed value chain.

Q&A session

The session was moderated by Prof R Prasad and Prof Sudhakar Rao.

On global trends in the jewelry industry

Jewelry is a more local industry compared to say watches or fragrances. Design, language, material, etc. vary from region to region. So global trends are not easy to identify. Having said that, Mr. Chawla pointed out that it is important to take note of some meta themes. These include minimalism, self-expression through colors, blurring of genders, etc. These meta themes have to be translated into something relevant for the local customer.

The pandemic has underscored the importance of above the waist expression. In today’s virtual world, we only see the upper part of a person. What Titan is attempting to do is that the jewelry is being worn by the person instead of sitting in the locker. One way to facilitate this is by making jewelry lightweight.

With gold prices going up, demand for platinum and diamonds has gone up. Lab grown diamonds is another emerging trend. (A lab-created diamond is “grown” inside a lab using cutting-edge technology that replicates the natural diamond growing process. The result is a man- made diamond that is chemically, physically, and optically the same as natural diamonds.) They are more affordable. Sustainability is also an important global theme. In short, despite being a local industry, there are some global trends waiting to be understood and leveraged.

On the importance of regulatory reforms

As mentioned earlier, jewelry is a fragmented business dominated by the informal sector. The more formal the sector becomes, the better it will be for the customer and for society. There is a need to curb gold smuggling. Banning gold imports does not help. If gold imports are allowed, the government can earn good revenues. How gold circulates within the economy and how black money is hoarded in the form of gold, is a topic in itself.

There are many unlawful activities associated with the industry, like the use of blood diamonds. Traceability is needed to verify both the source and purity. Hallmarking is important.

It is important to enable hedging in the domestic market. Currently the domestic market lacks liquidity.

On the price of gold

Gold prices are volatile and fluctuate quite a lot. The prices are driven by international demand and supply rather than by jewelry use during the festival season. Central banks and bullion traders dominate the market. During economic and political crises, gold becomes a safe haven and prices go up. There is a negative correlation between the prices of gold and the dollar. It is difficult to predict gold prices in the short run. But in the long run (50-60 years), it is safe to expect gold prices to grow at 4- 6% CAGR. Titan hedges 100% of the gold needed and does not take any open position. But many local jewelers leave their exposure uncovered to take advantage of the volatility.

On gold as a luxury item

Mr. Chawla pointed out that luxury is traditionally associated with exclusivity. But Tata brands like the Taj and Vistara have been providing warmth and hospitality while trying to make luxury more inclusive. Titan believes it is important to invite more and more people to express themselves and aspire for the good things of life. It would also be simplistic to describe jewelry as a discretionary item. It is viewed as an asset by many Indians and treated as an integral part of festivals and weddings. Indeed, jewelry is seen as something precious with a deeper meaning in the psyche of the customers. After the lockdown ended, even if travel did not take off and marriage celebrations were toned down, people rushed to buy gold. They looked at it as a symbol of love. So instead of treating gold as luxury, it is best considered as something which evokes emotions and is deeply connected with our culture.

On understanding customers

The best way to understand customers is to go out and meet them. Mr. Chawla has found it very useful to stand in the stores and observe customers. Market research is also useful. It can provide both qualitative and quantitative insights. Titan also hosts many partner round table conferences with advertising agencies, etc., to understand the customers better. Titan also undertakes customer sentiment analysis. In these studies, Titan looks at the larger universe of consumer spending and tries to figure out the role played by jewelry. By studying and observing customers, Mr. Chawla has picked up several useful insights. For example, value and self-expression go together. It is not one versus the other. People have had a tough past and face an uncertain future. So, they have an innate need to celebrate the present.

On the shift from 22 carat to 14 carats

This is not a universal trend. Most customers still prefer 22 carat gold. It is more applicable to gold studded with stones and the younger customers who prefer to wear something lighter. Plain 14 carat gold jewelry has not taken off.

On higher making charges at Titan

Purity, making charges and the gold rate determine the price which the customer ultimately pays. Titan has much higher design and quality standards. Because of the quality of finish and craftsmanship, Titan does charge a premium for jewelry making. Since Titan conforms to LBMA (London Bullion Market Association) norms, it does charge a higher mark up over the market rate, about Rs 50-75 per gram. But Titan is completely transparent in what it does. Customers know exactly what they are paying. When they exchange gold at Titan, they get better prices than what other jewelers offer. Unfortunately, many players have tried to create the perception that Titan has higher making charges.

On Titan’s internationalization plans

Tanishq has focused by and large on customers in India. But it has been serving customers across the world using online channels. Tanishq has two stores in the US. The middle east is another important overseas market. The company mostly targets the NRIs. Titan’s overseas expansion plans have been delayed due to the pandemic. And with many expansion opportunities in India, the focus has been largely domestic so far.

On how Titan responded to the pandemic

When the pandemic broke out, the management first reached out to the employees to check their wellbeing. The store employees who were all at home, were encouraged to call up their customers and check their wellbeing. These “empathy” calls covered some 1.4 million customers in 2 months and were well received. In some cases, help was provided to the customers. During the second wave when staff called up customers, the staff were told politely not to bother unless they could arrange for hospital beds or oxygen concentrators. This was an important lesson for the store staff. It is important to be authentic. “Put on” behaviors do not help. The staff decided not to make unnecessary calls. Instead, the focus shifted to helping customers where Titan had the necessary resources. Titan also took various steps to institutionalize strong safety protocols in the stores, including ultraviolet sanitization of phones. Soon the stores were seen to be safer than homes! Effectively, during the pandemic, safety has been equated with trust. Thanks to all the measures taken, Titan has been able to build trust with the customers. This is turn has led to increased market share.

On how Titan manages logistics

Titan does not import any gold. Imports can be done only by banks. Similarly, diamonds are imported by the cutters. Some 55% of the gold needed in the country is imported with the remaining being sourced through exchange. Much of Titan’s logistics happens within the country with some 220 towns and warehouses involved. Reverse logistics is also important. Unsold stocks and customer returns have to be handled efficiently. Though some of the functions are outsourced, Titan has a large inhouse logistics team. To handle international consignments more effectively, Titan has set up warehouses in GIFT city and Sree City.

On women and diversity

Mr. Chawla explained that Titan takes diversity and inclusion very seriously. Some 60% of the store staff (on rolls and with franchisees) are women. There are many policies to support women. Though many women do not prefer to become store managers owing to domestic compulsions, quite a few important functions are staffed by women.

On certification/ skilling programs for entering the industry

There are many jewelry design institutes which also teach CAD. Graduates of these industries are recruited by the jewelry manufacturers. There are various training programs to help people understand how jewelry is manufactured. There are also training programs for modern technologies such as direct casting and 3D printing. In addition to these design and technical roles, MBAs are employed in functions such as retail, merchandising, sales, product management, supply chain management, etc.

An excellent session by a very knowledgeable leader. Very good moderation by Prasad and Sudhakar.

We thank Dr. Vedpuriswar for bringing out the highlights in the form of this note