Home > industry > retail > Demand for jewellery affected by uncertainty in gold prices: Titan

Bangalore: Shoppers postponed buying jewellery in the September quarter till this festive season because they were expecting gold prices to fall, and though the demand for lifestyle products has improved from last year, most are still spending cautiously, Titan Co. Ltd’s managing director Bhaskar Bhat said.

Jewellery generates 80% of Titan’s business and roughly three-quarters of the jewellery sales come from gold. Gold prices have dropped more than 20% over the past year.

“It’s been slow but steady from a consumer sentiment point of view, which is preferable to wild swings," Bhat said in an interview. “Jewellery demand has been hit by the uncertainty in prices. There’s an expectation of a fall in price so people are holding back. The eyewear business continues to be driven by need. The watches business is slow and steady."

Still, several analysts expect Titan to report sales growth of more than 45% for the September quarter, primarily because of a one-time benefit related to the end of the company’s Tanishq Golden Harvest Scheme. Under the scheme, customers paid 11 monthly instalments on gold purchases and Titan gave these customers one month’s instalment as a promotion or discount.

The demand for diamond jewellery has been better than the company’s expectations this year, because of promotional schemes and small price cuts, he said.

Titan shares have risen more than 70% over the past year partly as the government moves to curb gold demand, which helps fuel the fiscal deficit, did not hurt Titan as much as investors expected. In general, stocks of consumer goods companies have risen sharply over the past quarter.

“Titan is one of the best-positioned companies to take advantage of the bounce-back in urban demand that is likely to happen soon," said Abneesh Roy, associate director at Edelweiss Securities, a brokerage. “Considering that consumer confidence in India is very high right now, discretionary spending is likely to improve significantly. Titan has a great penetration of stores across urban India and is a quality brand. So it will benefit greatly from rising discretionary spends."

In July, the government asked Titan to stop its Tanishq Golden Harvest Scheme, which contributes more than 20% of its sales.

Titan has received shareholder approval to launch its new gold jewellery scheme in October, replacing the Golden Harvest Scheme, Bhat said. The new scheme will offer customers an effective interest rate of 12% compared with more than 15% earlier, and the interest would be given as a promotion.

“We’ve got shareholder approval. There are some procedural matters remaining but we should be able to (launch the scheme in October)," Bhat said.

Titan said on 6 October it started selling jewellery products to customers in the US, the UK, Singapore, Australia and the United Arab Emirates from its website. Titan has a separate e-commerce team led by Alokedeep Singh, who was previously an e-commerce executive at ICICI Bank and ING Vysya Bank.

Retailers are increasingly trying to adopt the hybrid retail model, which involves having both online and offline store presence, after seeing sales hurt by the e-commerce boom. Titan, however, has been much less affected than some other offline retailers such as Croma and The Mobile Store because most Indians still prefer buying jewellery from a store.

“We look at e-commerce as a channel of sale that is integrated with other channels. E-commerce accounts for less than 1% of Titan’s sales but we are looking at aggressive growth in this channel over the next few years," Bhat said.

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