EARLY YEARS
By the 1980s, Titan (the parent company of Tanishq which produced watches) had successfully captured the Indian market. At around 2 a.m. local time on August 2, 1990, Irani soldiers invaded Kuwait. The US had recently invaded Iraq in response to Saddam Hussein's annexation of Kuwait. Prior to the invasion, Kuwait and Iraq produced around 4.3 million barrels of oil per day. This intrusion resulted in the 1990s Oil Shock, wherein the oil prices surged radically. In October, a barrel costing USD21 had increased to USD46. Due to a shortage of oil deposits in the nation at the time, India purchased oil from other countries. This Oil Shock put an enormous strain on the Indian economy since India paid for imported oil in dollars. In June of 1991, India had less than a billion dollars in foreign reserves, which were only enough to cover three weeks of imports. India even attempted to remedy the problem temporarily by borrowing funds from the International Monetary Fund (IMF), but this strategy flopped. As a result, India began to reject businesses that needed dollars because they intended to spend them on the purchase of oil. The Indian government instructed the businessmen to earn or borrow money from a third party and then spend it entirely on their own.
Titan chose to pursue a plan of creating and selling jewelry in Europe to acquire enough currency to import watch components from Europe. The proposal then stated that these imported components would be utilized to manufacture additional watches in India, which would subsequently be marketed all over the world.
India initiated its liberalization program in 1991, allowing international corporations to set up divisions and invest in India because the Indian government believed that its domestic players were ready to compete with international competitors. As a result, the impacts of the Oil Shock gradually faded. Liberalization enabled India's information tech firms, such as Infosys, to earn substantial sums of foreign currency.
Titan chose to concentrate its Jewelry business on the Indian market after 1991. Gold had a huge potential in India since it was regarded as an investment rather than an expense. Even the poorest and most conservative households were enthusiastic about purchasing jewelry and were willing to spend a large portion of their earnings on it.
INITIAL FAILURES
Unfortunately, Tanishq failed terribly in its first goal of supplying gold to Indians, and there were discussions of selling Tanishq owing to its poor state. There were three reasons for Titan's initial failure in India's Jewelry segment:
1. The hurdle of trust:
Local and unorganized competitors had successfully captured the Indian Jewelry industry since, according to Indian tradition, an Indian family exclusively trusted local family jewelers. Each family, like a family doctor, had its own permanent jeweler from whom they acquired gold for numerous generations.
2. Overemphasis on design:
Titan emphasized the design of the Jewelry with the assistance of its professional technical expertise. At the time, 22k gold was the gold standard, with 91.6 percent gold and 8.5 percent alloys. Titan attempted to launch 18k jewelry because it was more durable, gave a better grip, and was less vulnerable to scratches. They had no clue that because gold was seen as an investment rather than an expense by the Indians, the percentage of gold was far more important than the design of the gold.
Local family jewelers typically misled consumers by lowering the quantity of gold in order to reduce fixed expenses and generate higher profits at the same price. These clients were completely unaware of the malpractices, and Tanishq recognized this tendency in the Indian jewelry sector as a potential for long-term customer acquisition. And here is where the Karatmeter method comes into play. The Karatmeter is a machine that uses modern X-ray technology to evaluate the purity of gold in a given piece of jewelry. Because this equipment was so expensive, its use was not prevalent in India.. Tanishq imported these machines from Switzerland and installed them in their stores. It then allowed anyone to walk into their stores and check the purity of their gold completely free of cost. As gold held high value in Indian houses, large crowds rushed to these stores to verify its purity of gold. And to their surprise, most of them found that they were being cheated on for generations by their so-called 'trusted family jewelers'.
Tanishq used another mind-boggling approach known as the 19-22 plan after making Indians aware they were being duped. Customers could get the purity of gold checked by the Karatmeter installed in Tanishq stores, and if the purity of the jewelry happened to be lower than 22k and higher than 19k, they would be eligible to exchange that jewelry for 22k jewelry from Tanishq and would only have to pay for the making charges, while Tanishq would bear the cost of gold. Tanishq was not making a profit, but rather depleting its money by implementing this method, in the eyes of the typical citizen. However, when studied extensively, it was striving for long-term client acquisition, which justified the short-term loss. Furthermore, once a consumer is brought into the economy of a given organization, he or she has the potential to create income in lakhs, if not crores, of rupees.
Titan established the Tanishq Gold Harvest Scheme, which was similar to a SIP for gold, in order to break down the trust barrier. This strategy allows you to buy gold in monthly installments rather than all at once. This enabled many middle-class and lower-middle-class households to purchase gold from Tanishq.
This is how Titan was able to establish the biggest Jewelry company in the Indian market. Hope you got valuable insights from this post!
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