All that glitters is gold

With the revolution that is sweeping through the Indian retail world and policies quickly evolving to ease the way for the entry of foreign brands into India, the luxury lifestyle segment is going to see rapid growth in the years to come. Gitanjali Group, set up in 1966, has been the forerunner of the transformation in the jewellery industry in India, having always been a step ahead of the marketplace.

Gili, an 18-carat diamond studded brand, a part of the Gitanjali Group, was launched in 1994, ushering in the birth of branded jewellery in India. Today, Gitanjali Group retails branded diamond and gold jewellery under the brands Nakshatra, Asmi, Gili, D'Damas, Sangini, Collection G, Gold Expressions and Vivaha Gold through 840 outlets and has more recently launched its plain gold jewellery brand called "Maya Gold", Such has been the power of branded jewellery brought in by Gitanjali Group, that the women force in India has not been able to get enough of the Nakshatra endorsed floral designs, signifying the constellation effect.

Gitanjali Gems has plans to open 150 branded stores in tier II cities across the country, over the next two years. The company also entered the lifestyle segment in 2006 and subsequently entered into various alliances with international luxury & lifestyle brands, with arrangements to retail their brands through its lifestyle stores in India.

Retailer: Gitanjali has been the forerunner in initiating branded jewellery in India. How do you feel that the consumer has accepted the market transformation from traditional to modern & branded over the years?

Mehul Choksi(MC): The Indian consumer has undergone the rational metamorphosis and has developed trust in a jewellery product sold off the counter, following the MRP pattern. People today, feel more assured of the quality of a branded jewellery product which offers standardisation. The young India consumer's perception of jewellery has changed from buying an asset to a more wearable, fashion accessory.

Retailer: There has been a significant increase in the business-mix of the company during the last few years. Gitanjali is venturing into jewellery retail, SEZ and lifestyle retail businesses to tap new high growth with high margin potential. What sort of growth are you expecting over the next couple of years, taking into account the contribution of these new ventures?

MC: We are expecting significant growth from these sectors. We have just ventured into lifestyle retail and are very much confident that it would start bringing the desired results in the next two years’ time. The contribution from jewellery retail is much significant & has been going up steadily. We are also concentrating on enlarging the share of jewellery retail, as margins and value addition are much higher in jewellery retail.

Retailer: How do you see the acquisition of US-based Samuels and Rogers in the Gitanjali Portfolio? Do you have any other acquisition plans in the international or domestic market? Would you say it is a good time for Indian companies to look at overseas acquisitions?

MC: Samuels and Rogers have helped us gain a strong foothold in the US market. The return on investment on the acquisition of the US retail chain Samuels and Rogers has been excellent, with a pay back period of 2.5 – 3 years.

With the global business slowdown, in a sense there will be more opportunities as valuations will go down. However, it is also a time to tread with a lot of caution and rushing into deals can be detrimental. We have been receiving many offers to buy companies, particularly in the United States and Britain. The group is also looking at possible purchases in China. Gitanjali is always keen on business opportunities which are consistent with its philosophy of adding incremental value at every level of the supply chain, thus ensuring greater shareholder value and bottom line profits.

Retailer: How do you plan to strengthen your jewelry business further, to drive profitability? What is your outlook on the growth in the Indian diamond and jewellery industry over the next couple of years?

MC: Although the Indian market is quite huge in size (USD 25 billion), the share of branded jewelry is a meagre 3-4 per cent and it is estimated that the share of the organised market would go up to anywhere between 20 to 25 per cent in the next 8-10 years’ time. Gitanjali, with all its branding and retail penetration is ideally poised to take advantage of the increased share in the organised market. Our revenues have been rising at 75 per cent in the financial year 2008 and to give a further fillip to profitability, we need to increase our product portfolio, introducing more variety in jewellery. We would also be growing our target audience to target more youth & men in coming years.

Retailer: How much investment are you planning over the next 2-3 years for the growth of the group at large? Are there any other verticals that the group is likely to foray into?

MC: The Group is ambitious about its foray into realty and infrastructure. We also plan to increase our brand portfolio in jewellery and start an accessories line. Gitanjali Lifestyle plans to set up retail stores across the country and will tie up with various brands worldwide in the domain of luxury retail, lifestyle & fashion. The group has more than $200 million in cash and would get Indian financial institution support if needed. We also aim to lift the operating margin to 10-12 per cent in the current financial year from about 8-9 per cent last year.

Retailer: The retail industry is going through a trying time. How do you think the global recession, inflation and slowdown will affect the retail industry in India? What measures should retailers take to beat recession?

MC: Consolidation is imminent in the retail sector today. The $300 billion Indian retail industry has attracted the who's who of India Inc. and many other foreign investors who want to ride on the Indian retail bandwagon; however, the unexpected inflation or the economic slowdown has played spoilsport and dampened retail industry expansion plans. Today, when consumers have a chokehold on their wallets, cutting edge innovations will help retailers keep pace and basic fundamentals of retail need to be revisited. The markets always have a hidden potential despite the slump.

Retailer: As India tops amongst the emerging markets as a business destination, what best retail practices from across the globe would you adopt in your stores to create a win-win situation for both consumers and retailers?

MC: In today's fast-moving economy, no brand is invulnerable, and longevity does not guarantee a future. Therefore, we are always keen to adopt best practices whether they come from abroad or taking good practices from other industries.

Retailer: The quality of retail talent is not able to catch up with fast paced retail growth in India and attrition is another big area of concern. What special measures would you recommend for improvising the quality of retail talent and overcoming retail attrition in India?

MC: Setting up institutes that cater to retail education & training will go a long way in answering this challenge. Better incentives to the employees will ensure better output, as retail is a labor intensive industry with long man hours involved. Employee satisfaction will ensure improvement in overall performance of the retail companies, which will take the business to new levels of prosperity.

Retailer: Do you feel that retail technology has been well accepted both by retailers and consumers in the present organised retailing in India? Do you feel there is room for improvement?

MC: Yes the retailers are graduating to understanding the importance of technology. There can be no denying that technology is one of the drivers of retail the world over, and the boom we have all been a part of, owes to it. Today, the changing market trends demand the retail industry to expand its reach to more customer touch points, so as to drive them to the retail points. 'Low investments and high returns' are now made possible with the arrival of technology enabled marketing services. The retail industry should realise that it would be at a fair advantage of including technology enabled marketing services to unfold the immense retailing opportunities.

Retailer: Are there plans to expand Gitanjali brands like Nakshatra, Asmi, and Gili in overseas markets like Europe & the US?

MC: We see huge potential for the company in the international market and some very interesting business opportunities are on the anvil which we would announce, as & when we embark upon them. We have plans for line extensions of each brand. Besides, with the full continuum of value chains, we have remarkable supply chain possibilities in the very interesting retail arena in the international market, mainly in the US and China.

Retailer: Looking back, are there any specific decisions that you feel have resulted in significant landmarks being created in the Gitanjali group for any particular reason?

MC: The launch of Gili truly began a new era, when traditional jewellers dominated the market. We grew and nurtured the brand that is today, an icon in itself. The acquisition of Samuels and Rogers in the US was another notable milestone we achieved.