Titan aims to set up 300-400 eyewear stores in three years

Titan Industries Ltd may have got its eyewear business wrong in the beginning, but S Ravi Kant, chief operating officer, eyewear business, tells DNA things are back on track with a revised strategy that has crunched the expected break-even time by trimming capex and pushing up volumes.
 
You had to close down some large -format stores set up in the initial years of your operation. Did you miscalculate on the format? 
In the beginning, we opened many big stores but (found) consumers will take time to warm up to this category. Unlike in European countries, where it (spectacles) is a style accessory, people here still buy specs only when their number changes or it breaks.

It is still a very functional category as opposed to a style accessory category in the West. That is the direction in which we want to take it. In the initial years, we felt it makes sense for us to look at stores which are more conveniently located to the consumers.

Now, it so happened that our expansion happened in the peak rental year. It’s like entering the stock market when it is at peak and then you realise the market has crashed and you tell yourself what have I done? That’s how we got into a lot of high-street, premium-location, large-size stores.

There were about 7-8 stores, which we felt were not viable in the long run. Those were the ones we had closed down but we have not exited from the catchment (area). We have just relocated ourselves in the same catchment but may not be in the prime high street.

We (now) have smaller stores but in the same catchment because we have developed a customer-base (there). But we are now expanding.

Has the revised strategy to go for smaller stores reined in capex?
At the store level, there is a minor difference. Frankly, if you ask me there is very little expenditure on stores. The capex in not entirely incurred by the company.

Most of our stores are franchised. Even if you look at company stores there are two kinds of expenditures — one is the interiors and the other is clinic. So, whether it is medium-size or large store, the clinic investment is the same.

Also, in smaller stores we try to accommodate as much as we can in terms of counters and everything else within that size. So, it finally comes down to savings at the level when you move to smaller format stores.

It must have advanced your breakeven too?
It would. That was the whole idea (of going for smaller format stores) — to break even earlier at the store level. At the business level, as long as you are in the expansion and investment mode, it is not possible to break even.

Currently, you can say we are in expansion and investment mode. Our expansion is in terms of stores and investment is in terms of brand building.

Unless, it reaches a certain threshold level, it doesn’t even make sense to look at our advertisement to sales ratio and those kinds of things. We expect to break even by fiscal 2013 at the company level.

When do you expect to get out of the investment mode?
For next couple of years, we will remain in this (investment) mode because we are expanding very fast. We are already 110 stores in India and we’ll be 150 stores by March next year.

We will be 300-400 stores in the next 2-3 years. So, 2012-13 is when we will kind of stabilise in terms of financials.

When do you plan to tap the overseas market?
Not immediately. Like I said, the opportunity in India itself is so big. In developed markets, there are already big chains but it’s not that we will not look at the overseas markets at all. It’s just that our whole focus is on the domestic market right now.

Would you look at another change in formats?
Not in terms of services or quality of services, but it is largely in terms of the number of clinics to be had in the store. So, we would look whether to have one or two clinics. We have fitting lab within a store, where lenses are cut and fitted in the frame in the same location as opposed to going to some central location.

What has been your capex for the lens manufacturing unit in the outskirts of Bangalore? Do you plan to scale up there, too?
Last year, we have got into manufacturing of lenses. We started with an investment of close to Rs15 crore but it can be scaled up. Currently, it’s catering only to our store. The current capacity is 10,000 lenses a month. We plan to expand that once we start contract manufacturing for other players in the eyewear sector.