Corporate: Marketing; Timex learns to stand on its feet

CORPORATE
Timex learns to stand on its feet

The break-up with Titan has made Timex go back to the drawing-board
and develop better, more feature-rich products at lower prices.

By Rajeev Dubey

In March, 1998, R.J. Masilamani, Managing Director, Timex Watches, was in Bangalore when he got a call from his company's Noida (near Delhi) factory. It was an sos from a worried executive who said Timex's joint-venture partner and watch and jewellery major, Titan Industries, had suddenly stopped its offtake of Timex watches that it sold through its network of showrooms.

Under an 8-year-old agreement, Titan, which had a 28.79 per cent stake in Timex, handled the marketing and distribution of watches made by Timex. Now, in one sudden move, it was ending the relationship. Masilamani was informed that Titan would stop distributing the watches with effect from April 1, 1998. Recalls Masilamani, 54: "It was an abrupt ending. We were expecting a phased withdrawal over a period of 18 months."

Overnight, 25 per cent of Timex's sales, made through Titan showrooms, disappeared. At that time, 60 per cent of Timex's sales came from its own re-distribution stockists and 15 per cent from dealers. The natural corollary to the face-off between the 2 partners was a share-purchase agreement signed on February 11, 2000, according to which Timex Watches bv would buy out Titan's 28.79 per cent stake in the Indian company, Timex Watches, thus increasing its stake to 58.46 per cent.

Coping with the break-up blues

Masilamani's real problem was that his company's factory was rolling out watches and he didn't have a channel to sell a fourth of its output. Since then, Timex has hastily set up a nationwide network of 30 exclusive showrooms (2 more are expected by end-2000). Still, that's not enough. Titan, for instance, has over 125 showrooms in the country. Predictably, the Titan pull-out has hurt. Timex's 1998-99 sales at Rs 66.52 crore were 8.93 per cent lower than the previous year's Rs 73.04 crore. And losses mounted from Rs 1.55 crore to Rs 17.51 crore. But Masilamani puts up a brave front: "The break-up was good for us."

Although the break-up came abruptly, it was in the offing for a while. Only, Timex didn't read the signals well. For instance, despite a non-compete agreement that Titan would not launch watches priced less than Rs 1,000, leaving the price band for Timex, Titan shortly rolled out 2 new ranges--the Sonata (Rs 375 plus) and Dash (Rs 250 plus) before the break up. Says Masilamani: "It was difficult for them to sustain volumes, and the Indian market was not ready to accept Rs 1,000-plus watches."

But first, a look at what Masilamani is up against. The 30 million units per annum Indian watch market is plagued by the unorganised sector, which accounts for as much as 60 per cent of the total annual watch sales in the country. Watches sold in the unorganised market are priced in the rock-bottom Rs 30 to Rs 300 range, posing a threat to organised players like Titan, HMT, Timex, and PA Time Industries. Titan sells 51 lakh watches, HMT 34.8 lakh watches, Timex 16.1 lakh, and pa Time Industries 12.0 lakh. The other small brands and imported watches account for 0.61 million of the 12 million units per annum organised market.

How does Masilamani plan to tackle this? For one, he's set himself a stretch-target of getting a 30 per cent marketshare of the organised sector, up from the existing 13.42 per cent. For this, Masilamani is planning to shrink his range of watches over the next 12 months, from the existing 600 models to 400. This is in line with an internal study that concluded that 80 per cent of Timex's sales come from just 200 of its styles.

Timex will also leverage its US pedigree heavily to first upset warhorse HMT from the No. 2 slot, and then aim at market-leader Titan. Timex's dominance over the US market is so great that the second-largest player, Citizen, has a marketshare of only 5.50 per cent. In keeping with its worldwide practice, Timex will overhaul its range every 2 years. Says Masilamani: "We are very strong in cutting-edge technology. It will be very difficult for anybody to replicate our models."

Taking on the small players

The biggest challenge Masilamani faces is in tapping the unorganised sector and getting consumers to graduate to the Timex range. The below Rs 500 watch segment accounts for 70 per cent of the Indian market--a majority of which falls in the grey market. Says Masilamani: "It's a very competitive industry. We're fighting a large faceless agglomeration. The dice is loaded against us." But he has not stopped trying. Although Timex started out with a Rs 450-Rs 1,200 range of watches, it has now widened its range to capture segments at the upper and lower ends. Its new Timex Basics is available for as low as Rs 350 while, at the top end, prices go up to Rs 3,000 (Timex Vista, a gold-plated metal watch).

But can Masilamani get Timex to make money? Currently, the company is losing 26.32 paise for every rupee of sale. Masilamani, however, insists that the company is on the recovery path. One way, he says, that Timex has tried to beat competition is by benchmarking competitors' products, and then going back to the drawing board and developing a better, more feature-rich product at a lower price. The company has then tried to capture the value-for-money proposition. Claims Masilamani: "Our margins are improving."

Though Timex posted losses in the first, second, and third quarters of the year--Rs 4.98 crore, Rs 2.98 crore and Rs 1.23 crore, respectively--the fact that the company's losses have been reducing is, definitely, a positive sign. In fact, Masilamani hopes Timex will end the year on a positive chime. That, of course, will only happen if his strategy works like clockwork.

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