INDIAN INSTITUTE Of MANAGEMENT RAIPUR
CaratLane
Authors: Abhilasha Kale, Ankur Katiyar, Ashwini Mahoorkar, Avishek Chatterjee
CaratLane is the biggest online jewellery company in India and has recently opened 6th store
in Bangalore and 39th in country. It was founded by Mithun Sacheti and Srinivasa Gopalan in
2008. Mithun Sacheti, a jewellery retailer, collaborated with Srinivasa Gopalan who is
an IT entrepreneur and the founder of Lister Technologies, to form CaratLane. It also
launched an app that uses facial recognition and 3D imaging technology to allow customers
virtually try on the earrings available on their site.
Their mission is to make beautiful jewellery accessible, affordable and forever wearable.
Jewellery that not only makes a woman look beautiful, but also make her feel beautiful and
loved. They surveyed women across the country and discovered that they were forced to
choose between expensive jewellery for special occasions, and everyday jewellery that was
of inferior quality and was not keeping pace with their changing lifestyle needs, which was
the reason they did not have access to stylish fine jewellery for everyday wear. Then, they
started CaratLane to make modern designs that can make women not just look, but feel
beautiful, every day!
In 2016, they joined forces with India’s most desired and largest jewellery brand, Tanishq,
through a strategic investment made by Titan Company in CaratLane. Also , their online
footprint is now complemented by their growing store presence and they are the world’s first
truly omni-channel jewellery brand.
History of the company
2008- foundation year
2011- identified as the top 20th ecommerce sites in India in a study conducted by
Dataquest, Sapient Nitro and JuxtConsult
Tiger Global started its investment in CaratLane
2015 (August) -launched an app that uses 3D imaging technology and facial recognition that
allowed customers to virtually try the jewellery that was available on their site.
2016 – Titan purchased a 62% stake joining forces with Tanishq which is India’s most desired
and largest jewellery brand.
2019- Titan increased its stake from 62% to 66.47%
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CaratLane: A Report
Competitive Dynamic in Industry
CaratLane faces competition from KuberBox, Velvetcase, jewelsify, bluestone, gold n stone
etc. It makes bulk of its sales from its retail stores out of which two-thirds are owned by
franchisees. Its online sales contribute to 40% of its revenue. They have made it simple for
the customers to explore their elegant designs removing friction from purchase. Usually, the
customers browse the designs online before visiting the stores. They have also facilitated a
try at home option which contributes to higher hit rates.
CaratLane launched different social media campaigns like #HazaroonMeEk,
#WondersOfWomen #StateYourStyle giving the brand an identity, personality and emotion.
[Link] is the major competitor of CaratLane in India. Below is the competitive
analysis of CaratLane with Bluestone.
Factors CaratLane [Link]
Facebook 2 Million followers 1.1 Million followers
Instagram 335K 71.4K
YouTube 305 videos 92.2K subscribers
Business Models
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CaratLane: A Report
Customer Value Proposition
• Offers Diamond jewelry with more choices
• Better quality and services
• Lower price
• Wide range of selections: It has ties with over 4000 suppliers from across the
world and CaratLane offers a wide range of up to 90,000 loose diamonds of all
colour, cut, clarity and carat combinations. This is in contrast with normal jewelry
stores which only have about five to fifty diamond jewelry in their inventory.
• Better Customer Service: Besides virtual storefront, CaratLane also delicate
webpages to educate customers on diamond purchase and offer comparison so
that customers will be able to make informed decisions and enjoy long-term
satisfaction with their purchases.
In addition, it has diamond consultants operating throughout the day to clear its
customers’ queries. This service help to complement its online business model in
answering any customers’ queries not answered on the online portal.
Quality Assurance: A key to CaratLane’s business model is that as a product, diamond
is standardised by universally accepted specifications – cut, clarity, colour and carat.
Hence once certified, diamonds of the same specifications are homogenous and
minimal value is added by the Brick and Mortar retailer. With its own manufacturing
facility and scientific automated processes, CaratLane is able to enforce tight quality
control. This enables CaratLane to achieve customer intimacy as it is able to deliver
highest quality diamonds with exact specifications and internationally recognized
certificates.
• Customization: Utilising interactive Web features, customers can make their own
customized solitaire jewellery by choosing from various designs of rings, pendants or
earrings that are available on the website.
• Ease of purchase: The online model allows consumers to shop 24/7 at their
convenience with just a click of the mouse. The portal was also designed for ease of
navigation by webpage experts and offers multiple payment options both offline and
online to satisfy all needs. Moreover, CaratLane has efficient delivery system which
allows the custom-made jewellery to be shipped to the customers within 10 working
days. This is shorter than the time its competitors take which can took around 2 weeks
usually.
• Low prices: Due to its virtual storefront, CaratLane is able to gain cost saving on
overheads such as setting up of showrooms and retail stores. These factors enable
CaratLane to price its diamond jewellery up to 25% cheaper than its competitors.
• Brick and mortar stores: For the people who would like to shop in store.
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CaratLane: A Report
Revenue model:
CaratLane manufacture its own diamonds. It takes on a sales e-commerce revenue model.
They sell the jewellery manufactured by them online. The advantages of having low
overheads and inventory costs as an internet business allow it to increase its operating margin
and offer lower prices.
Market segments:
They target younger generation of age 20 to 45 years who like shopping online. They target
modern day working independent women who like to wear light classy jewellery.
Growth model:
• The access to Titan's infrastructure has been a great support to the growth of
Caratlane. The trust the Tatas and the Titan owns is important to the online jewellery
business, which has to be built on trust
• Caratlane is going for omni channel strategy with both online and brick and mortar
stored
• Caratlane is planning to penetrate in tier 2 and tier 3 cities
• Aims to establish 50 brick and mortar stored every year
Capabilities:
• Omni channel presence
• Expertise in diamond manufacturing
• significant internal capabilities in design, manufacturing, technology and e-commerce
TEECE Model:
Capabilities (innovation and complementary):
▪ Equipment, tools and machinery required for making jewellery and raw
material like precious metals, gems etc.
▪ Brand name of Tanishq associated with Caratlane as a partner
▪ Omnichannel presence
▪ Expertise of diamond and jewellery manufacturing of Caratlane
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CaratLane: A Report
▪ Highly experienced and skilled top management(both in IT and Jewellery
business) and internal capabilities in design, manufacturing , technology and
e-commerce
▪ Investments and financing from Tiger Global and partnership with Tanishq
Caratlane has both the capabilities and the jewellery business is difficult to
imitate given the expertise it requires in identifying the diamonds, making
jewellery etc. and there are not many competitors of Caratlane in the market
currently. Hence, Caratlane is profitable and makes money. Hence, it should
try to block the competitors by increasing the barrier to entry and increasing
the value proposition. It can also go for acquisitions.
Industry Analysis: -
1. Threat of New Entrants: The threat of new entrants is high, as with low data rates and
high internet reach, the ecommerce segment is growing rapidly, and this could bring
companies offering similar products and the switching cost for the consumers is none.
2. Bargaining power of Buyers: - The bargaining power of Buyers is very high in Jewellery
Industry, as there are many choices available for the buyers to choose from. Also,
many people trust and prefer to go to their family jewellers.
3. Threat of Substitute: - Threat of substitute products are low in this industry, as there
is very little chance that jewellery will go out of demand, the elements in demand may
vary based on trends, that Caratlane can invest in. But the chance of Substituting the
Jewellery Industry with other product is unlikely.
4. Bargaining Power of Suppliers: - China which produced 399.7 tonnes of gold in 2018,
is the largest gold producer, but that also only accounts for 12% of total global gold
supply. Therefore, there are a lot of choices available for the jewellery manufacturers,
and thus the Bargaining power of suppliers is low.
5. Rivalry among existing competitors: - There are no major competitors as of now, but
as the market size grows and the industry becomes more and more lucrative. More
companies will compete with CaratLane.
Therefore, considering all the above discussed factors, CaratLane should improve its market
size to get the first mover advantage and develop its operational capabilities in such a way
that it is ready to compete with new entrants, also it can bargain with the suppliers to get the
best deal at lowest prices.
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CaratLane: A Report
SWOT Analysis: -
Strenghts Weakness Opportunities
Threats
CaratLane’s strength is that it is one of the first company to adopt this business model of
Online plus offline jewellery store and can benefit from being the first mover. The Weakness
for CaratLane may be that the barriers to entry in the Industry are quite low and switching
cost for the end user is none. Major opportunity for the company is that there is a lot of
untapped market in Tier II cities, where company can leverage its online model to reach to its
customer. Threat for CaratLane is that the existing Offline Jewellery stores who already has a
loyal customer base decide to enter into CaratLane’s market and consumers.
Therefore, CaratLane should build operational capabilities to capture the market in Tier II
cities and make it difficult for new entrants to compete with such a large network.
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CaratLane: A Report
Analyse the profitability potential of the company
If we take a look at the statement of profit and loss of the Company.
For year ended For year ended
March 31, 2017 (in March 31, 2017 (in YoY
Particulars Lakhs ₹) Lakhs ₹) Change %
Revenue from operations 17784 13207 0.34655864 34.65586
Other Income 979 861 0.13704994 13.70499
Total Income 18763 14068 0.33373614 33.37361
Expenses
Cost of materials used 11666 10300 0.13262136 13.26214
Purchase of stock in trade 5210 3077 0.69320767 69.32077
Changes in inventory -1922 -977 0.96724667 96.72467
Excise duty on sale of goods 73 9 7.11111111 711.1111
Employee Benefit expense 3161 1845 0.71327913 71.32791
-
Finance Cost 46 63 0.26984127 -26.9841
Depreciation & Amortization 430 410 0.04878049 4.878049
Other Expense 6011 4828 0.245029 24.5029
Total Expenses 24675 19555 0.26182562 26.18256
Profit/Loss before Tax &
Exceptional Item -5912 -5487 0.0774558 7.74558
Exceptional Items -2039 -825 1.47151515 147.1515
Profit/Loss before Tax -7951 -6312 0.25966413 25.96641
Tax 0 0
Profit/Loss after Tax -7951 -6312 0.25966413 25.96641
The Company has Increased the Total Income by 33 %, but at the same time the losses have
also increased by 25%, which can be understood as the company is investing in its growth.
Among the expenses Excise duty on sale of goods, Exceptional Items (Allotment of equity
shares without consideration & Closure of franchisee business) and Employee benefit
expense being the top 3 expenses.
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CaratLane: A Report
Now if we look at the report foe 2018-19
Operating Revenue INR 100 cr - 500 cr
EBITDA -37.80 %
Net worth -111.57 %
Debt/Equity Ratio -8.06
Return on Equity N/A
Total Assets -10.93 %
Fixed Assets 29.08 %
Current Assets -18.46 %
Current Liabilities 102.87 %
Trade Receivables 65.59 %
Trade Payables 11.95 %
Current Ratio 0.78
Here we can see the Debt to equity ratio of -8.06 %.
The lender Banks are as follows.
Top Lenders
(Amount in ₹ Crores)
80
70
60
50
40
30
20
10
0
Banks
ICICI Bank Axis Bank RBL
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CaratLane: A Report
The Total debt comes at ₹140 Crores, which is normal for a company with a revenue of more
than ₹200 Crores in growth stage.
The company had 16 retail stores -- including in Delhi, Mumbai, Bengaluru, Chennai,
Hyderabad, Chandigarh, Pune and Coimbatore, by 2017 end, and revenue from operations of
₹178 crore approx.
It is coming as ₹11.125 crore per store, and after that they had invested in opening 23 new
stores, bringing the total to 39 stores, which explains the debt and Losses in the statement of
profit and loss.
Assuming that the new stores start generating revenues as the old ones, in two years.
By 2022, March, the revenues come at 39* 11 = ₹ 429 crore, which will allow the company to
repay its debts and be profitable by 2022, March.
They should also focus on bringing down the cost they are incurring due to Exceptional Items.
If they do all the necessary changes, then by March 2022.
For
year
ended For year For year For year For year For year For year
March ended ended ended ended ended ended
31, March 31, March 31, March 31, March 31, March 31, March 31,
Particulars 2017 2018 2019 2020 2021 2022 2023
Revenue
from
operations 17784 23947.19891 32246.30767 43421.5443 58469.65578 78732.82035 106018.3597
Other
Income 979 1113.171893 1265.732036 1439.200539 1636.442889 1860.717292 2115.728488
Total
Income 18763 25024.89117 33376.60172 44515.57991 59372.03766 79186.63226 105614.0732
Total
Expenses 24675 31135.54717 39287.63112 49574.1395 62553.91931 78932.13802 99598.594
Profit
before Tax -5912 -6110.6560 -5911.0293 -5058.5595 -3181.8816 254.4942411 6015.479154
Assuming the growth rate remains constant and the Expenses on Exceptional Items is brought
down to 50%, the company can be profitable by March 2022.
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CaratLane: A Report
Strategies to adopt
In the coming years, growth in Jewellery sector would be largely dominated by the
development of large retailers/brands. Established brands are mainly guiding the organised
market. Increasing penetration of organised players provides variety in terms of products and
designs. Online sales are expected to account for 1-2 per cent of the fine jewellery segment
by 2021-22. Also, the relaxation of restrictions on gold import is likely to bring change to the
industry. The development in availability along with the reintroduction of low-cost gold metal
loans and likely stabilisation of gold prices at lower levels help the jewellers to grow over short
to medium term. In this Dynamic scenario Caratlane can adopt below strategies to be
competent and profitable-
1. Tapping the Global jewellery market: Growth in the global jewellery market is being
boosted by the shift to e-commerce over the last few years. According to Research
and Markets, the global jewellery market is expected to reach $257 billion in 2017,
and grow at a rate of 5% per year over the next five years. The online fine jewellery
market currently accounts for only a fraction (4%–5%) of this, it is expected to grow
at a much faster rate, and to capture 10% of the market by 2020. So if Caratlane can
tap the online jewellery market outside India in other countries they can be more
profitable. Having the capital (contributed by Titan mostly) it should be a right move
for them.
2. Making the operation more standard: While the market is strong, moving luxury
jewellery online presents challenges: Caratlane must adapt proper operation
strategies to establish credibility and reputation. This means they have to adjust their
operations for online sales by changing production, inventory and fulfilment
processes.
3. Adapting try at home strategy: Caratlane can be more trustworthy brand by offering
a try-at-home service, similar to Warby Parker’s model, where customers can select
pieces to see in person at home before purchasing them. Plukka, an omni-channel
jewellery retailer, operates on the try-at-home model as well, calling it “View On
Demand.” The View on Demand service allows customers to see, feel and try on
jewellery before making a purchase, essentially marrying online and brick-and-mortar
shopping in a unique and cost-effective way.
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CaratLane: A Report
4. Allowing designers to contribute to design: Caratlane can invite different jewellery
designers to design for the customers as per demand in their platform. This will offer
the customers more customized option and it will also increase their satisfaction.
5. Partnership with Other Global Brands: CaratLane can partner with Fashion Show
organizers to provide their product and reach to the interested consumers. They can
also enter other markets with strategic partnership with Local Jewellery store to
fulfil their orders Locally, thus establishing better distribution network and gaining
advantage over any new competitors.
6. Customer rewards and Loyalty points: This can be a great promotional strategy,
earning loyalty points makes customers invested in the products and chances of
repurchase go up significantly.
Other Information
All the relevant information about Caratlane have been discussed in above questions. Apart
from those one more thing can be added. Caratlane in near future can go for some more
mergers and acquisitions. Probably acquiring an e-commerce clothing brand will be a good
option. Apart from that they can also make strategic partnership with e-commerce giants
such as Amazon, Flipkart to reach more customer in future.
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