Titan Company - Competition Chipping Away Tanishq’s Gold Rate Premium: ICICI Securities
Pressure on gross margin to sustain; operating leverage advantage aids Tanishq’s ability to compete.
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ICICI Securities Report
The rise in (relative) competitive intensity in jewellery retailing led to melting-away of gold-rate premium charged by category leaders (versus historically) compared to competition.
We observe that in key cities (top nine cities which contribute ~30-35% of Tanishq’s total retail area)-
premium charged by Tanishq has declined by ~50% (to 1-3%) from historical levels;
Tanishq is aggressively competing with retailers like Kalyan Jewellers India Ltd., Senco, GRT, Malabar; in 50% of its key markets (the top nine cities), gold rate charged by Tanishq has been 0.2-0.8% lower than Senco;
key national competitors (Kalyan Jewellers, Malabar) have moved to one-nation one-gold price;
gold price charged (under one-nation one-gold) is similar across companies, as per market rate set in Kerala (generally lowest compared to other markets; 1- 1.5% premium versus bank rate);
amongst all key markets, gold-price premium (charged by Tanishq) in Kolkata is the highest (6% higher than Kalyan Jewellers, Malabar).
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