While many large companies are looking at India as the next big market for growth, Vaibhav Global, the Jaipur-based electronic retailer of discounted fashion jewellery, has focused on the developed retail markets of the US and the UK. The rationale of Sunil Agarwal, Vaibhav Global electronic retailer fashion jewellery retail market US UK, founder CMD, is simple. "India isn't a profitable market yet. We don't want to burn money like other players." He is always on the prowl for opportunities. "We are never first movers but fast followers." This prudence and business acumen has enabled this first generation entrepreneur to grow the company he founded in 1980 into a global player with consolidated revenues of Rs1,276 crore in 2015/16 and offices in the US and the UK. Over the last three years, the company has been growing at a CAGR of 12.6 per cent. Much of the company's revenues (70 per cent) comes from sales through its television shopping platforms - Shop LC in the US and The Jewellery Channel (TJC) in the UK - while 20 per cent comes from its e-commerce websites, informs Agrawal. The remaining 10 per cent comes from B2B clients. It makes, on an average, 300,000 pieces of jewellery in India every month for its subsidiaries in other countries. Last year, it invested $4 million in its Jaipur unit to expand capacity to 500,000 units per month.
Agrawal's business journey is a gradual success story. Coming from a middle class family, he learnt the ropes of the gemstone business at his friend's export factory during a six month internship. He subsequently started supplying gemstones to jewellery manufacturers and stone dealers in Hong Kong. That helped him understand the $2 billion fashion jewellery and accessories market in the US, dominated by television shopping channels. He went on to foray into manufacturing and claims to have been the first to establish his own mechanised gemstone manufacturing unit in Jaipur where the industry was largely handmade. However, in the 1990s the perception globally was that gemstones from Indian manufacturers were poor in quality, hurting the business prospects of Vaibhav. Changing that perception took time. Agrawal invited potential clients to visit his facility in Jaipur and test the products. "We were the first ones from India who started supplying mass merchandise stones to the US and the UK," claims Agrawal. The next step was to venture into jewellery making and supply directly to television home shopping channels such as QVC in the US.
Vaibhav Global went public in 1996 to raise funds for expanding its production capacity. But selling to large buyers doesn't give any pricing power to the manufacturer. So Agrawal decided to create a B2C company and reach consumers directly. "The idea from the beginning was to cut layers for better margins and long term value for shareholders."
The company acquired STS Group to have an established retail chain of 19 outlets for its products by 2007 at tourist locations in the Caribbean, Alaska and Mexico. Warburg Pincus invested $47 million in the company for a 27 per cent stake in Vaibhav. The additional funds led the company to start its own television shopping channels in the UK, Germany and the US over three years.
However, the fast paced growth came to a halt when the recession hit the world in 2008. "We had four startups in our company - the TV channel in Germany, the US and the UK and the retail stores chain - and all of them were losing money as they had not reached critical mass," says Agrawal. "Deciding which ones to shut down was the toughest decision of my life." He eventually sold the televison channel in Germany and the retail chain which led to laying off of thousands of employees across the globe. Agrawal was also contemplating selling the US channel when a change in business model began to pay off. The company began to focus on mass market products, after observing that its annual sales in UK were a big hit, by lowering the price point to $18-20 per piece for its jewellery from the earlier average of $100, thus generating volumes.
The company largely focuses on its house brands. "We have developed seven jewellery brands. Rest are from designers who sell their branded products on our TV channels and websites but we manufacture for them. That's our USP," says Agrawal. Group CFO, Puru Aggarwal, says that for jewellery the company has a margin of around 60 per cent. Vaibhav Global expanded its product portfolio in 2014 to include lifestyle products such as bed sheets, perfumes and beauty products.
Over the past two years, the focus has been on developing its e-commerce business and launching mobile apps for shopping, digitising its television channels and having customer-friendly payment initiatives in a lacklustre business environment. It recently started offering EMI solutions and quicker shipping alternatives to their customers. Irrespective of business cycles, Vaibhav has found its feet.
So, what keeps Agrawal going? A daily one hour of yoga and meditation keeps him charged up for the rough and tumble of business after 36 years, he sums up.