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Niche Online Retailers turn acquisition targets

Update On :12 May 2016

Niche Online Retailers turn acquisition targets

Titan Co. Ltd’s move to acquire a majority stake in jewellery start-up CaratLane Trading Pvt. Ltd shows that niche online retailers are becoming attractive acquisition targets for traditional stores that are struggling to adapt to the rise of online shopping.

Titan, the maker of Tanishq jewellery and Titan and Fastrack watches, on Friday said it will buy a majority stake in CaratLane. The investment comes after a string of disappointing quarterly results at Titan. The company is struggling with weak demand for jewellery, which accounts for more than 80% of its business. The deal will also mark the exit of Tiger Global Management, which has so far pumped in more than $50 million in Chennai-based CaratLane since its launch in 2008.

“The acquisition of a majority stake in online jeweller CaratLane gives Titan a strategic advantage of becoming the leader in online and offline sales,” Titan managing director Bhaskar Bhat said in an email. “The combination of the two provides the best platform for omni-channel play in jewellery. CaratLane adds to Titan’s jewellery customer base as it brings along a younger, modern and tech savvy segment. Moreover gifting of jewellery, which is also increasing, would be facilitated by the well-developed online presence of CaratLane.”

Bhat added that online sales of jewellery may account for 3-4% of Titan’s sales in five years from 0.5% now.
“Tanishq gives us the strategic back-end enabling us to scale at an affordable cost while we offer digital experience and capabilities that they currently were planning to build,” said Mithun Sancheti, co-founder and chief executive at CaratLane.

Titan’s buyout of CaratLane is the latest acquisition of a niche online store by an offline rival. In April, Kishore Biyani-led Future Group said it will buy online furniture store FabFurnish from Germany’s Rocket Internet and Kinnevik. Godrej Nature’s Basket acquired ekstop, run by Buy Daily Retail Pvt. Ltd, in February last year for an estimated Rs.30-40 crore. The same month Mahindra Retail bought online baby products store BabyOye, owned by Nest Childcare Services Pvt. Ltd and backed by Tiger Global Management, Helion Venture Partners and Accel Partners.

“One reason to acquire online assets will be to get the people and the team, as it will be difficult for offline businesses to do online with the existing set of people. (But) probably the biggest driver is the price. If you look at the valuations of online businesses, a lot of money has been poured into them and many are not doing well. Offline retailers are hence being able to pick up these companies at very good valuations,” he added.

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