How Digital drove success of Carat Lane – Digital Leadership Summit
Below is the gist of the talk given by Mithun Sacheti on “How Digital drove the success of Carat Lane” at the Digital Leadership Summit in Chennai in August 2016.
Key Highlights from his talk include:
- Discovery is going to be driven by digital, consumption will remain omnichannel depending on the product/service
- Consumers often make the decision online, but still, like to see the product in high-value purchases
- Omni-channel is the approach towards profitability and Carat Lane has seen that with their Delhi centre, which contributes to 38% revenue and is a profitable city for them.
- Extremely data driven approach with 4000 data points being tracked every month
- Even spends on TV are tracked diligently
- Key metrics to track: Cost per lead, Cost per conversion and Cost per visitor/traffic
- Early days for digital transformation with more to see in the coming years
Mithun started off by highlighting that Chennai as the choice for Carat Lane did not come from the fact that he was based here but based on research that Chennai has the fastest clearing airport in the country. He goes on to talk about how opening the first Jaipur Gems store was challenging. Their biggest learning over the initial years was getting a clear understanding of the top/key customers since they used to get only about three walk-ins a day when they started out. They soon realized that making customers discover the store and new products is key. So when they opened their next store in Coimbatore, they were able to combine their learnings to ensure that 500 key customers walked into the store just on day 1.
How did they get into e-commerce?
They realised that discovery of products is a problem because of the limited walk-ins in retail as well as the limited scope to discover products before walking into the store. E-Commerce fundamentally changes the discovery process.
Today consumers make a choice before entering the retail store – the decision is usually made online. This is why global e-commerce started with books so that the discovery & shopping can happen online. For other products discovery is still lead by digital, but consumption is happening across e-commerce, offline retail, kiosks, etc.
In 2011, Carat Lane opened its first retail store – but they got it wrong in many ways. Firstly, they did not put much jewellery over there, though in hindsight they understood that consumers come in to try out the product. In Mithun’s words “We assumed customers were as obsessed with technology, as we were”. This changed when they opened their future stores. Moreover, their Perfect Look app allows you try out jewellery real time, and this was a big hit amongst consumers.
Why do consumers have distrust amongst e-commerce companies?
Mithun highlights on e-commerce evolution in India and candidly pointed out that between 2000 to 2009 there were early adopters who did not focus on last mile delivery and consumer experience – players like Indiatimes, Rediff, infibeam. This mostly led to distrust from consumers because they went through such bad experiences from these brands. This, of course, changed when the new age e-commerce companies started, including Carat Lane in 2008.
Is ROI real in E-Commerce?
Mithun was candid in saying that “Understanding of ROI was missing when we started, but we understood it the right way.”
In 2012 when the company evaluated its results, it realized that cost of acquisition was so high; it would take three transactions to make the customer profitable but an Indian consumer shop for jewellery twice a year so there was something wrong in the approach.
Their retail stores were a game changer because the process of discovery started falling in place. Consumers now started coming to the store with the product photograph wanting to try the product. It became evident that conversions will happen where they have an omnichannel presence. Two years ago they opened six stores in Delhi and now 38% of their revenue comes from Delhi and is the only profitable city of operation at the moment.
Is it an analytics business or a jewellery business?
Carat Lane is an extremely metric driven business, as Mithun pointed out. They track 4000 data points every month, but the critical ones are
- Cost per lead
- Cost per conversion
- Cost per visitor/traffic
Mithun aptly put it “There is never too little data”. Data helps bring clarity, and while it took Carat Lane 6 years to figure it out, it finally made sense. In the early days, the cost of consumer acquisition was never in focus. You need to know how much you are willing to pay for each of the above actions, as the business profitability depends on that. Each company needs to create its own attribution model – based on customer type. Google Analytics is a good starting point.
Mithun spoke at length about the advanced analysis that is done on TV ad spends. They used tools to find out in which tv program & which ad break & which ad slot had the highest visitors and highest brand search of Carat Lane. As per Mithun, searches & traffic ultimately reflect in conversions & sales assuming you have a great product + great UX. Of course, it’s not a perfect model. You can have assumptions and capture the ROI, in case there are two ads at the same time
On Startups, Funding & more
Speaking on how they used the funding they got, Mithun admits “Money is like oxygen, the human body is like iron – money can corrupt you”. They have learnt it the hard way and now moving towards profitability with a data-driven approach.
Talking about his investor, Lee Fixel, he mentioned an interesting quote. Apparently, Lee said, “My Fund has ten lives. You as an entrepreneur has 2-3 lives. Carat Lane has one life. If you think omnichannel is the right approach, then let’s do it.”
On closing. Mithun said that Digital would own discovery and budgets will move digital – which was also reflected in the Social Beat Industry Report. We, of course, agree when he said that India would be driving the digital transformation and even today with the worst internet bandwidth ever we have achieved this much – it’s only up to our imagination what the future holds!