With inventory returns pretty low in the brick and mortar model for solitaires, Caratlane.com found the right niche that combines the advantages of transparency, price and on-time delivery to make it a success.

Solitaires by nature leave little room for innovation. In addition to that, at any point, the inventory return for a solitaire is low – around 0.7 percent. Given that it is a high cost business with low returns, even the largest jeweller does not stock more than 50 solitaires at a given point in time. And customised delivery alone can take up to three weeks.

Chennai-based Caratlane.com (Caratlane), a portal dedicated to solitaires and, recently, diamond bangles offers an impressive 1,30,000-1,50,000 solitaires from over 2000 suppliers. The solitaires come with third party certification from Gemological Institute of America and other such leading gem related organisations, thus, ensuring the genuineness of the products.

The company’s price points are very competitive as it is easily 25 per cent less than that of direct competition. This is possible as Caratlane eliminates several layers of the supply chain cycle, typically needed in an offline business. And the portal has worked on systems to ensure shipping on the fifth day of ordering and delivery by the seventh day.

Mithun Sacheti, director, Caratlane Trading, says, “This is a disruptive model, changing the way business is done. But, it works for the supplier and the customer, so it has succeeded.”

Path to portal

Even while studying gemology in California, Sacheti had the opportunity to understand the way the market moves when he worked as a broker between wholesalers and retailers. He returned to India to handle the Chennai branch of Jaipur Gems, a jewellery store set up by his parents with headquarters in Mumbai. He observed that 40 per cent of the business came from bangles and solitaires, both of which had fairly standard specifications, rendering them ideal to selling online. The online model, if successful, would also ensure higher profitability.

Caratlane became operational in 2008, though the company was established in 2007, and had as technology partner Lister Technologies that also developed the portal.

The retail outlet enabled it to leverage its relationship with its suppliers and provide, in his words, “a variety that a customer will not get in a shop, at prices that are the lowest and with on-time delivery due to efficient supply chain management systems that enable the customers to track their orders.”

In addition to its business-to-customer model, Caratlane also addresses the business-to-business segment through its website dedicated to traders which enable them to sell to retailers to add value to its suppliers.

Business sense

Last year, the company earned revenues of Rs. 18 crore and is targeting Rs. 60-100 crore this financial year. The target is existing online users as Sacheti believes that the business potential is high and needs to be tapped effectively before targeting those who prefer buying it offline. “In the U.S., the online jewellery market is estimated to be U.S.$ 6 billion. In India, there are no official estimates for the online business,” he says. He adds that solitaires business is estimated at Rs. 5,000 crore. Even if the online business is only 1-2 per cent, it offers a huge potential. “To my knowledge, there is no one else who offers our advantages consistently in this segment,” he says confidently.

To meet its targeted growth, Caratlane plans to improve the quality of suppliers by sprucing up its back-end.

For promotions, the portal depends on social websites and online advertising. “We come up with unique offers like the Rupee symbol dollar for Independence Day,” he explains. The user community is strong and helps spread the word.

Caratlane has also co-branded stores and plans to set up shop-in-shop counters and kiosks to enable offline buyers to experience buying online to promote this concept. If all of these methods come together, the company targets earning Rs. 250 crore by 2012.

The company is self-funded, but, is also exploring the possibility of being funded. “We rejected two venture firm offers. We would like to do it on our terms, because we have become cash positive since this quarter,” he says. Quarter-on-quarter targets will ensure that they monitor their performance and correct the course if needed.

Caratlane has been able to achieve success in a niche, high-value business by understanding customer needs, establishing strong technology and good delivery systems. Along with pricing, customer service and building trust have enabled it to strengthen its operations. Transparency and providing customers a wide choice are the other qualities that have encouraged Caratlane to target a high growth rate.