The chief executive officer of CaratLane, India’s largest diamond jewellery portal, tells Sushila Ravindranath how it disrupted the Indian jewellery business
Whoever I have been wanting to meet in recent weeks is either travelling to New York or returning from there. Mithun Sacheti, the chief executive officer of CaratLane, is no exception. He is leaving for New York in a couple of days to meet his investors. CaratLane is India’s largest diamond and diamond jewellery portal (with a wide range of gold and platinum jewellery as well), which was launched by Sacheti in Chennai in 2008. He suggests we meet in his office and have a home-cooked vegetarian meal which is sent to him every day. I am glad I agreed. The simple fare of dal, rice, roti and two vegetables is delicious. The place is buzzing with activity as Sacheti is about to launch his offline store in Chennai in a few days. He finds a small, empty cabin where we can have lunch and talk.
Sacheti is from a Mumbai family which has dealt in gems and particularly solitaires for generations. After finishing his undergraduate studies, he went to the US and pursued a two-year course to get certified as a gemmologist from the Gemological Institute of America, California.
As soon as he returned, he headed to Chennai in 2000 to set up Jaipur Gems, an upmarket jewellery store that was promoted by his family. “Chennai has a large jewellery market. I had to make a success out of it. You don’t get any respect unless you work well in our family,” he tells me as we start serving ourselves.
“I used to attend to every customer morning and evening. With the success of the Chennai store, I expanded to Coimbatore as well. All the while, I was thinking of a different model for this business where returns do not normally exceed 3-4%. Financing cost is very high. Inventory carrying costs are high too. We, as a family, do not borrow any money. I knew I had to go online, do something disruptive to restructure the balance sheet of jewellery business.”
One of his customers was Srinivasa Gopalan, the founding member of Sify, who was running Lister Technologies—which provides solutions to e-commerce businesses.
Sacheti persuaded him to be his partner and help him set up CaratLane. “He was finally convinced when his friend from the US bought a diamond ring online.” CaratLane.com was officially launched in 2008.
As we help ourselves to more rotis, Sacheti explains his business model. “Solitaire buying is traditionally a time-consuming process. The jeweller gets in touch with various suppliers to get the diamond the customer wants, which takes time. CaratLane is an aggregator, and so we first got the back-end in place. We started with solitaires and today have the largest selection to choose from. They are all certified from the best labs in the world. We have the lowest prices in the market and help consumers save up to 25% of retail prices. We work across six countries with several vendors, with over 1 lakh stock keeping units for solitaires. Depending on the arbitrage of currency on that day, and the demand and supply in that country, we locate the one with the lowest price. We sell this under the CaratLane brand name. We don’t create inventory. When a customer buys the solitaire, she can choose the pattern to mount it on the jewellery piece. The website provides a 3D model of how the piece will look.”
I ask Sacheti about the early days of CaratLane.
“It was a nightmare. We had a series of press conferences. A national TV channel presented us almost as a joke. It took some time to catch on, as jewellery online was not so big globally that its shadow could be seen in India. The site was funded by Gopalan and me. We were struggling. Then, the global meltdown happened. We told suppliers we will take diamonds directly to the customer. We had 50,000 diamonds in our kitty. It took one year of convincing and we began supplying to Titan. After experimenting with one shop, Titan sourced from us in six more Tanishq showrooms. Ours is an omni-channel model,” Sacheti takes me through the journey.
In the first half of 2011, Sacheti received a LinkedIn request from Tiger Global, a New York-based international investment firm.
“I had been talking to a couple of venture capital firms for almost a year and nothing had worked out. At that point, I hadn’t heard of either Tiger Global or its famous partner Lee Fixel. So I didn’t respond. A week later, a friend told me to take Tiger Global seriously. I met Fixel in Delhi. We had a three-hour-long meeting. I left with a term sheet in my hand. A month later (in June 2011), nearly $6 million were transferred to CaratLane’s bank account. The first investment by Tiger Global was in place and the company was on a roll. This year, CaratLane raised $31 million from Tiger Global, the fourth capital infusion by the fund in four years.”
By this time, we have polished off lunch. I wait for coffee.
Sacheti has opened nine high-tech stores in major cities of the country which exhibit an array of solitaire, diamond jewellery and CaratLane’s signature collection of precious jewellery. These stores have been designed to encourage ‘browsing’, similar to shopping on a website, and are equipped with touch-screens and tablets that showcase CaratLane’s collections. They also have a lounge to create a feeling of seeing the products at home. “I believe these stores will cater to those who are still unsure about the online buying experience. These showrooms have far exceeded our expectations and give us five times better return on investment than any other jewellery store.”
Sacheti says he is not worried by the mushrooming competition. “We are four times bigger than our nearest competitor and technology will keep us several steps ahead. Jewellery contributes to 4% of India’s GDP. There is room for everybody.”
At the pace with which he is growing and expanding (300% per year since 2011) when will he break-even? Sacheti is confident his turnover will hit R650 crore in a couple of years and he will start showing profits.
As I leave, I ask Sacheti about the reports on Titan planning to take a 15% stake in CaratLane. “We are talking,” he smiles.