Consumers shifting to organised jewellery retail

The jewellery market in India, worth $75 billion, has seen changes in buying behaviour, with consumers shifting from unorganised to organised retail stores for selling second-hand ornaments, apart from improved transparency in transactions after the introduction of the goods and services tax (GST) in July last year.

Organised retail has gained consumers’ trust by adopting mandatory hallmarking of gold ornaments, and this has been a major driver for jewellery purchase over the past one year.

Assured re-sale value, coupled with offers of discount on making charges, has moved customers to branded retail stores.

Despite an overall downturn, organised players have increased their share in ~2.7- trillion jewellery sales, including domestic and foreign.

From 22-23 per cent of the total till last year, at the time of the introduction of the GST, the branded market share has surged to 29 per cent by the end of March this year.

The overall domestic jewellery market is expected to grow 31 per cent by 2023.

“India’s jewellery market has remained flat over 2013-14 to 2017-18 as both volume and price have remained stable. However, 17 leading organised retailers including Tanishq, Tribhovandas Bhimji Zaveri (TBZ) and Thangamayil have grown at a compound annual growth rate of 11 per cent, implying a clear shift of business towards organised trade. We expect this group of 17 jewellers to corner around 42 per cent of the domestic market by 2022-13 as against 29 per cent currently, underpinned by their aggressive expansion drive, design, and increasingly competitive pricing vis-à-vis family jewellers,” said Jay Gandhi of HDFC Securities.

The battle for market will continue as pricing premium, gold scheme offerings, repurchase/exchange commission among leading jewellers are converging.

Around three-fourth of the combined top line of key south jewellers come from the five southern states, where customer purchasing behaviour is largely homogeneous in terms of design.

Meanwhile, south-based jewellers face weaker artisan tieups in the rest of India. But they are proactively fixing this gap and increasing their non-south ‘karigar’ pool. Hence, the design arbitrage will dwindle in the medium term, resulting in better craftsmanship offers from jewellers such as Joyalukkas, Kalyan Jewellers and PCJ.

“We remain bullish on the formalisation theme. Unorganised jewellers are facing issues owing to demonetisation, the goods and services tax (GST) and mandatory hallmarking (which is likely to be implemented soon). This has led to customers switching allegiance to organised jewellers, who offer the advantages of contemporary design, lightweight jewellery, and most importantly, trust,” said Vishal Gutka, an analyst with PhillipCapital India Research, in a report on Thangamayil Jewellery.