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Organised Jewellery Retail India


Organized Jewellery Retailing in India

Foremost, organized retailing and branding initiative are capital intensive. It requires deep pockets and
strong balance sheets.

Exhibit 7-4: Organised retailing versus Informal retailing

Organized Retail versus Informal Retail.png

Source: Equity Communications

Low-margin but high volume gold jewellery products are still expected to dominate the jewellery market in India. This will check growth of organised retail businesses.

Fundamentally, retailers that seek to establish organized jewellery stores and retail brands require higher product margins to compensate for the fact that inventory costs, inventory carrying costs, marketing budgets and branding initiatives are all costly while consumers buy high margin precious jewellery products infrequently.

For this reason, our view is that organised jewellery retailing in India requires a much longer period before it becomes firmly established.

You have to be realistic. The majority of Indians do not afford exquisite precious jewellery for adornment only purposes. If jewellery is not being bought for investment, the money would rather be spent elsewhere - food, shelter, clothing, technological gadgets.

The market of people who actually afford adornment-only type of jewellery with price points above Rs30, 000 is actually limited and there is intense competition in that space. Numbers are not growing as fast.

Moreover, the middle class in India is still not yet worldly middle class while jewellery for adornment
purposes is still a luxury even in the wealthiest countries.

Franchise model most suitable for expansion of organised sector

One key feature of the jewellery market in India is its diversity in consumer preferences. There are strong regional and even local variances in consumption behaviour that must be accounted for in product planning.

For example, in the East and South, gold jewellery has a high association with culture and traditions, making them better markets for traditional designs. The North and West, on the other hand, have higher demand for white gold and diamond jewellery with class, status, and modern aesthetics as major demand drivers, making them better suited to modern jewellery designs.

Such regional and local variances make it extremely difficult to establish strong national retail chains that carry similar carefully coordinated products. In fact, it is actually a competitive disadvantage to stock jewellery products that appear too similar.

Add to this, jewellery consumption in India has to fit into budgets. Consumers want to try out everything before making the final decision so variety is crucial. Lack of variety is often interpreted as a sign of inadequacy and this can hurt sales.

Yet variety is costly. A national jewellery chain with serious ambitions to dominate all consumption regions has to stock products that cater for all the various local and regional preferences. However, such an undertaking is extremely capital intensive and quite impractical.

Practically speaking, we do not think diversity in jewellery consumption in India will go away. Matter of fact, we believe local influences in consumption behaviour will likely become even more entrenched with greater economic growth. For this reason, our view is that the franchising model is the most suitable expansion model for jewellery retailers that have regional and national growth ambitions.

Key factors for success in organised jewellery retailing

Price - product price points that meet buying power of your customer base

Design - jewellery designs that meet the expectation of your market, including wide-ranging local varieties

Image - presentation that meets the brand image you want to present - trust, familiarity and comfort

Diversity and variety in regional consumption patterns means that expanding retailers gain limited benefit from centralized product design and planning. In other words, the cost advantages that enterprises normally obtain due to size are absent.

Therefore, expanding retailers can outsource price and design and focus their resources on building brand equity - essentially steering clear of expensive capital expenditure outlays. Consumers from all over India can share the same broad emotional attachment to a brand and still exhibit local consumption preferences.

For example, a jewellery brand that stands for prestige, quality and authenticity could collaborate with local retail partners who have the capacity and capability to design and promote jewellery products that meet these requirements.

Links to Pages on India Jewellery Market

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