Shining India

Jewellery makers are trying to polish slackening sales by reaching out to an all-new segment of buyers

Two husbands fret over the likely damage to their wallets as their stylish wives pore over expensive-looking diamond jewellery displays at a Tanishq store. But they are pleasantly surprised when their bill finally arrives — it turns out to be way below their fearful expectations.

Titan Industries’ flagship and India’s biggest jewellery brand aims to bust several myths at once with this TV commercial for Tanishq’s ‘affordable diamonds’ range, launched in April 2012 with price ranging between Rs.10,000 and Rs.25,000. The myths: diamond jewellery is always expensive; it’s not within reach of the design-savvy young woman on a limited budget; and Tanishq sells only expensive jewellery.

Even as Tanishq concentrated on repositioning its marketing strategy to bag the fashion-conscious buyer, the Gitanjali Group, which has nearly 40 brands in its portfolio, including some that promise affordable jewellery (Diya, Gili, Sangini), took its product experiments even further.

In February 2012, Gitanjali launched Amore, a brand that sets diamond solitaires in silver and stylised, coloured polymers, for young buyers. But the question is — why are the jewellery brands, at the highest end of luxury purchase, going out on a limb to prove themselves affordable? 

Ever since gold prices went through the roof, the revenues of jewellery-makers have grown nicely but, side by side, sales have been slackening. For instance, Tanishq’s senior officials recently said that its 38% sales value growth in FY12 may drop to 30% in FY13 if gold prices continue to rise. The All India Gems and Jewellery Trade Association, in fact, pegged March 2012 as the worst month for jewellery sales — volumes dipped by as much as 50-60% compared with March 2011.

Jewellers are now realising that they can no longer afford to wait on traditional buyers — parents spending on heavy, loud sets when their offspring get married, or homemakers who buy sentimentally on Akshaya Trithiya. Instead, they are lining showcases with sexy, light and trendy designs that are affordable and easily accessible (think mouse click). 

Leading the new line-up of buyers are people like 21-year-old student Shivangi Sharma of Pune, and 32-year-old housewife Roli Srivastava in Bengaluru. Sharma purchased branded diamond earrings for Rs.10,000 with her own savings (well, saved pocket money), also without her mother’s supervision, and Srivastava, who came to Bengaluru with her husband after his transfer to the city, for the first time chose to buy jewellery from a branded outlet and not her Agra-based family jeweller. “We change cities often,” Srivastava says.

“I would rather buy it from a store like Tanishq where I can go for servicing and returns at any time. Besides, I don’t trust the local jewellers.” As for Sharma, the sheer range of jewellery available online within her budget was an eye-opener. “Anyway, when I visit a store, the jewellers tend to not take me seriously, probably because of my age,” she says. 

Jewellers can no longer take customers like Sharma lightly because they are the chief drivers of the affordable jewellery market. “It [the market for affordable jewellery] has grown to 30% from the under 5% it was 8-10 years ago,” says Vijay Jain, CEO of Orra Diamond Jewellery, a 35-store plus national chain.

Such designs are typically fashionable and everyday jewellery that women can mix and match with their Indian and western dresses, and wear across occasions, whether a typical day at work, a PTA meeting or simply for lunch or shopping dates. At 60%, bridal or wedding-related jewellery still accounts for the bulk of the market, but that has come down from the 80% or more a decade ago. “This segment will only grow as more women join the workforce and become aware and financially independent,” says Jain.

Rating agency Crisil values the Indian jewellery market at nearly Rs.1.3 lakh crore at present with a growth rate of 15-20% per annum. Of this, the semi-urban and rural segments comprise about Rs.55,000 crore or over 40% of the total market. Overall, the jewellery trade remains largely unorganised with 300,000 individual jewellers and about 15-20 branded players who have multiple outlets and comprise around 12-15% of the total jewellery market in the country. Many brands are also region-specific — for instance, PC Jewellers in the north, Tribhovandas Bhimji Zaveri in the west, Joyalukkas in the south or BC Jain in the east. Titan Industries, Gitanjali and Orra are some of the pan-India players. 

Titan Industries, with its multiple jewellery brands, accounts for nearly 40% of the branded market. For 2012, Titan reported sales of Rs.7,045 crore from jewellery sales. Gitanjali gives it a close fight with its well-recognised brands like Nakshatra, Gili and Asmi, and over 4,000 points of sale — shop-in-shop, franchises and company stores (see: Going for the gold). Gitanjali reported jewellery sales of Rs.7,007 crore in fiscal 2012.

Though it does not disclose sales by region, industry analysts say that the company’s India operations account for nearly 85% of these sales. Some other players like Reliance Jewels, Rajesh Exports, Shree Ganesh Jewellery, CaratLane and Bluestone are also changing the way jewellery is marketed and sold in India. And the object of their collective attention is the new-age consumer who is driving the demand for affordable jewellery in the sub-Rs.50,000 price range, and even more specifically, in the sub-Rs.25,000 segment. 

More sparkle for less

Mehul Choksi, owner and chairman of the Gitanjali Group, is of the view that young adults and teenagers are moving away from costume and junk jewellery to light gold, silver and diamonds as fashion and lifestyle statements. Affordable diamonds, especially, have proved to be very popular. The companies, too, have fed the craze for affordable diamond jewellery in the search for higher margins, which stand at 20-22%, or almost double that of gold. Choksi explains that the margins come mostly from how the diamonds are set and sold. “Diamonds could be set in silver or other metals as against gold, which helps reduce cost,” he adds. 

Companies have also been able to reduce the purity of gold from 22 karat to 18 karat or even 14 karat for setting diamond jewellery — the 22 karat mark is still preferred for pure gold jewellery (see: Take your pick). Yet another approach is to set diamonds of a smaller size to make the jewellery less expensive. For instance, a good quality 1-carat solitaire can cost upwards of Rs.3 lakh but diamonds of the same clarity and colour would cost a third of that or even less as the size becomes smaller. 

The market for affordable diamonds really took off in the early 2000s with the entry of players like DTC (Asmi, in partnership with Gitanjali), Tanishq and Gitanjali that started selling cheaper diamond jewellery. Now, diamond jewellery comprises over 50% of the market, compared with 15% earlier. The Gems and Jewellery Federation (GJF) holds that the diamond jewellery market in India is close to Rs.70,000 crore now and is growing at almost 20% annually.

Innovative and new ways of looking at design is a key area of focus for online jewellery sellers like Jewelskart CEO Peyush Bansal and Bluestone co-founder Vidya Nataraj. “We design jewellery around themes like ‘what would a college-goer want?’ or ‘what would be easy to gift?’ or ‘what could be worn with both Indian and western wear?’ Anniversaries are a big sell. We have also designed pendants with initials that sold really well,” says Bansal. 

And why not? For this new breed of buyers, jewellery is not bought for its chief role as a “store of value” as was the case for earlier generations, but as an accessory. They don’t care much if the making charges are 7% or 10% or what the piece would fetch if they resold it — the idea is to look good.  

Jewellery businesses are also innovating in other ways. Bengaluru-based C Krishnaiah Chetty & Sons launched a steel-based ‘Denim and Diamonds’ collection in 2011, with prices starting at Rs.3,500. Titan launched the Mia brand of gold and diamond jewellery for working women priced at Rs.6,000-50,000. More recently, it launched the FQ brand of diamonds with a starting price of Rs.499 aimed at teenagers. Orra’s range of everyday jewellery ranges from Rs.10,000 to Rs.50,000.

“Anyone who is looking at having scale and a presence on a national basis cannot afford to ignore this category,” says RK Nagarkar, CEO, Tribhovandas Bhimji Zaveri (TBZ), who finds about 30% of his store sales coming from the affordable segment. “It is the entry point for many customers and the beginning of a relationship. Increasingly, we are seeing even more volumes from this segment.” 

The online goldmine

Online jewellery stores are benefiting most from the trend — websites like Bluestone, CaratLane, Diamondere and Jewelskart have over 80% of their collection dedicated to the ‘affordable jewellery’ segment. They have the backing of PE funds and a growing number of customers, and their buyers come from the metros as well as far-flung villages in UP and Mizoram. This works especially well for gifting. 

The online medium has also made it possible to set up stores without a physical presence. Industry experts put the value of the online jewellery market at Rs.200-250 crore with a growth rate of close to 30%. But what’s remarkable about the segment is its ability to convince buyers to spend large amounts of money online and overcome trust issues.

Jewellery retail site Bluestone’s Nataraj says that buyers start out with small purchases of around Rs.5,000, perhaps as a gift. As their trust builds up, they are okay with buying even larger amounts. Appropriate certificates for purity, return and buyback policies help. “Customers realise they are getting goods cheaper than at a store, and without the hassle of visiting one,” Nataraj says. 

Typically, brands like Gitanjali sell at the same prices online or offline, but private labels of sites like CaratLane, Jewelskart, Bluestone, Diamondere and Surat Diamonds  price items with similar gold or silver grammage, or precious stones, 30-40% lower than offline brands. Jewelskart’s Bansal says, “An offline retailer may have the margins but may decide not to pass them on, or he may pass them on selectively to a consumer based on his relationship. But on a site, the listed price is what everybody pays.” 

Bansal also points out that online jewellery retailers cover more geography with just one site unlike offline jewellers whose sales are split between more shops. The online retailer has higher volumes, which helps him have better margins and offer better prices. Also, cutting the middleman means an online retailer can pass on more discounts or charge lower prices from customers. Others like Rajiv Joshi, digital channel head for Gitanjali, say that the distribution channel costs amount to 40-50% of the final selling price. 

Unlike pure gold jewellery where price is a function of gold price and making charges, allowing little flexibility to jewellers, diamond jewellery prices are more make-believe. Except the traditional jewellers and Tanishq, which also buy back diamond jewellery based on prevailing prices, branded diamond jewellery players offer to buy-back only at a discount to MRP. Their prices are quoted per piece, with no break-up given for gold, diamond and making charges.

That’s because their costs also include branding and distribution costs, which are substantial. “The manufacturer sells jewellery to a distributor, who keeps 15-20% margin for himself while selling to a retailer,” Joshi says. “The retailer charges the customer another 25-30% to make his profit. With the online medium, one can straight away eliminate these middlemen and go directly to the end-consumers.” 

Not even strong brick-and-mortar jewellery brands can take the online sales opportunity lightly anymore. Take Titan’s online shopping portal, for instance. You can shop online for a pair of gold earrings for as little as Rs.2,000, or a pair of diamond studs from Rs.10,000. The maximum purchase value of items, though, is capped at Rs.1 lakh. If you want to buy something more expensive from, say, the ‘Wedding’ or ‘Taj’ or ‘Glam Gold’ collections, you have to visit a company showroom, but you can still browse through the online catalogue to help narrow down your choices.

 Gitanjali, too, has been selling on the net for the last three years. Recently, it launched a site called Jewelsouk that sells over 30 labels not only from its own stable but also that of other brands. Joshi says that the site has added 40,000 customers since its launch in May this year. “We have even sold jewellery to customers in remote Kalahandi in Odisha, and diamond mangalsutras to army officers posted 100 km from Mizoram,” Joshi says with a smile.

Despite the online surge, Joshi claims the offline store does not work at cross purposes with Gitanjali’s core retail businesses but rather complements them. “Very often, people browse the site and come to an offline store to purchase the goods, or they follow the reverse process,” he says. “People tend to trust you more if you have a physical presence, especially for repairs and returns.”

The desire for jewellery in India is inbuilt into its cultural fabric. At a time when rising gold prices threaten to dampen jewellery sales, jewellers are turning to a new buyer segment that cares less about saving and, therefore, looks at jewellery not as a store of value and status symbol but also as a beauty aid. Is anyone really complaining about gold prices?