indian gold jeweler market: consumption, market dynamics, and growth strategies

Browne & Mohan

© Browne & Mohan, 2013

Indian Gold Jeweler Market: Consumption, market dynamics, expansion and Growth Strategies

V Usha Murthy, Assistant Consultant

All images used in the report belong to their respective owners.

Golden facts…..

India’s appetite does not take a hit even in worst economic times. India imported 800 tons, valued at $56 Bn gold in FY 2012-13. Gold is the third highest imported product after crude oil and capital goods.

Gold also dictates a very lucrative parallel economy. Directorate of Revenue intelligence impounded around 200kg gold worth $15 Million in 2012 compared to $2.1 M in Fy2011. Many a wise men believe this may be the just the tip of a giant Iceberg beneath.

On the brighter side, more than 50% of the gold jewelry manufactured in India is for wedding purposes.

Most exports happen to primarily Indian diaspora living in Middle east, US, and Europe.


Sources: World Gold Council, Ministry of Commerce and other reports

Region-wise gold consumption in India-2012

176

320

96

216

0

50

100

150

200

250

300

350

North South East West

Consumption in Tonnes


Delhi, Punjab, Haryana contribute 65% of North sales.

Junagadh, Ahmedabad, Mathura, Rajkot, Mumbai, Pune are the major consumption centers of Western India.

Kolkatta, Chhattisgarh, and Raipur major consumption centers in Eastern India.

In FY2012, 63% of the demand comes from tier-2 cities and consumers recycled about 100 tons of gold.


The big fat Indian wedding

India witnesses approximately 10 Million weddings in an year. Gold is a compulsory element in all the weddings.

$528 Million or around 380 tons get consumed by weddings alone!


Average Spending

100000

0 25000

100000

25000 0

25000 50000

200000

50000 50000

0

50000

100000

150000

200000

250000

0.5 to 5 yrs 5 yrs to 12 yrs 12 yrs to 18 yrs 18 yrs to 30 yrs 30 yrs to 60 yrs 60+ yrs

Male Female


Female

0.5 to 5 years – Piercing ear, Gold bracelet(light weight), Finger ring, Chain

5yrs-12 yrs- Ear-rings

12 yrs -18 yrs – Ear-rings, chains, pendants

18 yrs – 30 yrs (Marriage) – Bangles, Necklace, Chains, Finger ring, Mangalsutra, Ear-ring, Nose-ring

35 yrs + - Daily wear bangles, chains, ear-rings, Studs, finger rings

Male

0.5 yrs to 5 yrs – Ear piercing, Bracelet, chain, finger ring

5 yrs – 18 yrs – Chain, finger ring

18 yrs – 30 yrs (Marriage) – Chain, finger ring, bracelet

30+ years – Finger ring, chain, bracelet

Gold consumption Life cycle - Female


Stage 1 – 0.5 to 5 years – Piercing ear, Gold bracelet(light weight), Finger ring, Chain (Rs 1 to 1.5 lakh)

Stage 2 – 5yrs-12 yrs- Ear-rings (a few thousands of rupees)

Stage 3 – 12 yrs -18 yrs – Ear-rings, chains, pendants (Approx Rs 50 thousand)

Stage 4 – 18 yrs – 30 yrs (Marriage) – Bangles, Necklace, Chains, Finger ring, Mangalsutra, Ear-ring, Nose-ring ( upto Rs 2 lakhs)

Stage 5 – 35 yrs + - Daily wear bangles, chains, ear-rings, Studs, finger rings (a few thousands every few years)

Sources: Browne & Mohan

Gold consumption Life cycle - Male


Stage 1: 0.5 yrs to 5 yrs – Ear piercing, Bracelet, chain, finger ring (upto Rs 1-1.5 lakh)

Stage 2: 5 yrs – 18 yrs – Chain, finger ring (a few thousands)

Stage 3: 18 yrs – 30 yrs (Marriage) – Chain, finger ring, bracelet (Rs 1 to 1.5 lakh )

Stage 4: 30+ years – Finger ring, chain, bracelet ( not a wide spread practice in India for men to purchase gold jewelry after a certain age)


Design preference

78%

43% 36%

21%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Plain gold jewelry withethnic/traditional design

Plain gold jewelry withcontemporary designs

Gold jewelry with stones Gold withPlatinum/pearl/diamond


Plain gold jewelry with traditional designs is consumed the highest in South India, Kolkata, Delhi and Pune, while contemporary designs are preferred by the working women and youngsters. Gold jewelry with pearl combination is preferred in Hyderabad while Jaipur and people in Mumbai prefer gold and diamond combination.

Sources: World Gold Council, Browne & Mohan

Popular designs across India

Consumer section Preference Purity

South India (TN, AP, Kerala,

Karnataka)

Motifs of Mango, rice, grains,

melon, cucumber seeds, antique

(Interpretation of religious symbols

& gods). Gold along with semi-

precious stones (signet stones,

ruby emerald), diamond, pearls.

22 K

Delhi, Punjab, Amristar, UP Gold along with diamonds &

stones. Sindhis prefer rhodium and

gold combination.

22K, 18K

Rajasthan Deep enamel + wax (meenakari) 14K, 16k, 18K (moving towards

22K)

Gujarat Kundan, Chakri 22 K

West Bengal Gold along with Light enamel

(meenakari), Filigree

22 K


Gold jewelry Demand

54%

36% 32%

35%

0%

10%

20%

30%

40%

50%

60%

Finger Rings Ear-rings (Studs andhangings)

Chains Bangles (for daily wearand Occasional wear)


17% 15%

10%

5%

0%

5%

10%

15%

20%

Necklace Pendants Bracelet (Chain form andbangle form)

Gold jewelry set(Necklace & earrings)



Gold jewelry purchase pattern


95% 80%

65% 60%

40% 22% 15%

0%

20%

40%

60%

80%

100%

Wedding Festivals(Akshaya

tritiya,dhanteras)

Availability ofsurplusmoney

Investment Baby Birth Anniversaries No specificreason

Decision makers/influencers are women in the age group of 40-60 yrs when it comes to bulk buying for weddings. (3-5 lakhs).

For a girl child, buying and storing gold jewelry for her marriage begins at young age. Atleast once in 5 years, the family buys a gold ornament for the girl.

Men’s suggestions have a string influence on multiple-item purchases.

For any bulk purchase (wedding) a minimum of three and a maximum of six people are involved.

Men above 60 years are buying to gift their children and mostly buy gold coins, finger rings, ear rings etc. Their association with store experience is highest amongst all buyers.


Gold Jewelry: Buyer insights..

Average time spent by a genuine buyer – 2-3 hours in the jewelry store.

36% make more than one item purchase.

18% repair or rework brings the customer to the store again!.

When only with friends, a women’s purchase is not more than Rs. 10,000 (light weight, contemporary jewelry for the working women and students are bought).

Women are the major investors into gold chit funds (Approx Rs 1000 per month) and 96% of them buy a gold accessory from the same store after the term.


Age group Decision Makers Decision Influencers

For Kids and teenagers Parents In a joint family, elders act as decision influencers

For unmarried Working women For married women and men

Self Self

Friends, colleagues, Mother Spouse, In-laws (for women), Mother(sometimes for the woman)

For Marriage Self (25%) Parents, Older siblings and relatives - (75%)

For Women and Men (30 + and above)

Self (75%) In-laws (for women), Spouse



Marketing vehicles


75%

55%

35%

15% 15%

0%

20%

40%

60%

80%

Print(Newspaper/Magazine)

Tv/radio Word of Mouth Banners &Posters Websites

Women in the age group of 18-35 are used to promote 95% of the jewelry ads in Print, electronic media, banners and websites.

Male actors help in strong brand association.

Combination of couples used during specific occasions like Diwali, Valentine’s day have an higher appeal.

Akshaya Tritiya, Dhanteras, Karva chauth creates hedonic demand.


Economics of Indian Jewelry stores


Store size Investment ROI

Stand alone 150 Sq Mt

20 lakhs 19%

Medium store format (Gold + Silver), 4000 Sq ft

400 – 500 lakhs 21%

Large, high street, multi strore (12,000 +++ sq ft)

800-1250 lakhs 20%


Reasons why people prefer a particular brand store

71% 70%

82%

69%

56%

89%

67%

0%10%20%30%40%50%60%70%80%90%

100%

Purity of Gold Certified Brand Name Differentdesigns

Exchange location Facilities


Location, Brand name and perceived purity of gold are three major reasons for customers choosing a particular store brand.


Reasons why people prefer un-branded store

56%

69%

54%

38% 40%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Lack of awareness ofexisting brands

Trust/Familiarity Less tax and makingcharges

Customizable(design & Size)

Repair/replace


Families prefer to go to a particular jeweler in their city because of familiarity and trust built over a period and also the price discounts they get. Repair/modification of the old jewelry is another reason customers prefer unbranded stores


How to improve same store sales?

Brand the Occasions/create gold buying events : identify local and national cultural and religious events. Recreate the ambience.

Life-stage events: Occasions that can be branded are the weddings, anniversaries, engagements, identify an uniqueness about a festival and brand it. Each state will have its own festivals. Such festivals can be identified and branded.

Commune day: Target a particular ethnic population and create community events. Create a platform where donations and offerings of gold and silver can be made through the store.

Reinforce the relationships – Spouses, siblings, parents, and friends are the best pool to target. Create offerings to gift each other, plan low investment accessories.

Engage, Engage …: use every opportunity like founder’s day, store anniversary (25 years, 50 years), antique day, new fashion day to reach out to them.


Expansion Strategies


We classify the expansion strategies into four broad categories.

Category 1: Local geographic expansion, Jewelry only: most single-stores or cult stores expand into multiple stores in the same region. VBJ of Chennai.

Category 2: Pan-state or Pan-India expansion, Jewelry only: from single stores in a city, many chain expand to closer geographic markets or markets with home client preferences. For example, Bhima Jewelers expansion into Bangalore and later parts of Kerala or Khazana Jewelry expansion into Pondichery or SRS Jewells expansions into Mumbai and Delhi markets. Strategy of Shubh and other brands can also be adopted to bring together single store brands to give economies of scale.

Category 3: Expansion into Garments, lifestyle and accessories: Kalyan, Saravana Stores and The Chennai Silks (TCS) have successfully managed the complementarity between gold and high end Silk and other garments.

Category 5: Expansion into unrelated business (: GRT, TBZ, Sri Lakshmi Jewelers, etc

Growth Strategies

Existing products, New Markets Navrathan, PCJ, Bhima ( expansion primarily in metros and tier-2 cities)

New Products, New Markets Tanishq, GRT, Joy Alukkas, TBZ (Diversified into Hospitality, Education, Real estate, Malls, Lifestyle, Money exchange) Expanded locally and internationally. Unexplored areas: Jewelers getting into Safety Locker business.

Existing Products, Existing Markets Sharadha Jewelers (Presence only in Mysore)

New Products, Existing Markets Titan (Fasttrak) Khadim’s (traditionally into footwear industry, later moved into Jewelry business)


PRODUCTS OR SERVICES

M

A

R

K

E

T

S

Existing products New Products

Existing Markets

New Markets

Growth Strategies

Pawn & Banking services

Men’s accessories

Safe deposit AA Class lockers (with HVAC, CCTV)

Wedding Garments, Gifts & Accessories,

Hospitality, Education, Real Estate


Diversification

Related Unrelated

Low

High

Inn

ovatio

n

Growth options


Safety deposit lockers seem to meet the security concerns of customers in major cities. Customers prefer gold jewelers with good reputation and with backward linkages into semi-banking areas.

Wedding related garments and accessories are major opportunity for traditional and single store jewelers to expand. Multi-ethnic silk sarees is the most preferred choice of customers.

Men fashions, currently underserved, has huge potential to grow. Men only, store-in-store, is a novelty that is waiting to happen.

22

Thank You

For any queries, please contact :

Srinivas Sawkar

157/A, II floor, 10th A Main

Jayanagar, 1st Block

Bangalore. 560011

PH: 91-80-2656 5164, 40951170

[email protected]

indian gold jeweler market: consumption, market dynamics, and growth strategies

Business

yrs ear

yrs chain

yrs earrings

pendants18 yrs

rings12 yrs

yrs5 yrs

yrs ear piercing

finger ring18 yrs