3 jewellery market_structure

28India’s gold market: evolution and innovation
3: Jewellery market structure
Retail market structure
India’s retail jewellery industry is highly fragmented,
but this is changing
Industry participants recognise that there are two parts
to the market: organised and unorganised. Organised
retailers are typically characterised by having a chain
of stores with a regional or national presence47
and a
strong brand, courting largely urban customers through
sophisticated advertising campaigns. Some, such as
Amrapali Jewels, also have international brands. Retailers
in the unorganised sector are usually smaller, standalone
entities, such as small goldsmiths, family jewellers or
designers focusing on high-end products. The majority
– around 70% – of India’s jewellery industry can be
categorised as unorganised (Chart 18).
India’s gold jewellery retail industry is highly fragmented.
There are a few regional and national chains, but small,
independent retailers take the lion’s share of the market.
Slowly, this is changing. Over the coming years, organised
retailers will increase their market share. The country’s
manufacturing industry is fragmented, too; most are small
goldsmiths employing just a few people. They are highly
skilled though. Cities often specialise in crafting jewellery out
of specific materials, be that gold, silver, diamonds or pearls.
But the sector faces challenges. Small gold manufacturers
often struggle to access gold loans, the jewellery industry
struggles to access bank finance, and the industry suffers
from poor infrastructure.
47 National chains are jewellers who have pan-India presence and differentiate on the basis of trust and brand name.
Regional jewellers form chains that are situated in particular regions such as north or south, but focus on
branding as well as personalised service.
48 Metals Focus.
38%
Stand alone jewellers and medium sized retailers
Regional chains
National chains
Chart 18: Jewellery market landscape in India48
Source: Metals Focus; World Gold Council
23%
7%
70%
95%
5%
Outer ring: 2015
Inner ring: 2000

49 This includes organised and unorganised retailers.
50 For more detail on the round table discussions, please see the methodology box.
51 Handbook of Statistics on the Indian Economy, RBI, 2015.
52 Company websites and investor presentations, correct as at April 2016.
53 Metals Focus.
It is difficult to accurately quantify the number of jewellers
across the country. The industry’s highly fragmented
nature and very long tail of small retailers make it quite
opaque and hard to gain full visibility. Even estimates by
trade associations can vary considerably on a state-by-
state basis.
In order to form our own estimate we undertook a
granular, bottom-up approach reviewing data on Justdial,
a pan-India search services company. Based on this
analysis, we estimate there are between 385,000 and
410,000 jewellers in India.49
This figure resonated with
the industry during the round table discussions held in
Mumbai, Kochi and Delhi.50
In contrast, there are only
125,857 bank branches.51
There are signs that the shape of the market is changing.
Between 2000 and 2015 we have seen the emergence
of more organised participants, with their market share
rising from 5% to 30%. By 2020, it is likely that this share
will have risen to between 35% and 40%. This trend is
concentrated in cities, supported by growing urbanisation
and increasing awareness of branded jewellery among
younger consumers. Regional chains have taken the lead
in increasing market share, but some national retailers
have also emerged (Table 6). For an example of the rise of
organised retailers, please see Focus Box: The rise
of Tanishq.
But the unorganised sector remains the major force in
jewellery retailing across India. Local standalone family
jewellers continue to dominate rural centres, not least as
they fulfil several roles, including in some instances acting
as banker. This role aside, there is also a clear demarcation
between the market segment catered for by standalone
retailers and that catered for by regional and national
chains (Table 7).
Table 6: Organised retailers‘ presence52

Name Stores Cities/towns
Tanishq (Including Zoya) 195 111
GOLDPLUS 32 31
PC Jewellers 58 48
Shubh Retail 80 N/A*
Malabar Gold and Diamonds 80 69
Kalyan Jewellers 68 59
Joyalukkas 58 53
*Not available
Table 7: Size of retail shops, stocks and employees53

Stand alone/
Independent retailers Medium sized retailers Regional chains National chains
Organised  
Unorganised  
Distinctive feature Caters to the market
where customers make
purchases based on price
This can include family
retailers. The focus is on
the traditional market
The focus is on local
trends and designs.
The differentiator is
purity and trust
The focus is on brands
and purity. Typically,
these chains have high
making charges.
Shop size in sq ft 150-500 300-1,000 500-3,000 4,000-25,000
Inventory 5-20kgs 25-50kgs 30-150kgs 150-500kgs
Display in store (% of total stock) 40-50% 60% 80% 90%
Employees per store 4-5 10-15 20-35 40-60
Only 30%of Indian
jewellery retailers are
national or regionally
branded chains

The growing importance of advertising
As organised jewellers continue to grow and compete
for business, they are embracing advertising to broaden
their appeal. As explained in Chapter 2, while tradition
and advice from friends and family are strong influencers
on purchase behaviour, spontaneity and self-direction
also play a role – some people buy a piece of jewellery
simply because they see it and like it. Advertising can tap
into that. Retailers view advertising campaigns as vital in
targeting young, urban consumers.
The evolution of retailers' advertising activity is interesting.
In the past, more traditional means – such as print media
– were used. Now, despite the cost, electronic as well as
outdoor media are much more prevalent. On average, it
can cost Rs9,000 per square centimetre to advertise in a
leading Indian newspaper. By comparison, advertising on
a national television channel during peak time may cost
between Rs30,000 – Rs40,000 for a 10-second spot,
and this can rise to Rs60,000 – Rs100,000 during major
sporting events. Regional entertainment channels are
cheaper, often by at least 30–50%.54
These often attract
regional chains that prefer to advertise in local languages.
The large organised retailers take marketing very seriously,
allocating significant budgets. Television advertising
spending by jewellers was consistently between
Rs3400mn and Rs3700mn (US$56mn to US$58mn)
during 2013–2015.55
To give a sense of individual company
spend, top branded jewellery chain, Titan Company
Limited, increased its advertising expenditure to Rs380mn
(US$6mn) in 2015 from Rs240mn (US$4mn) in 2013.
Similarly, Kalyan Jewellers spent Rs700mn (US$11mn) in
2015, up from Rs610mn (US$10mn) in 2013.
Online market
India has embraced online retailing. Flipkart, Snapdeal
and Amazon are battling it out to gain market share in the
broad consumer market. Some jewellery retailers have
also ventured into this market place. At present retailers
are largely focused on selling lighter pieces at lower price
points online. Consumers have a strong preference to
touch and feel larger or more intricate jewellery before
purchasing – in our 2016 consumer research, 55% of
consumers said they prefer to touch the product before
buying it, and that was why they bought in-store
rather than online.
Although online jewellery retailing is at present a very
small part of the market, it is growing. Traditional retailers
are showing increasing interest in entering this space. In
May 2016, Titan Industries acquired a majority stake in
CaratLane, a move that will allow the company to enhance
its e-commerce capabilities significantly and help target
younger customers. Those close to the market believe that
in 10 years online sales could account for between 7% and
10% of total sales by value. Whether or not this happens
is dependent on the consumer – their preferences will
shape how the online jewellery market grows.
While the growth of online jewellery sales may take
several years, online, digital and social activity already
plays an important part of the purchase journey. In urban
India 40% of consumers said that they browsed online
before purchasing their jewellery. And around a quarter
of urban consumers said that they used online blogs and
social media for ideas and inspiration. For millennials –
those aged between 18–33 years old – the figure is closer
to a third.
Gold jewellery transactions: cash buying vs exchange
Cash is the most common method of purchasing gold
jewellery. It accounts for 70%–80% of all transactions.56
But consumers often exchange bars and coins for
jewellery. Why?
There are two drivers which can influence whether
bars and coins, or older jewellery, is exchanged for new
jewellery or bought for cash: the time of year and gold
price trends.
Although gold is bought throughout the year, as discussed
in Chapter 2, there are certain months when purchases
accelerate, such as festive or marriage seasons. This
affects how people buy gold jewellery. For example,
during Diwali, the ratio of cash buying is much higher.
This is because harvests have been reaped and cash has
flowed into households’ coffers, especially in rural areas.
This is in contrast to the marriage season when exchange
rises as consumers exchange bars and coins, which they
have accumulated over many years, for bridal jewellery.
The Indian consumer is very savvy when it comes to
the gold price. During periods of high and rising prices,
a consumer is more likely to exchange gold for new
jewellery, saving cash to buy gold when prices are at
levels they are more comfortable with.
54 All costs are 2015 averages.
55 Maxus India.
56 The remaining 20–30% of transactions are made by cheque, credit or debit card.

The early years
India’s jewellery industry started to change in 1995
when Titan Industries,57
one of India’s leading watch
manufacturers, launched its own jewellery brand,
Tanishq. Its aim was to target a different type of jewellery
consumer. Rather than focus on traditional 22-carat
designs it developed a stylish portfolio of contemporary
18-carat jewellery and watches. Up until this point, the
Indian jewellery market had been largely unorganised and
fragmented, with few recognised brand names.
Tanishq found trading challenging at the start. Domestic
consumers did not readily accept a modern concept in
what was such a traditional jewellery market. By contrast,
exports performed well. Sales to key jewellery markets
such as the UK, US, Australia and the Middle
East flourished.
Re-working its strategy for the home market
Tanishq revised its strategy. With an initial emphasis on
exports, its designs were predominantly Western oriented,
but similar product lines were also offered at home. For
many consumers, the designs were too contemporary.
Given India’s diversity, Tanishq realised that it should cater
to the tastes across the country. Its emphasis shifted from
modern to more traditional design, including 22k and 24k
ornaments inspired by designs from various states.
It incorporated traditional styles into its more contemporary
designs. The company also began seasonal and localised
promotions based on Indian festivals, and embarked on an
overhaul of its retail stores.
The second step involved enhancing its brand and
reputation by building trust. To do this it focused on purity.
In 1999, Tanishq introduced the concept of Karatmeters
in its retail boutiques. The Karatmeter used X-rays to
provide an accurate reading, within three minutes, of the
constitution of gold in an ornament. As part of its strategy,
Tanishq also conducted tests on 10,000 ornaments
selected at random. In many cases, the pieces were found
to be under carat. Over time, this focus on purity proved
to be a key selling point for Tanishq. And to bolster trust
further it decided to use a standard gold price across all
its showrooms from March 2000.
This emphasis on trust led to a sharp jump in sales and
helped the firm expand. By 2001, Tanishq had nearly
50 stores located in metros and Tier 1 cities.
Tanishq further built its market by highlighting its
connection with Tata, a trusted brand in the Indian
corporate world with businesses ranging from steel to
airlines. Its marketing budget expanded to encompass
national-level spending (both electronic and print media),
regional budgets, direct mail and research.
Second push for penetration
Having built its brand and established itself as a leading
jeweller, Tanishq started to branch out. In 2005 it explored
the corporate gifts and vouchers market and began to
provide financing for the purchase of gold jewellery.
In 2007, the company started focusing on higher-end
jewellery with the introduction of Zoya, a chain of
luxury jewellery boutiques encompassing designer and
international designs.
It also expanded its geographic coverage. After
establishing Tanishq among the large and growing middle
class in urban centres, Titan Industries decided to venture
into rural India. To do so, it launched Gold Plus, a brand
aimed at semi-urban and rural locations.
Tanishq and Gold Plus delivered approximately Rs87bn
(US$1.29bn) of combined net sales in 2015. Tanishq has
over 190 stores and Gold Plus has over 30 stores, with
a combined retail space of more than 800,000 sq ft.
Tanishq is now one of the largest retail jewellery chains in
India, with an excellent reputation for its combination of
traditional and contemporary designs.
Focus: The rise of Tanishq
57 Titan Industries is a subsidiary of Tata Group.

Manufacturing market structure
Jewellery manufacturing also highly fragmented,
but this is changing
Even though India is one of the foremost jewellery
fabricators in the world, its manufacturing facilities are
largely unorganised. Barely 5%–10%58
of units operate
as organised, large-scale facilities – ten years ago these
would have hardly existed. The vast majority of the industry
is characterised by small workshops, each typically
employing two to four goldsmiths. This is reflected
in the fact that between 60% and 65% of jewellery
manufactured in India is handmade. This figure was much
higher a decade ago – the rise of manufactured jewellery
has led to the drop in share of handmade jewellery.
One of the key reasons that jewellery manufacturing
remains largely unorganised is the relatively low capital
requirements of small workshops. Rarely do they own the
gold on which they work. Instead, they carry out what the
industry calls job work for others.
Regions specialise in producing different types
of jewellery
Jewellery manufacturing in India is highly concentrated.
Around 60%59
of the gems and jewellery industry is
centred around Mumbai, Kolkata and New Delhi. The
majority of jewellery manufactured in these locations is
sold outside these cities, either nationally or internationally.
As jewellery tastes and preferences differ across the
country, so do manufacturing skills and expertise
(Map page 33). Regions specialise in producing specific
types of jewellery. Jaipur in Rajasthan has a world-class
reputation for producing jewellery with semi precious
stones and gems; Hyderabad has a tradition in pearls
going back centuries, so much so that it is known as the
City of Pearls; similarly, Surat in Gujarat is known
as Diamond City.
58 Metals Focus.
59 Metals Focus, World Gold Council: an introduction to the Indian gold market.
The majority of manufacturing facilities in India are small workshops
of two to four employees.
This is both a strength and a weakness. The artisan,
bespoke nature of the handmade jewellery allows the
karigars to produce beautiful, intricate pieces which are
not possible with machine-made jewellery.
But it also means the sector suffers from a lack of
transparency. This makes it difficult for banks to lend and
goes some way to explaining the lack of readily available
capital, which would be required for a manufacturer
to develop its workshop or factory and recruit more
employees.
Growth in organised manufacturing over recent years has
owed much to the growth in exports and the requirements
of the organised retail sector. International buyers, for
example, have strict procurement policies which rule out
many of the smaller workshops. Orders from overseas
and domestic organised retailers are often large and
manufacturers need to be of a certain size in order to
fulfil them. Therefore, growth in the organised retail
sector and in India’s jewellery exports – as outlined in
Chapter 4 – has supported the development of the
organised manufacturing sector.
60%–65%
of jewellery manufactured
in India is handmade

Key
% = Regional share of Indian jewellery demand.
58 58
58 58
58 58
58 58
58 58
58 58
58 58
58 58
58 58
58 58
58 58
58 58
sh
hattisgarh
Odisha
West
Bengal
Jharkhand
Bihar
Assam
Meghalaya
Arunachal
Pradesh
Nagaland
Manipur
Mizoram
Tripura
Andaman and Nicobar Islands
Sikkim
herry
58
6
3
1
3
1
22
East
15%
South
40%
Delhi/Agra
Silver jewellery
Kolkata
Handmade jewellery
derabad
mi-precious
dded jewellery
mbatore
ting jewellery
king centres in India
= The number of BIS-approved hallmarking centres in each Indian state.60 BIS.
Major Jewellery manufacturing centres and hallmarking centres in India60
The map shows the number of BIS-approved hallmarking centres in each Indian state.
Jammu and Kashmir
Himachal
Pradesh
Punjab
Haryana
Rajasthan
Uttarakhand
Uttar Pradesh
Madhya Pradesh
Karnataka Andhra Pradesh
Telangana
Chhattisgarh
Odisha
Tamil Nadu
West
Bengal
Jharkhand
Bihar
Assam
Meghalaya
Arunachal
Pradesh
Maharashtra
Dadra and
Nagar Haveli
Delhi
Gujarat
Chandigarh
Nagaland
Manipur
Mizoram
Tripura
Kerala
Lakshadweep
Andaman and Nicobar Islands
Sikkim
Puducherry
Goa
Daman and Diu
58
38
26 26
2
6
3
1
1
1
5
7
3
9
1
3
13
23
1
22
4
36
28
North
20%
East
15%
West
25%
South
40%
Delhi/Agra
Silver jewellery
Jaipur
Kundan stones and
semi precious
Gujarat
• Rajkot – coloured
stones and gold
jewellery
• Surat – diamond
polishing hub
Mumbai
• Machine made
jewellery
• Largest wholesale
market
Kolkata
Handmade jewellery
Hyderabad
Semi-precious
studded jewellery
Coimbatore
Casting jewellery
Thrissur
Lightweight
jewellery
Major jewellery manufacturing centres and hallmarking centres in India

Hallmarking
It is odd that there has been little consumer
protection in a country with such a strong
relationship with gold
The Bureau of Indian Standards (BIS) is the national body
of standards in India. In 2000, it launched a long-term
scheme to encourage the voluntary hallmarking of gold
jewellery. The objectives of the BIS certification of gold are
to protect consumers, support the export of gold jewellery
and to develop the country as a reliable gold centre.
BIS has made huge strides in this area. Over 300
hallmarking centres61
have been rolled out across the
country (Map page 33), 13,000 jewellers have been
accredited, and a supervisory structure has been
established for both hallmarkers and retailers.
But more needs to be done. Despite 15 years of
hallmarking, gold jewellery is still routinely under-carated.
According to research by the consultancy, Oliver Wyman,
under-carating of gold jewellery weight has fallen from
between 20%–40% to somewhere around 10%–15%,
although the true percentage may well be far higher given
there are limited number of BIS certified jewellers.62
This is an important issue for the consumer. In urban India,
5% of consumers say they do not know the caratage
of the jewellery they bought in the past 12 months; this
increases to 18% in rural India. Furthermore, 86% of
respondents in India said that hallmarking is extremely or
very important. Tackling this issue is key to ensuring the
health of the gold industry.
Consumer protection can be improved in the short
and medium term
More rigour in the hallmarking process would benefit
India’s consumers and gold market. Trust in the industry
would increase. This would benefit consumers, retailers
and exporters.
What needs to be done? In our report Developing Indian
hallmarking, a roadmap for future growth, we advocate
six short-term measures to improve the efficiency and
effectiveness of hallmarking:
• Strengthen governance around hallmarking processes
• Drive customer awareness of hallmarking
• Incentivise and facilitate expansion of hallmarking
centres
• Use BIS data to develop a ratings system for jewellers
• Pilot Unique ID or other technology solutions to support
hallmarking
• Pursue membership of the International Hallmarking
Convention, or develop an Asian alternative.
Over the longer-term, we suggest:
• Moving to a mandatory hallmarking regime
• Placing the onus of hallmarking on manufacturers
• Developing mechanisms to monitor the flow of gold
across the supply chain.
Mandatory hallmarking of jewellery with
BIS Act, 2016
Recent developments herald further improvements, with
the approval of a new BIS Act 2016. A detailed overview
of the Bill is discussed in Chapter 10, but its primary aim
is to make the hallmarking of gold jewellery mandatory and
allow the government to enforce it. This could largely wipe
out the malpractice of gold jewellery and ornaments of
inferior purity being sold as 22-carat.
61 As of Jan 2017, there are 431 hallmarking centres.
62 World Gold Council, Developing Indian Hallmarking, a road map for future growth.
Hallmarked bangle.

The hallmarking process explained
In accordance with BIS procedures, hallmarking is applied
to all parts of the item that can be easily detached or
replaced, except for bangles and light weight items where
hallmarking is only applied once. A hallmark is made up
of five different symbols which should be inscribed to
illustrate the following:
• BIS mark
• Fineness
• Assaying and Hallmarking Centre mark
• Year of marking
• Jeweller’s mark.
Outlook
Challenges…
Despite its huge importance to the economy, the jewellery
industry is one of the most heavily regulated industries
in India. Take how difficult it has been to secure its raw
material; gold. No other industry has had to endure rules
as complex and market-distorting as the 80:20 rule.
Encouragingly, the policy approach seem to be improving.
In November 2014 the 80:20 rule was repealed. And in
the 2015 Union Budget a policy framework – including
the gold monetisation scheme and Indian gold coin – was
established to support India’s gold industry.
BIS hallmarks for gold jewellery consist of several componentsFocus box: BIS hallmarking components
916 J ABC
The BIS
logo
A three digit number
(out of a set of six
predefined values)
indicating the purity of
the gold in part-per-
thousand-format viz;
958, 916, 875, 750,
585, 375
A code denoting
the year of
hallmarking
Logo of the
assaying centre
Logo/code of
the jeweller

But the industry still faces some challenges. For a start,
small and medium sized manufacturers struggle to obtain
gold loans to purchase material. This may change given
the introduction of the government’s gold monetisation
scheme, which may make it easier for manufacturers to
obtain gold loans.
More generally, smaller participants in the industry
struggle to access credit. For FY2015–16, only Rs727bn
was made available to the industry by the financial sector,
accounting for just 2.7% of total bank credit.63
This is
unlikely to change any time soon. The fragmented nature
of the industry means that some parts lack transparency,
which makes it hard for banks to complete the due
diligence necessary to advance loans. The opacity also
hides some shady practices. Stories of banks falling foul of
devious jewellery firms who fraudulently obtain loans, and
subsequently default, are rife.
The gold jewellery industry also suffers from poor
infrastructure, largely as a result of it being unorganised
and dominated by small, independent retailers and
manufacturers. Transport, vaulting, technology and
training are weak by international standards. As the sector
becomes more organised this will improve.
… and opportunities
India’s gold jewellery industry is highly fragmented:
70% of retailers and 90%–95% of manufacturers are
small, independent firms. But we have seen slow and
steady progress in this area. Large regional and national
retailers have taken a greater share of the retail market.
They seem to have the momentum behind them. By
2020 their share could rise to 35%–40%. And as India’s
jewellery export market grows, organised manufacturers
should grow too.
63 Industry-wide deployment of Gross Bank Credit from RBI, published on 10 May 2016.
By 2020, large regional and national
retailers could have become
35%–40%of the market
India’s gold jewellery industry can look to other sectors,
and indeed other countries, for inspiration. The Bharat
Diamond Bourse (BDB) in Mumbai, which opened in 2001,
supports industry sourcing, transportation and vaulting.
In 2006 a complex in Istanbul, Turkey, called Kuyumcukent
– Goldsmiths’ City – began making gold jewellery.
Kuyumcukent is the world’s largest integrated goldsmith
centre and houses around 2,500 production units and
shops, as well as the Istanbul Gold Refinery. We see no
reason why India’s gold industry cannot emulate either
of these.

3 jewellery market_structure

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