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

Browne & Mohan
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.
© Browne & Mohan, 2013

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
350 320
300
Consumption in Tonnes
250 216
200 176
150
96
100
50
0
North South East West

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
250000
200000
200000

150000
100000 100000
100000
50000 50000 50000
50000 25000 25000 25000
0 0
0
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)
Sources: Browne & Mohan

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

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 Sources: Browne & Mohan
jewelry after a certain age)


Design preference
90%
78%
80%
70%
60%
50% 43%
40% 36%
30%
21%
20%
10%
0%
Plain gold jewelry with Plain gold jewelry with Gold jewelry with stones Gold with
ethnic/traditional design contemporary designs Platinum/pearl/diamond

Sources: World Gold Council, Browne & Mohan

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.


Popular designs across India

Consumer section Preference Purity

South India (TN, AP, Kerala, Motifs of Mango, rice, grains, 22 K
Karnataka) melon, cucumber seeds, antique
(Interpretation of religious symbols
& gods). Gold along with semi-
precious stones (signet stones,
ruby emerald), diamond, pearls.

Delhi, Punjab, Amristar, UP Gold along with diamonds & 22K, 18K
stones. Sindhis prefer rhodium and
gold combination.
Rajasthan Deep enamel + wax (meenakari) 14K, 16k, 18K (moving towards
22K)

Gujarat Kundan, Chakri 22 K

West Bengal Gold along with Light enamel 22 K
(meenakari), Filigree


Gold jewelry Demand
60% 54%
50%
40% 36% 35%
32%
30%
20%
10%
0%
Finger Rings Ear-rings (Studs and Chains Bangles (for daily wear
hangings) and Occasional wear)

20%
17% Sources: Browne & Mohan
15%
15%
10%
10%
5%
5%

0%
Necklace Pendants Bracelet (Chain form and Gold jewelry set
bangle form) (Necklace & earrings)

Gold jewelry purchase pattern
100% 95%
80%
80% 65% 60%
60% 40%
40% 22% 15%
20%
0%
Wedding Festivals Availability of Investment Baby Birth Anniversaries No specific
(Akshaya surplus reason
tritiya, money
dhanteras)

 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..
Age group Decision Makers Decision Influencers

For Kids and teenagers Parents In a joint family, elders act as
decision influencers
For unmarried Working women Self Friends, colleagues, Mother
For married women and men Self 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 Self (75%) In-laws (for women), Spouse
above)
 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.


Marketing vehicles
80% 75%

60% 55%

40% 35%

20% 15% 15%

0%
Print Tv/radio Word of Mouth Banners &Posters Websites
(Newspaper/Magazine)

 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 20 lakhs 19%
Mt
Medium store format 400 – 500 lakhs 21%
(Gold + Silver), 4000
Sq ft
Large, high street, 800-1250 lakhs 20%
multi strore (12,000
+++ sq ft)



Reasons why people prefer a particular brand store
100%
90%
80% 89%
70% 82%
60% 71% 70% 69% 67%
50% 56%
40%
30%
20%
10%
0%
Purity of Gold Certified Brand Name Different Exchange location Facilities
designs

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
80%
70%
60% 69%
50% 56% 54%
40%
30% 38% 40%
20%
10%
0%
Lack of awareness of Trust/Familiarity Less tax and making Customizable Repair/replace
existing brands charges (design & Size)
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 New Products, New Markets
Navrathan, PCJ, Bhima ( expansion Tanishq, GRT, Joy Alukkas, TBZ
M New primarily in metros and tier-2 cities) (Diversified into Hospitality, Education,
Real estate, Malls, Lifestyle, Money
Markets
A exchange)
Expanded locally and internationally.
R Unexplored areas: Jewelers getting into
Safety Locker business.
K
Existing Products, Existing New Products, Existing Markets
E Markets
Existing Titan (Fasttrak)
Sharadha Jewelers (Presence only in
T Markets Mysore) Khadim’s (traditionally into footwear
industry, later moved into Jewelry
S business)

Existing products New Products

PRODUCTS OR SERVICES

Growth Strategies

High

Pawn & Banking services Safe deposit AA Class lockers
(with HVAC, CCTV)
Innovation

Men’s accessories

Wedding Garments, Gifts & Hospitality, Education, Real
Accessories, Estate
Low

Related Unrelated
Diversification


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.


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
ssawkar@browneandmohan.com

22

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