Jewellery Outlook
 
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Analysis
 
 
India’s $9.6 Billion Rural Jewellery Market

 

Sensing a robust market in these areas, the firm established a Rs.50 crore ($11.4 million) jewellery manufacturing plant situated in Hosur, Tamil Nadu. The company started making and outsourcing gold jewellery. The challenge then was to generate profits through the scale of operations, which required a large amount of working capital. “It was also important to have good, active vendor partners. We screened many hopefuls, educating them about the manufacturing processes and hallmarking standards,” explains Natarajan. The company also motivated them by offering rewards for conformance. Additionally, the company trained around 3,000 karigars (artisans) to impress upon them the need for maintaining gold purity and quality.

“We targeted the lower middle- and the middle income group and began to ‘upgrade’ them gradually,” says Natarajan. In 2005, GoldPlus opened two showrooms, one in Erode, Tamil Nadu, and the other in Ratlam, Madhya Pradesh. Today it has 27 showrooms in six states. GoldPlus is today the largest jewellery chain in Tamil Nadu and its average sticker price is gradually increasing. “When we started, the average price used to be around Rs.12,000 ($274); today it has moved up to Rs.18,000 ($411),” says Sharad R., the head of retail and marketing.


Reports suggest that southern India consumes 40 per cent of all jewellery sold in the country. “Thus having a base in the south made sense. We did our learning in a high-traffic market and were able to build up a nice platform before moving on to other parts of the country,” says Natarajan.

First-Mover Advantage

If the south was a gold mine for GoldPlus, the Hari Krishna Group trained its sights on Mumbai, Gujarat and Maharashtra. Since 2005, the firm has been selling Kisna, branded 18-karat diamond jewellery in these regions through 1,091 jewellery retail outlets. Kisna is sold in a wide price range from 4,900 ($112) to Rs.250,000 ($5,716), and the brand introduces new designs every four months to cater to its design-conscious customers.

 

At the India International Jewellery Show (IIJS) in August, they picked up orders from 3,416 retailers from other states as well – Madhya Pradesh, Chattisgarh, Bihar and Jharkhand. These retailers were keen to stock Kisna in their stores, says Ghanshyam Dholakia, a partner of the Hari Krishna group. “The field is open for innovative and smart players.

We are now asking ourselves, why didn’t we tap these markets earlier? Look at the growth potential! There are over 15,000 jewellers in the three areas where Kisna is currently sold. And we have tapped only 7.27 per cent of them so far!” According to Dholakia, the rural consumer is very smart and knowledgeable and insists on certificates.


“Thanks to the media and movies, the rural consumer is also getting design savvy.”

Western designs are popular and this Diwali, Dholakia predicts that their solitaire range – ranging upwards from 0.25 carats, priced between Rs.15,000 ($343) and Rs.100,000 ($2,286) will do exceptionally well. However, the fastest moving price points for Kisna jewellery in the rural areas are between Rs.10,000 ($228) and Rs. 30,000 ($686). For now, the brand is keen on expanding its footprint in the western and northern regions.

On the other hand, Ciemme Jewels has targeted the so-called Tier-3 and Tier-4 cities in Gujarat, the north-east, central and north India since 2003. Deepak Raval, the firm’s general manager, says the Ciemme brand today is retailed through 250 outlets and 70 per cent of them are situated in semi-urban and rural areas. The firm is currently looking for franchisee showrooms in Mangalore, Karnataka. “By 2010 we want to expand our reach to 500 stores,” says Raval.

It was very difficult at first, Raval notes. “Selling branded diamond jewellery was tough. Most of the retailers we approached offered to stock our jewellery, but wanted sell it as their own product and not use our label. It took us a while to impress upon them how to sell a branded product.” Ciemme uses only VVS diamonds up to I2 clarity and E-G colours. They offer 80 per cent buyback on the sticker price and deduct only 10 per cent if the product is exchanged. Raval adds, “To cater to the superstitious buyer who prefers to keep the diamond jewellery for a week or more to check if the stones prove ‘favourable’ or not, we offer to take back the jewellery at 100 per cent if it is returned within a month.”

 

Ciemme caters to rural tastes and brings out limited edition designs. Their customers are traditional but want something tweaked to suit their sensibilities. Minor alterations that look trendy are acceptable. If in the northern rural areas, the brand’s white gold and coloured gemstones are making inroads, the southern customers demand quality diamonds set in their jewellery. Raval feels that the design element trickles down from the urban areas to the rural in no time, thanks to the influence of Hindi films. Buyers copy what film heroines wear. Long chandeliers, which came into vogue in urban areas only recently, are already hot in rural areas.

The brand’s 18-karat diamond- and coloured stone jewellery ranges from Rs.999 ($22) to Rs.1,000,000 ($22,867), and the popular price points that sell well in the rural and semi urban areas are Rs.15,000 ($343) to Rs.35,000 ($800).

Rural areas are hooked up to global influences

The company issues certificates and arranges additional lab certifications if the consumer wants them. The brand has registered a 100 per cent growth in volumes every year since its inception.

Natarajan feels that rural markets are traditionally dominated by yellow gold, with only 10- to 15 per cent favouring coloured stones like rubies and emeralds, and only 4- to 5 per cent preferring diamond jewellery. “But a deeper analysis of these markets shows that the share of gemstones and diamonds will gradually increase in the months and years to come.” Raval says that today about 10 per cent of the rural and semi-urban population has warmed up to buying diamond jewellery. Five years down the line, he thinks, at least 50 per cent of this population will seek diamonds.

Lessons Learnt

So where is the rural market heading? “The rural market will equal the urban market soon,” says Natarajan. The rural customer is changing and so, the rural retail scene is evolving at a rapid pace.

 

Natarajan says, “We thought they are price sensitive, but we have been proved wrong. They are as design conscious as any urban customer and want design variety every six months.

They are also willing to pay a premium for differentiated design. However, the wedding market, which accounts for 60 per cent of total sales, continues to be dominated by traditional jewellery. The rural consumer is drawn to stylish jewellery, but “style” as such is perceived differently by rural customers.
Kisna
 
Ghanshyam Dholakia
Partner, Hari Krishna Group

”Rural India offers the jewellery industry a huge opportunity. But Natarajan cautions, “You have to keep pace with the change. You have to adapt quickly – or lose your customer. One constant is gold. Gold is a commodity dear to all Indian women, irrespective of income group. Only the quantum of gold bought varies with differences in income and savings. The growth of our business will depend on how efficiently we catch the consumer traffic from the villages, which today travels all the way to the nearby Tier 1 or Tier II towns to buy jewellery.”

As Dholakia points out, “The field is vast, and open for all the organized players. Five years from now, only brands will sell. Those who offer quality, certification and service will rule and reap the rewards. The turf is teeming with opportunities.”