The World Gold Council has launched a report entitled “Jewellery market structure”, as part of a series of in-depth analyzes of the Indian gold market. The report highlights a notable change in the Indian gold jewelry market over the past few years, catalyzed by changes in consumer behavior and government regulations. While small independent retailers still dominate the landscape, the market share of chain stores (national and regional) has grown steadily over the past decade. Unlike jewelry retail, changes at the manufacturing level have been relatively slower, but as the market continues to grow, organized retail and manufacturing operations are well positioned to see their share of market increase.
Somasundaram PR, Regional CEO, India, World Gold Council, said: “The Indian retail jewelery market has undergone several structural changes over the past decade, some driven by regulation and some by behavioral change. consumers. While mandatory hallmarking, implemented in its final form as defined, is expected to provide a level playing field, national and regional chain stores are nonetheless set to gain market share in the current trend due to their access to credit and the large stock they have. Smaller players must become more transparent and adapt technology faster if they are to gain similar access to credit and protect their market share.
“On the other hand, the manufacturing sector is only at the beginning of its much-needed journey of transformation. Jewelery parks, some of which have already been established, will help address concerns about ethical standards and working conditions. The same can help remove obstacles that hinder the growth of the manufacturing industry, further supporting demand in a positive way. The bottom line is that the sector has grown, but the wave of change the industry is facing due to technology adoption and broader tax compliance in the economy can be a boon for those who are ready to transform and a significant risk for those whose business models continue to rest. on inherited practices.
Retail market structure
The retail jewelry market in India has undergone notable changes over the past decade, owing to changing consumer preferences and government regulations which have encouraged the industry to become more organized. In recent years, demonetization and the introduction of the Goods and Services Tax (GST) have helped the industry become more organized and therefore more transparent. In addition, changing consumer preferences have helped the organization of the industry, as customers seek better shopping experiences, transparent pricing, buy-back policies and are increasingly buying through invoices and online transactions. line. As a result, chain stores have grown over the past 10-15 years, gaining 35% market share from 2021. Demand for better designs and better customer experience, growing awareness of punching , better pricing structures and competitive return policies, have all accelerated the move towards chain stores. Chain stores, with nationwide operations, focus on daily wear and fast-moving jewelry (such as chains and rings) and these items account for 50-60% of their business. The report estimates that in the next five years, chain stores will continue to grow and their market share will exceed 40%. The top five retailers alone are expected to open between 800 and 1,000 stores during this period.
While stand-alone retailers initially struggled to compete with chain stores, the adoption of best practices allowed them to coexist in a highly competitive landscape. In 2021, their market share in the retail jewelry industry is 37%. Typically, stand-alone, mid-size retailers tend to focus on three things: bridal jewelry, personalization, and developing personal relationships with their customers.
Millennials are driving online jewelry sales
India’s online jewelry market has also seen rapid growth over the past few years, driven by demand from millennials, growing internet penetration and an increase in smartphone sales. Most sales are driven by consumers between the ages of 18 and 45. Interestingly, while online jewelry shopping has increased, the average note size has remained between 5 and 10 grams. Online shoppers tend to buy lightweight 18k gold fashion jewelry. Looking ahead, the report predicts that the online jewelry market share over the next five years could reach 7-10%.
The Challenges of the Gold Jewelery Retail Market
Although there are many promising signs that the retail market is moving towards a more robust and organized ecosystem, there are still many challenges threatening its growth. India’s gemstone and jewelry industry is still struggling to get bank credit. More than 20% of loans extended to this sector have become non-performing assets (NPA), resulting in the gems and jewelry industry earning only 2.7% of total credit issuance in India. Financing is even more troublesome for small independent jewelers who tend to rely on the monthly gold program for financing or act as lenders. The report assumes that national and regional chain stores will continue to gain market share due to their access to credit and the large inventories they are able to manage. Conversely, if smaller players are unable to meet accepted transparency standards, their access to credit will be limited, as banks and financial institutions remain reluctant to lend to the gemstone and jewelry sector.
Structure of the manufacturing market
Despite being one of the largest gold jewelry manufacturers in the world, India’s manufacturing industry is still very fragmented and unorganized. The report says only 15-20% of manufacturing units operate as organized, large-scale facilities, which was less than 10% about five years ago. The report attributes this growth to three distinct factors: the expansion of organized retail; export growth; and repression by the authorities. The manufacturing industry is still dominated by small jewelry workshops and artisans. Although there is no official estimate of the number of manufacturers in India and many operate independently as freelancers, industry estimates suggest there are 20,000 to 30,000 manufacturing units Across the country. While ‘karigars’ (craftsmen) form the backbone of India’s gemstone and jewelery industry, many still work in extremely precarious conditions and are underpaid compared to other industries.
Increasingly, government and industry are focusing on moving manufacturing from congested centers to jewelry parks, which will facilitate organization within the trade. These integrated industrial parks will provide access to facilities for artisans under one roof, including manufacturing units, commercial areas, residences for industrial workers, business support services and an exhibition center. Through the introduction of mandatory hallmarking, the government has attempted to create a level playing field in terms of purity and allow retailers to focus on differentiation. These measures aim to remove some of the obstacles that are hampering the manufacturing industry, which in turn should support demand.
Pictured: A girl tries on bridal jewelery with her parents at Tribhovandas Bhimji Zaveri, Mumbai. © World Gold Council
