Photo: Mamta Badkar
On a weeknight in a middle-class Mumbai suburb, young couples and middle-aged women browse at the local branch of Tanishq, India’s largest national jewellery chain. A woman is buying bangles with her winnings from an informal lottery.A couple plan to spend 250,000 rupees ($4,700) a year on baubles that will act as a savings fund for their five-year-old daughter. Until recently, such customers would instead have gone to a small-scale “family jeweller”.
India is the world’s largest market for gold trinkets. Reliable figures are hard to come by, since there are so many tax-shy small retailers, but Crisil, a credit agency, reckons the country’s jewellers turn over about $25 billion a year, with gold accounting for four-fifths of that. Not surprisingly, some of India’s biggest firms want a piece of the action. The jewellers’ chains they have set up are beginning to eat into the smaller operators’ share.
Their success has not come overnight. Tata group, the country’s biggest conglomerate, launched Tanishq in 1996 and almost abandoned it six years later because of its poor performance. However, since 2007 Tata’s jewellery revenues have taken off, growing by around 40% a year on average. Tanishq and Gold Plus, the conglomerate’s second jewellery brand, brought in $1.3 billion in the group’s 2011-12 financial year.
Gitanjali Gems, a diamond cutter that has gradually built up 31 jewellery brands, is the other large national competitor. Its jewellery sales in India were $645m, a third of the company’s revenues, in the nine months to December. Reliance Industries, another of India’s biggest firms, launched a jewellery line in 2007. Regional chains and online jewellery stores are also on the up.
Their rise marks a shift in how and why Indians, rich and poor, buy bijoux. Traditionally, gems have been personal whereas gold, even when made up into jewellery, has been seen more as an investment. So, for gold purchases, customers expect to haggle furiously over prices: sellers down at the bazaar will bargain, whereas the new chains have fixed prices.
However, as incomes rise, customers’ ideas are changing. The jewellery chains are seeing more women buying for pleasure and for themselves, rather than parents buying wedding sets for a departing daughter’s rainy-day fund. Affluent youngsters often live in different cities than their parents’ family jeweller, worry about unfamiliar small vendors cheating them and thus feel safer shopping with a chain store. Such shoppers may still see their adornments as investments to some degree, but they also care about whether their designs are fashionable.
The chains are now pushing out into small and rural towns. Tanishq has 134 shops and plans to open 45 more in the coming financial year. Abhishek Gupta, Gitanjali’s head of strategy and investor relations, sees promise in any town where annual income is over $2,000 per head.
So far the chains’ national market share is only around 8-13%, reckons Crisil. Their unwillingness to haggle still deters many. They also miss out on another Indian “tradition”–laundering undeclared income by converting it to gold. As high-profile, listed companies they are forced to invoice and declare all their sales, and to obey a recent law obliging them to record the tax number of customers spending more than $9,300 in cash on jewellery. “We lose customers because of that but we will live with that,” says Sandeep Kulhalli, Tanishq’s head of retail and marketing.
The draft version of this year’s budget sought to extend the taxman’s reach to the family jewellers, making them pay excise duty on gold jewellery and requiring paperwork for every last anklet. The small jewellers staged a three-week strike, arguing with some justification that such demanding requirements were unreasonable in a chaotic industry involving many illiterate craftsmen. The wobbly Congress-led coalition government, wounded by recent state-election defeats, backed down, in one of several U-turns in the finance bill published this week (see “India’s balance of payments: The tail that wags the elephant”). They may be losing younger customers to the national chains, but the dealers in the bazaar are not done for yet.
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