The World Gold Council launched a report titled ‘Jewellery market structure’, as part of a series of in-depth analysis on the Indian gold market. The report highlights a notable shift in India’s gold jewellery market over the past few years, catalysed by changes in consumer behaviour and government regulations. While small independent retailers still dominate the landscape, the market share of chain stores (national and regional) has increased steadily over the last decade. In contrast to the retail jewellery trade, changes at the manufacturing level have been relatively slower but as the market continues to develop, organised retail and manufacturing operations are well-poised to see their market share grow.

Somasundaram PR, Regional CEO, India, World Gold Council, commented, “The Indian retail jewellery market has seen several structural changes over the last decade, some driven by regulations and some by shift in consumer behaviour. While mandatory hallmarking, implemented in its final shape as defined, should provide a level playing field, national and regional chain stores are nevertheless set to gain market share in the current trend because of their access to credit and the large inventory they carry. Small players need to become more transparent and adapt technology faster if they have to gain similar access to credit and protect market share. On the other hand, manufacturing sector is only at the beginning of its much- needed transformational journey. Jewellery parks, some of which have already been established, will help address concerns about ethical standards and working conditions. The same can help eliminate barriers impeding the growth of manufacturing industry, further supporting demand positively. Bottom line is - the sector has grown but the wave of change facing the industry due to tech adoption and broader tax compliance in the economy can be a boon for those who are willing to transform and a significant risk for others whose business models continue to rest on legacy practices.”

Retail Market Structure

The retail jewellery market in India has undergone notable changes over the last decade, driven by evolving consumer preferences and government regulation that has encouraged the industry to become more organised. Over the last few years demonetisation and the introduction of the Goods and Services Tax (GST) have helped the industry to become more organised and therefore more transparent. Moreover, shifting consumer preferences have aided industry organisation as customers seek better shopping experiences, transparent pricing, buyback policies, and increasingly purchase via bills and online transactions. As a result, chain stores have grown over the last 10-15 years, gaining 35% market share as of 2021. Demand for better designs and consumer experience, a growing awareness about hallmarking, better pricing structures and competitive return policies, have all accelerated the shift towards chain stores. Chain stores, with national operations, focus on daily wear and fast-moving jewellery items (such as chains and rings) and these items account for 50-60% of their business. The report estimates that over the next five years, chain stores will continue to expand, and their market share will surpass 40%. The top five retailers alone are likely to open 800-1,000 stores during this timeframe.

While stand-alone retailers initially struggled to compete with chain stores, the adoption of better practices has allowed them to co-exist in the highly competitive landscape. As of 2021, their market share within the retail jewellery industry is at 37%. Typically, stand-alone and medium-sized retailers tend to focus on three elements: bridal jewellery, customisation, and developing personal relationships with their customers.

Millennials Drive Online Jewellery Sales

The Indian online jewellery market has also seen rapid growth over the last few years, driven by demand from millennials, growing internet penetration and a hike in smartphone sales. Most sales are driven by consumers aged between 18 and 45. Interestingly, while online jewellery purchases have risen, the average ticket size has remained between 5 and 10 grams. Online buyers tend to purchase lightweight daily wear/fashion jewellery in 18-carat gold. Looking ahead, the report projects that the market share of online jewellery in the next five years could increase to 7-10%.

Challenges In The Retail Gold Jewellery Market

While there are many promising signs of the retail market moving towards a more robust and organized eco-system, there are still numerous challenges that threaten its growth. The Indian gem and jewellery industry still struggles with securing bank credit. More than 20% of loans given to this sector have become non-performing assets (NPAs), resulting in the gem and jewellery industry gaining just 2.7% of India's total credit issuance. Financing is even more troublesome for smaller independent jewellers who tend to rely on the monthly gold scheme for funding or act as money lenders. The report surmises that national and regional chain stores will continue to gain market share because of their access to credit and the large inventory they are able to carry. Conversely, if smaller players are not able to meet accepted standards of transparency their access to credit will be limited, as banks and financial institutions remain wary of lending to the gem and jewellery sector.

Manufacturing Market Structure

Despite being one of the world’s largest fabricators of gold jewellery, India’s manufacturing industry is still highly fragmented and unorganised. The report states that only 15-20% of manufacturing units operate as organised and large-scale facilities which was less than 10% about five years ago. The report attributes this growth to three distinct factors: the expansion of organised retailing; a growth in exports; and a clampdown by authorities. The manufacturing industry is still dominated by small jewellery workshops and artisans. While there is no official estimate on the number of manufacturers in India, and many operate independently as freelancers, industry estimates suggest there are 20,000-30,000 manufacturing units across the country. While ‘karigars’ (artisans) form the backbone of the Indian gem and jewellery industry, many still work in extremely poor conditions and are underpaid as compared to other industries.

Increasingly the government and industry are focusing on shifting manufacturing from congested centres to jewellery parks and this will aid organisation 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, commercial support services and an exhibition centre. Through the introduction of mandatory hallmarking, the government has attempted to create a level playing field in terms of purity and enable retailers to focus on differentiation. These moves are designed to eliminate some of the barriers impeding the manufacturing industry, which in turn should support demand.

Read or download the entire report from here: http://spr.ly/6041MZRjt. The above featured gold jewellery photograph is for representational purposes and courtesy to Reliance Jewel's Mahalaya Collection.