With inflation peaking, retailers are experiencing a bit of a slump, with the middle class particularly sticking to pre-planned budgets and going for more of light-weight jewellery, finds out Suneeta Kaul
According to the data released by the Reserve Bank of India in August 2022, the headline Consumer Price Index inflation rates for FY 2022-23 have been projected at 7.1% for Q2, 6.4% for Q3 and 5.8% for Q4, with the projected inflation rate for FY 2022-23 being 6.7%. Put simply, the inflation rate is high.
This has led to a tangible slow-down in the retail jewellery sector, with middle class consumers being impacted the most. As per the latest report of the World Gold Council, after rising 49% year-on-year (YoY) to 140.3 tonnes in the quarter ended June 2022, the demand for gold jewellery in India is likely to dip in the remaining part of the calendar year 2022.
Reflecting on this, Shreyansh Kapoor of Kanpur-based Kashi Jewellers says, “The market has been experiencing a slow-down since April this year. There is a pronounced slump. Ironically, when Covid was at its peak, the jewellery sector was doing really well. In fact, 2021 was a great year for the industry. There was urgency to buy jewellery among people. They were badly affected by the pandemic, and it seemed like there would be no tomorrow. People took to spending on jewellery and other luxury products without a thought. Such was the demand that delivering orders took two to three months!
“Now Covid fears have abated considerably and the urgency to buy jewellery is over. People are buying at their own pace. Moreover, they have started spending on other activities as most spending avenues have opened up again. Additionally, there is no particular occasion as of now that would prompt the purchase of jewellery. The next big jump will happen only around Navratri and Diwali.”
The bulk of jewellery purchase continues to be a very cyclical affair in India, coinciding with the wedding season and auspicious occasions. With inflation peaking, off-season purchases seem to be suffering considerably. Explains Sumeet Anand of Indore-based Punjabi Saraf Jewellers, “The rising inflation is causing middle class consumers to be more circumspect when it comes to buying jewellery. While their budgets are intact, the grammage has reduced. The ticket size may not have changed, but the amount of gold in the jewellery has definitely come down. Actually, it’s a complicated situation, with many layers to it. There has been a property-led boom in Tier II and Tier II cities, which has increased the purchasing power of people. Besides, Covid has changed people’s mentality. They feel life is uncertain, there is no point in just saving. At the same time, rising prices are making them careful about what they spend on.”
When it comes to the kind of jewellery the middle class is buying, inflation or no inflation, gold continues to be the stand-out purchase. “The pandemic has played a significant role in strengthening the case for gold as an asset,” says Mohit Sheth of Nagpur-based Batukbhai Sons Jewellers. “But with expenses and prices going up, we have witnessed a slight reduction in ticket size per customer, but overall volumes remain stable. In the past three months, we have recorded an average 6% increase in the number of bills, compared to 2021 May, June and July. While the ticket size has reduced by an average of 15%, we have also recorded new customers. Middle class customers have always been gold-centric, but in view of the rising inflation, this cohort now prefers purchasing light-weight jewellery such as in rose gold colour and with Turkish finish,” he adds.
Notably, most retail jewellers are unanimous in their view that not much is going to change in the economy in the days to come. “I don’t see things improving, and inflation easing out. So, the only solution is to come up with new techniques of manufacturing jewellery,” says Tejpal Ranka of Pune-based Ranka Jewellers. Sharing his experience, he says, “Earlier, people did not mind going over their budget a bit if we nudged them towards a slightly more expensive piece of jewellery. Now, things are different. Even if our staff pushes customers towards jewellery that is a little beyond their budget, they do not bite. They are sticking to their pre-planned budget. During the pandemic, people were more willing to buy jewellery and splurge on it -- there was little else they could spend on. Now they are more mindful and weigh their options carefully.”
In the end, all projections indicate that inflation is here to stay. Jewellery retailers have to make their peace with it, and find creative ways to sell their wares.