Volatile gold had kept customers away from jewellery stores these past couple of months and hopes were fading fast for a spectacular Diwali. But a sudden 10% drop in the yellow metal s value has lifted the mood and retailers may have reason to celebrate this festive season after all. Shanoo Bijlani, Regan Luis and Erum Ali Qureshi report. Joyalukkas old s bullish run these past couple of months has flattened jewellery sales across India. An anticipated correction in diamond prices too has kept buyers away. There couldn t have been a more contrasting scenario in the run-up to the year s most festive and joyous period especially since Diwali and the upcoming wedding season account for nearly 70% of jewellery sales in India. At the time of going to press, gold prices had dipped from a peak of R29,000 per 10 gm to R26,000. This has lifted the mood in the market. Solitaire spoke to 15 top retailers spanning the length and breadth of the country, and found out about their sales projections for this Diwali. On average, retailers expect revenues to jump to 50% due to the escalating price of the yellow metal 62 INTERNATIONAL OCTOBER 2011
SPECIAL REPORT CkC studio Tara compared with last year. But many anticipate up to 15% growth in physical demand. Shreyansh Kapoor, vice president of Kashi Jewellers, Nagpur, and regional chairman (north), the All India Gem and Jewellery Trade Federation (GJF), says, Diwali sales will be tied to the prices of gold and diamonds. Sales have been dismal across the board. Gold prices have shot up by 25% in recent months; diamonds are up by 60%. Store walk- ins have been impacted because of the instability in the yellow metal prices. Today, gold prices have touched $1,558 per troy ounce and platinum is selling at $1,514. Gold has started charging ahead of platinum and that is normally unheard of. Kapoor notes that the minute gold began to slide (it was R26,000 for 10 grams at the time of this interview), customers started visiting his jewellery store again. Customers today follow shreyansh kapoor Diwali sales will be tied to the price of gold and diamonds. Sales have been dismal across the board. Gold prices have shot up by 25% in the recent months; diamonds are up by 60%. Store walk-ins have been impacted because of the instability in the yellow metal prices. Today, gold prices have touched $1,558 per troy ounce and platinum is selling at $1,514. Gold has started charging ahead of platinum and that is normally unheard of. INTERNATIONAL OCTOBER 2011 63
SPECIAL REPORT Ajit Gadgil Demand for jewellery is steady, but though the last couple of months have been slow (August-September), we are seeing a big surge in the market, as both gold and silver rates have started dropping. We have got an immediate reaction from customers as they have been flocking to the stores. I feel today s customers are very knowledgeable and alert. Not only do they have a keen sense of style and design, they are aware of the investment angle, and they balance both beautifully. dilip lagu With increased rates of gold and diamonds, my customers will prefer to buy smaller items as one cannot do away with the traditional demand of making token purchases during Diwali. I also expect solitaires to do well since the rates are comparatively stable. Overall, sales could climb by 50% year-on-year in rupee terms. the gold rates closely on the net, in the newspapers and on the World Gold Council website among others. They are cued in and adopt a wait-and-watch approach. Unless the inventory in the retail stores doesn t move, why will a jeweller confirm orders for more goods? These days, we hardly get cash-and-carry purchasers. Almost all the customers are exchanging old gold for new. There is a liquidity crunch. Ajit Gadgil, partner, P.N. Gadgil, Pune, echoes the same sentiments: Demand for jewellery is steady, but though the last couple of months have been slow (August-September), we are seeing a big surge in the market, as both gold and silver rates have started dropping. We have got an immediate reaction from customers as they have been flocking to the stores. I feel today s customers are very knowledgeable and alert. Not only do they have a keen sense of style and design, they are aware of the investment angle, and they balance both beautifully. Diwali in the northern region, according to Kapoor, will hinge on the gold rates. An increase in revenue is obviously assured, but volumes may stay the same. He strongly feels that gold should not be traded as a commodity as speculation affects the pricing of the metal. We are not too optimistic; in fact, we are cautious. Lighter designs and items will move including rings, pendant sets and the like. Necklaces and necklace sets, bridal sets will not do well. In the northern region, retailers have experienced the toughest few months in the run-up to Diwali, Kapoor notes. Although there are no cohesive attempts on the part of jewellers to initiate schemes, everyone will have to work out a scheme tailor-made for its customers to make up for the lost ground during the festive season. Also, the past few months, jewellery sales have been dull, thanks to the galloping prices of gold and diamonds. Gadgil believes that diamonds and coloured stones have also been steadily rising both in price and demand. There is a certain segment of the customer base which always prefers diamonds. They have been pushing demand increasingly. A lot of new customers are also buying diamonds every year. Reasons for this would be manifold increased spending power, availability of diamonds, design factor, and aspirational growth. Gadgil expects that overall the festive sales will be good this year primarily due to the surge in the price of the metal. During Diwali we expect to sell a lot of jewellery with traditional motifs as customers prefer to buy jewellery which they intend to keep for a long time. At the IIJS this time, we unfortunately didn t find anything new or strikingly different. Dilip Lagu, managing director of Lagu Bandhu Motiwale, Mumbai, expects to sell mostly lightweight jewellery this festive season. The retailer s forte is diamond jewellery, pearls and gemstudded jewellery. With increased rates of gold and diamonds, my customers will prefer to buy smaller items as one cannot do away with the traditional demand of making token purchases during Diwali. I also expect solitaires to do well since the rates are comparatively stable. Overall, sales could climb by 50% year-on-year in rupee terms. To help spur sales, Lagu will be running special schemes to celebrate the firm s diamond jubilee year. Every customer will get an assured gift, and a chance to participate in a contest. Gold sentiments Rising gold prices elicit different buying patterns and reactions from consumers. On the one hand some curb their budgets due to prohibitively high rates and stick to token lightweight purchases, while others feel it is a reiteration that gold is the best investment vehicle and do not think twice about splurging on heavy sets. Pradeep Kothari, Kothari Jewellers, Nagpur, is more cautious. This Diwali, we expect a 5% increase in physical demand, but in terms of value we may see an increase of up to 25%. This year because of a good harvest, customers 64 INTERNATIONAL OCTOBER 2011
CKC CKC CKC Abaran INTERNATIONAL OCTOBER 2011 65
Abaran Abaran Studio Tara 76 INTERNATIONAL OCTOBER 2011
SPECIAL REPORT will buy gold without much hesitation. Sentiments regarding the yellow metal seem to be very strong, and it is rumoured that gold may touch the R35,000 mark soon. However, buyers come with a fixed budget and look for jewellery within that limit. Diamond studded jewellery, on the other hand, may not do well. Diamonds are in a bubble market. The rise in per carat rates has been too fast, thus giving customers no time to get psychologically attuned to accept it. Gold buyers are switching from 22 karat to 18 karat at times to suit their budgets, or they still root for 22 karat jewellery, but prefer lightweight items. Scaling down purchases in volume terms is not such a problem for Indian customers today because they have faith in the metal s liquidity as it is still an asset. When it comes to diamonds, buyers don t want to switch to lower quality diamonds. According to me diamonds will be hit this season, for sure. Joy Alukkas, managing director, Joyalukkas India Limited, Kerala, firmly believes, There is always a concern in the jewellery industry that rising and volatile gold and diamond prices will affect sales. But the consumers keep proving sceptics wrong. Whatever the price of gold or diamonds, the demand actually increases because consumers have an unshakeable faith in the investment value of gold and diamonds. While luxury and lifestyle products depreciate considerably in value over time, this is not the case for gold and diamonds. Gold is still volatile and may be volatile for some considerable time yet. Alukkas comments, We cannot expect the gold rate to be stable based on its past performance. Definitely the constant fluctuations will make the customer wary but her confidence in the long-term investment value of gold is rock solid. Alukkas further notes: Diwali is one of the biggest festivals in India and a key part of this festival is gifting. Also Dhanteras (just before Diwali) is celebrated with gusto and enthusiasm. On Dhanteras there is a belief that it is auspicious to purchase gold or any other precious metal. So we expect a huge demand for gold, diamond and other precious jewellery. There is no alternative to gold and diamond yet in the consumer s mind. But this time the prices of gold and diamond have increased much more than last year. So there might be a shift in the purchase pattern i.e. there could be an increase in demand for smaller jewellery items in terms of weight. The southern parts of India, as usual, will purchase more traditional jewellery as compared to the northern region, where trendy and contemporary jewellery is much more appreciated. Also, it has become very common among Indian buyers to have some element of diamonds in their jewellery. Retailers point of view Much of the success in drawing the consumer to the store depends on the fact that the Indian retail jewellery industry has managed to get the customer attuned to paying a premium by offering the right designs to the right consumer. I feel the Indian retail industry is coming of age. Retailers today offer certified goods, hallmarked jewellery, and good after sales service. The only factors that decide the jewellery sales are the general economic scenario and the disposable incomes. Indians can never get cured of the yellow fever. And it is up to the retailer to find the right remedy for it, says Anil Talwar, owner of Talwarsons Jewellers, Chandigarh. Retailing is an art, and selling a piece of art needs that skill. Today s consumer is savvy, an inveterate traveller and makes informed choices, he believes. Talwar feels that a retailer has to be mature and knowledgeable in terms of studying his customers buying patterns. Above all, today s woman is a selfpurchaser. Gone are the days when families would come to a jewellery store to buy a neckpiece or bangles. As retailers, we too, have to evolve and stay abreast with the latest trends and understand what the consumer exactly wants. The Joy Alukkas There is always a concern in the jewellery industry that rising and volatile gold and diamond prices will affect sales. But the consumers keep proving sceptics wrong. Whatever the price of gold or diamonds, the demand actually increases because consumers have an unshakeable faith in the investment value of gold and diamonds. While luxury and lifestyle products depreciate considerably in value over time, this is not the case for gold and diamonds. Anil Talwar I feel the Indian retail industry is coming of age. Retailers today offer certified goods, hallmarked jewellery, and good after sales service. The only factors that decide the jewellery sales are the general economic scenario and the disposable incomes. Indians can never get cured of the yellow fever. And it is up to the retailer to find the right remedy for it, INTERNATIONAL OCTOBER 2011 67
Ishu Datwani Classic jewellery has come back in fashion. People are buying plain diamond jewellery or fusion jewellery. Diamonds are moving very well. In coloured gemstones, rubies, emeralds and pearls are the most preferred gems. My customers do not favour plain gold jewellery; instead they pick up kundan and gem-studded gold ornaments. Bharathi Raviprakash Like every year, this festival season will see an increase in sales volumes. The trends look favourable for us and I am sure it would be good for the overall industry too. Abaran consumer today is spoilt for choice and it is clearly a buyer s market. A retailer in India can no longer sell what he wants to sell. But it is rather about what she wants to buy, he adds. Talwar is more gung-ho about sales this festive season. We expect an actionpacked Diwali this year. Demand is surging ahead as we are going through a very stable and a smooth economic scenario at the moment. Growing disposable incomes get reflected in better jewellery sales across the country. Gold rates have gone up by almost 45% since last Diwali, but again that has generated a lot of interest among buyers of the metal. It is tough to quantify at this point in time, but we expect sales to cross all expectations of the past. The overall trend is very encouraging, Talwar explains. Design element Ishu Datwani, proprietor, Anmol Jewellers, Mumbai, has stocked up on uncut and fancy-cut diamond jewellery for Diwali as he feels that there is a good demand for fusion jewellery which combines diamonds accented with coloured gemstones to create bold and unusual designs. The new collection at his showroom ranges from medium to heavy sets. He notes, Classic jewellery has come back in fashion. People are buying plain diamond jewellery or fusion jewellery. Diamonds are moving very well. In coloured gemstones, rubies, emeralds and pearls are the most preferred gems. My customers do not favour plain gold jewellery; instead they pick up kundan and gem-studded gold ornaments. This Diwali, Datwani expects sales to rise by 10-15% in volume terms and up to100% in value terms. From Chennai, the land of gold lovers, designer Bharathi Raviprakash of Studio Tara, says, Like every year, this festive season will see an increase in sales volumes. The trends look favourable for us and I am sure it would be good for the overall industry too. Raviprakash believes that contemporary design shifts are totally influenced by international trends, but she also stocks up on timeless classics like kundan jewellery and traditional South Indian designs. Our customers come to us because we make bespoke jewels for them. These could be contemporary or traditional depending upon the occasion. Normally, weddings are the time when buyers choose a mix of traditional and contemporary sets. Apart from that, Raviprakash has her new Lustrous Moon and Mystique collections lined up for the season. Brushing aside the threat that the jewellery industry faces from luxury items and the white goods sector, Raviprakash feels that consumers who want to buy jewellery, keep a certain amount aside. It is a well-planned and thought-out decision. Escalating gold rates do impact sales, but my jewellery typically has more precious stones like diamonds, rubies, spinel, and emeralds. So in that context, the contribution of gold to the overall cost of a jewellery piece is not as much as in a typical gold set. This year we have a cache of interesting designs which have been developed internally for our customers. We have introduced a fusion of coloured stones and designer motifs that will appeal to all age groups. Keeping the metal rates in mind, we have tried to keep the jewellery lightweight. But we also offer heavy items because we observe that some buyers invest more if the prices of the metal keep rising. Overall we at P.N. Gadgil expect a 30-35 % annual growth over last year, estimates Gadgil. If gold rates don t fluctuate, we will have a good Diwali. Rupak Saha, director, Shyam Sunder Company Jewellers and president, Tripura Jewellers Association, says, If jewellers have a strong product and the jewellery has a story behind it, I believe sales will rise despite high prices on the sheer design appeal of the jewellery. We have seen this happen with our new lightweight Classic Calcutta collection. Calcutta jewellery is known for its craftsmanship 68 INTERNATIONAL OCTOBER 2011
SPECIAL REPORT Studio Tara Joyalukkas but is becoming a mass produced commodity, thus sidelining the role of the craftsmen. We have enhanced the original aesthetic appeal of this art work and it has received tremendous response from our customers. Hoping for the best For established retailers, actual demand in the market, so far, has been steady as per the projections when compared year-onyear. Bangalore-based Abaran chief executive Pratap Kamath, too, is upbeat about the sales projections for Diwali. This is the time when bonuses are doled out. I feel the current dull scenario will soon lift up. Considering the high prices of gold, the cosmopolitan buyers of Bangalore will opt for lighter ornaments, and both contemporary and traditional motifs should sell well. Despite a major threat to the jewellery industry posed by luxury and lifestyle products, gold will still do better as the metal is an intricate part of our customs and tradition. Stability in gold rates is sure to boost sales this festive season, Kamath notes. Abaran is launching a bridal collection in the run-up to the Dussera festival. The store will hold an exhibition to showcase its new range prior to Diwali. Vinod Hayagriv, managing director of C. Krishniah Chetty & Sons, Bangalore, says it is going to be another year where sales will pick up at the last minute. With rates of gold, diamonds and silver expected to correct favourably, we hope to see a higher off-take than last year. Hayagriv feels that consumer demand will shift to serious jewellery and larger gift items; however, corporate gifting demand may be lower this year. Smaller products move off the shelves because of high rates of precious metals. So, expect a flat growth in quantity. Positive cues are Pratap Kamath Considering the high prices of gold, the cosmopolitan buyers of Bangalore will opt for lighter ornaments, and both contemporary and traditional motifs should sell well. Despite a major threat to the jewellery industry posed by luxury and lifestyle products, gold will still do better as the metal is an intricate part of our customs and tradition. Stability in gold rates is sure to boost sales this festive season. Vinod Hayagriv With rates of gold, diamonds and silver expected to correct favourably, we hope to see a higher off-take than last year. INTERNATIONAL OCTOBER 2011 69
Joyalukkas Vivek Chand There is a lull in the market currently, and the mood should lift during the festive period. We are witnessing considerable resistance from consumers to spending because of volatility in both gold and diamond prices. As a result, buyers will seek lower price points for their festival purchases, and that may mean contemporary designs may be favoured over traditional designs. needed to improve demand drastically, and stable gold prices will positively help us sell more. So, plain gold jewellery and studded jewellery will move like they did last year, Hayagriv notes. Although CKC doesn t offer any discounts, it prefers its products to do the talking. Designer jewellery and a good range of inventory always play an important role in promoting sales, Hayagriv believes. Some retailers are more realistic and their outlook towards growth is modest and cautious. Suvankar Sen, executive director, Senco Gold Impex Pvt. Ltd., Kolkata, says, Since prices have gone up and customer budgets have not, we expect buyers to stick to a certain budget for Diwali or the wedding season ahead. We are expecting pocket-friendly items such as necklace sets and bangle pairs in the price range of R50,000-60,000 to move well. This year we expect Diwali sales to increase 25% by value and 10% by volume. Diamond jewellery accounts for 30% of our sales and gold jewellery makes up the rest. With respect to the high price of gold, drop in the stock market and signs that real estate too may be in for something of a slide, the retail industry has to adopt a wait-and-watch attitude. Ratanlal Agarwal, director, R.R. Agarwal Jewellers Pvt. Ltd., Kolkata, adds, We expect to sell lightweight diamond sets that we manufacture in-house. Jadau and kundan sets too are in great demand with our high net worth clientele. A 20-25% increase in sales is what we are looking at this Diwali. Bharat Mehta, secretary, Patliputra Sarafa Sangha and proprietor Bharat Jewellers, Patna, notes, We expect lightweight jewellery to sell this Diwali. Apart from this, gold coins and bars weighing 5-10 grams and silver bars are also expected to sell well. In my opinion 70 INTERNATIONAL OCTOBER 2011
SPECIAL REPORT Studio Tara Studio Tara we will not be able to meet the volumes from last Diwali and sales will be down by 70%. Vivek Chand, partner, Rajarathnam, Bangalore, feels that Diwali will be a moderate affair this time. There is a lull in the market currently, and the mood should lift during the festival period. We are witnessing considerable resistance from consumers to spending because of volatility in both gold and diamond prices. As a result, buyers will seek lower price points for their festival purchases, and that may mean contemporary designs may be favoured over traditional designs. Chand says that diamond sales may not shine this time because many buyers are expecting a price correction. He believes that lifestyle products will be a lesser threat than last year as consumers have started to look at the ever-appreciating yellow metal with renewed interest and as one of the better investment options. INTERNATIONAL OCTOBER 2011 71