The gems and jewellery market in India is home to more than 300,000 players, with the majority being small players. The sector plays a significant role in the Indian economy as it employs more than 4.64 million workers. The industry is one of the fastest-growing sectors, it is extremely export oriented and labour intensive.
The Indian Market
The Indian jewellery market is a highly fragmented and unorganised. It is classified into fine jewellery and costume jewellery. Under fine jewellery, apart from local players, there are several large nation-wide players such as Tanishq, Kalyan Jewellers, etc. In foreign players, brands such as Swarovski are already present and newer ones such as Tiffany are only entering the market.
Foreign players are very cautious while entering the Indian market due to the large demand for local traditional jewellery which these players do not hold expertise in.
Costume jewellery is the fastest-growing category in India which is projected to grow at 20 percent CAGR between 2019 and 2024. This segment is benefitting from the growing trend of consumers seeking lightweight, stylish jewellery at affordable prices.
Growth of the Sector
In the last five years the jewellery market in India experienced strong growth of 15 percent CAGR between 2014 and 2019. During the period, several factors have aided this such as:
Rise of E-Commerce Players: Between the year 2013 and 2018, there was a growth of 22 percent CAGR amongst Internet users in India due to deeper penetration of smartphones and reducing mobile tariffs. As per the Department of Telecom (DoT), India’s internet tariffs were amongst the lowest globally at `21 per GB in 2017. This has given a strong push to digital commerce through the usage of mobile phones. Online jewellery players such as CaratLane has experienced revenue growth in this space in the last five years. This is visible in digital commerce demonstrating exponential growth through usage of mobile phones which grew at 51 percent CAGR between 2013 and 2018.
– Growing Options: Indian market has been traditionally known for its gold consumption and traditional jewellery. However, in the last few years, jewellers have increased their offerings which have resulted in growth. Options such as platinum & diamond jewellery, costume jewellery, wedding collections, etc. came into existence boosting the growth of overall jewellery.
Since last year, jewellers have been finding it hard to raise capital through financial institutions. This is largely due to the Nirav Modi and Mehul Choksi scandal which involved wilful default and scamming on behalf of the jewellers against Punjab National Bank. This resulted in negative sentiments being developed among financial institutions to lend credit to jewellers, thus adversely impacting the business. Major financial institutions had previously announced that they had reduced their exposure to this industry.
Though the stance of the banks is now changing, they are still having a conservative approach in granting loans to small jewellers and diamond merchants.
As the fine jewellery trade is quite capital intensive due to high prices of metals such as gold and silver, small jewellers are finding it hard to maintain healthy working capital levels which might result in these players gradually shutting their businesses. However, in the longer term, as this scandal loses its commercial steam, it is expected that the stance of these institutions will change.
Industry Trends Making an Impact
Rise of Costume Jewellery: The new age urban woman is no more interested in piling up her locker with traditional fine jewellery made from mostly gold and worn rarely during festivals and family events. As most urban woman is now stepping out for work, education etc., there is demand for more functional jewellery pieces which she can wear daily. This has triggered the trend for costume jewellery which are inexpensive and stylish.
Men’s Jewellery: This trend is arising and making its impact as a new category. As men are becoming more fashion conscious, there is a huge increase in demands for jewellery pieces such as rings, bracelets, chains, etc. This shift in consumer demand has been largely driven by social media platforms such as Instagram, Pinterest or Facebook where men are viewing their favourite Hollywood or Bollywood celebrities, sportsmen, etc flaunting jewellery pieces. Even fashion blogs have been widely publicising the usage of subtle jewellery pieces to enhance a man’s overall look. The demand for both affordable costume jewellery as well as expensive fine jewellery such as solitaire diamonds for ears, platinum chains and bracelets are on the rise.
This category is still small and largely untapped resulting in many new players entering this space. In 2019 itself, brands such as Tiffany which recently entered India launched its men’s jewellery range globally. Apart from this, regional players such as Senco Gold & Diamonds roped in Saurav Ganguly to launch its exclusive men’s jewellery collection called ‘AHAM’. Players such as Kalyan Jewellers are known to already be present in this space. Companies are moving towards offering a large assortment of products such as rings, bracelets, cufflinks, ear-studs, chains and pendants to men.
Tier I, II & III Markets: Demand vs Supply
The Tier I market is known to have differences in terms of demand when compared to Tier II & III markets. There are several differentiating factors mentioned below based on the market.
– Tier I Market: Tier I market is witnessing a growing demand for offerings made of platinum and diamond for formal events. For day-to-day usage, consumers here prefer costume jewellery, which is stylish, affordable and can be accessorized based on the outfit. Consumers also prefer more sophisticated and lighter designs compared to the heavy traditional jewellery pieces.
– Tier II & III Markets: Consumers in these markets are still known to have a strong preference for gold and silver jewellery. This has resulted in continued demand for traditional designs and jewellery. In this market, jewellery pieces are also considered as an investment avenue for consumers due to its ease of liquidity.
Platinum on the Rise
India has traditionally been a market that consumes gold jewellery. Apart from gold, silver is the only other leading element that consumers seek when it comes to jewellery. However, in the past few years this has been experiencing a shift. Consumers are experimenting with platinum and it is being well received by the Indian clientele. As per ‘Platinum Guild International’, the industry association of platinum, there was a 26 percent year-on-year rise in the sale of this metal in FY19. The demand for platinum jewellery is largely driven by men and young consumers who are influenced by social media posts where platinum and diamonds have been trending due to Hollywood celebrities, sportsmen, etc.
Consumers are also purchasing these jewellery pieces to celebrate reaching certain milestones in their life. During the forecast period, it is projected that the demand for platinum jewellery would continue rising as it has still not penetrated enough in the country and there is a large untapped market potential.
The rising demand for platinum should not act as a challenge for traditional jewellers. It is rather acting as an opportunity for them. High demand for gold has historically resulted in strong imports. As this results in trade deficit, the government regulates this segment very closely thus, impacting jewellers. Growth in demand of a new metal such as platinum will help mitigate the risk and balance the demand for gold. Apart from that, it will also allow jewellers to diversify their offerings with no major rise in costs.
Role of Technology
Technology advancement through development of e-commerce distribution channel has benefitted the jewellery market immensely.
– Tier II & III Markets: The aspirational consumers in these markets who want to have the latest designs find it difficult to shop them at their local jewellery stores. E-commerce has been allowing them to make these purchases from the comfort of their home.
– Wider Coverage for Jewellers: Retailers are expanding their presence when it comes to e-commerce as it can reach out to a larger audience which is not possible using the traditional store-based retailing format. To achieve this, players such as Titan Co Ltd. increased its stake in CaratLane, an e-commerce jewellery platform by acquiring additional 3 million equity shares in 2019 at an investment of ~Rs 1,000 million.
– Allows Consumers to Make More Frequent Purchases: Consumers nowadays are looking for lightweight, affordable and stylish jewellery pieces for everyday use rather than the heavier traditional pieces. This is resulting in frequent online purchases on behalf of consumers due to the comfort and convenience attached to e-commerce.
Innovations: Retail stores are also seeking ways through which they can increase engagement with consumers by using different technology innovations. One such instance is that of CaratLane which has a virtual mirror installed in their stores allowing consumers to try jewellery pieces virtually and get a 180-degree view of wearing them.
During the coming five years, the jewellery industry is projected to grow at a CAGR of 8 percent between 2019 and 2024. Segments such as costume jewellery which currently contributes ~6 percent in overall jewellery sales as of 2019 is projected to grow at 20 percent CAGR in the coming five years and account for ~10 percent in 2024. This is projected due to the growing demand for lightweight jewellery and more frequent purchases for affordable options amongst consumers. Also, the niche segment of men’s jewellery is projected to experience strong double-digit growth due to the rising trend amongst men to accessorise.
Lastly, as urban consumers move away from the yellow metal when seeking jewellery options, it is resulting in rising demand for platinum which is also projected to demonstrate strong growth. Apart from that, Tiff any’s announcement to enter India might result in other foreign brands also following suit resulting in further heating up of the competition in this highly fragmented market which is followed by an expanding Internet retail space.