Gold sellers in the coastal state are raising a branding shrill in a market that's blowing hot and cold. Kerala accounts for nearly a fourth of India's 900-tonne gold sales, the largest in the world. The state commercial taxes department estimates gold sales of at least Rs 10,000 crore a year. Yet gold sellers are in a tight spot this season, caught in the price crosscurrents of a commodity that is both a symbol of conspicuous consumption and a prized investment.
A steep fall in the prices of key cash crops like rubber and pepper has limited the buying power of the tiny states roughly 3.18 crore people. To top it, a tide of uncertainty has built up over the states money-order economy; hinged on remittances from its about 20 lakh migrants to the Gulf. Fears of a possible reverse migration have people postponing inessential shopping.
In December 2008a festival month for the states 19% Christians who are relatively affluenta fall in footfalls and plateauing of sales were evident, say jewellers.
One reason for that was the sudden crowding of the market; many branded jewellery retailers like Tanishq, Khazana and Prince Jewellery have come into the state, while local brands like Bhima, Kalyan, Josco, Alukkas and many more expanded their retail footprint.
"Some are also exiting pretty quickly, uneasy with the slippery market," says TS Kalyanaraman, managing director, Kalyan Jewellers, but point to greater sales at his outlets. "In March 2009, we logged 20% higher sales than in March 2008," he claims.
Apparently, there has been a classic pyramid-effect, with top brands holding their own and the medium-sized players feeling the shakedown. At least three of the new big showrooms in the state are now on the verge of downing the shutters.
Bit Kalyanaraman does admit that business was uncomfortable from mid-January to February-end. That's when Thrissur-based Kalyan Jewellers and Kozhikode-based Malabar Gold went into a media blitz, showcasing the barcoded rate-tags that showed the break-up (of gross weight, net weight, making charges, stone weight and stone charges) in bare detail.
Not to be left behind in the brand war, Kottayam-based Josco Jewellery threw in a challenge-ad, making fun of the "salesman who does not talk." Two Malayalam movie stars, with a couple-next door image, endorse a decision to boycott shops manned by `tongue-tied sales folks'.
In their battle for mind space, top retailersall have outlets abroad, especially in the Middle Eastseek to build showrooms "bigger than jewellery houses in the US." But the overhead costs for this mad rush are staggering. Every 10,000 sq ft gold showroom conventionally demands the splendour of 100 sales people, entailing a neat wage-outgo.
And its getting bigger. WS Atkins, designer of Dubai's Burj-al Arab, is designing Arrens Gold Souk International's 5,00,00 sq ft gold mall at Kochi. Most brands in Kerala have been roped in as prospective tenants.
Such splurge is justified by the promise the market holds. The national market for gems & jewellery is predicted to hit $20 billion by 2010 and $30 billion by 2015. In that, branded jewellery has been growing at a 40% clip to touch $2.2 billion by 2010, says a McKinsey report. Since the market is expanding, jewellers are vying for a larger slice of the business.
The ad blitzkrieg of January-March alone have seen a freeflowing ad budget of Rs 5 crore, says an advertising agency head, on condition of anonymity.
"The ad-wars have been useful for the already sharpened brands, but not so much for small town jewellers" says Suhas Rao, director, Bhima Jewellery, one of the oldest jewellers in the state. Largely urbanised Kerala has significant share of Indias over 2.5 million jewellery shops.
Gold traders in Kerala argue that there has been "psychological, not real" impact of the global downturn in the consumer's spending behaviour, and gold is now seen more as an investment than a luxury. Since gold price fluctuations are related to international demand, it is the investment angle that's most tempting now, says K Shivram, vice-president, World Gold Council. By World Gold Council data, gold has yielded annual average rate of return of 26% in the past decade (from 1999-2008).
The most watchworthy rivals to jewellers in promoting gold as investment to panic-stricken Gulf returnees are now bankers and the modest postmaster. A Kerala bank claims to have sold over 100 kg on Akshayatridiya festival, even offering three-year loans for buying gold coins. The national market for gold coin is about $2.11 billion. Not to be left behind in the market, post offices, which have tied up with Reliance Money for gold coin, are offering 0.5 gm free for every 10 gm bought between mid-April and mid-May. Indian Post has turned savvy and has offered a trip to Switzerland for its lucky-draw winners.
Some jewellers see a revival in gold buying once the marriage season picks up after the summer. They say the global meltdown jitters will melt away soon and the market focus then will turn from purity to design.
Says Bhimas Rao, it is the young fashionista who ultimately holds the key to gold jewellery sales, not the lonmg-term investors. In glittering optimism, traders insist that the present demand slowdown is only fleeting and as forgettable as the blinking TV ads.
All that glitters
Gold sellers in the state are in a tight spot this season due price crosscurrents of a commodity
A steep fall in the prices of key cash crops has limited the buying power of the states roughly 3.18 crore people
Fears of a possible reverse migration have led to people postponing inessential shopping
Fall in footfalls and plateauing of sales are evident since December due to sudden crowding of the market; many branded jewellery retailers like Tanishq, Khazana and Prince Jewellery have come into the state, while local brands like Bhima, Kalyan, Josco, Alukkas and many more expanded their retail footprint
Its getting bigger. WS Atkins is designing Arrens Gold Souk International's 5,00,00 sq ft gold mall at Kochi. Most brands in Kerala have been roped in as prospective tenants
The national market for gems & jewellery is predicted to hit $20 billion by 2010 and $30 billion by 2015. In that, branded jewellery has been growing at a 40% clip to touch $2.2 billion by 2010. Kerala alone accounts for nearly a fourth of India's 900-tonne gold sales