Shoppers made a beeline for jewellery stores during the festive season, spurring a revival of the jewellery industry that took a beating last year. In the July-September quarter, India’s gold demand saw a 47% y-o-y jump, according to the World Gold Council. The value of total jewellery sold was Rs 41,030 crore during this quarter, 48% higher than the same quarter last fiscal.
Sales volume is estimated to have dropped by 35-40% last fiscal over the previous one, when consumers curtailed discretionary spends in the wake of the pandemic. However, a revival is now on the cards. CRISIL Ratings estimates that the revenue of gold jewellery retailers is set to grow by 15-20% y-o-y in FY22. This growth would come after two consecutive years of subdued jewellery sales.
The gradual reopening of markets, positive tailwinds in the economy and an optimistic consumer sentiment are driving sales. Organised national jewellery brands such as Tanishq, Kalyan Jewellers, and Malabar Gold & Diamonds have all posted a 60-80% y-o-y surge in revenue in Q2FY22.
Redirection of spends from other avenues has benefitted jewellers. In a press statement on sales during Dhanteras, Tanishq CEO, Ajoy Chawla, said, “Jewellery has gained share of wallet compared to travel, purchase of automobiles, and other discretionary spends.”
Sale of jewellery for weddings accounts for 55-60% of annual demand. Delays in weddings due to the pandemic and related restrictions are manifesting in pent-up demand for jewellery currently. That apart, a consistent move away from unorganised retailers is driving growth for jewellery brands. Hallmarking of jewellery is expected to further consolidate and formalise the industry. “Jewellers have been promoting hallmarking to draw shoppers. We are seeing a transition towards organised retailers even before the implementation deadline, which bodes well for these retailers,” says Manoj Menon, head – research and consumer analyst, ICICI Securities.
As consumers resume purchase of gold jewellery, a major chunk of sales is coming from non-studded products where the margins are low. The share of studded jewellery sales is yet to return to pre-pandemic levels, say analysts. Anuj Sethi, senior director, CRISIL Ratings, observes that mid-range and low-value products are the ones that are moving fast, with most purchases costing less than Rs 75,000.
Brands are formulating strategies to sell studded jewellery to those on a tight budget. “While we are innovating in the staple gold jewellery space for consumers who are moving from unorganised retailers to our stores, we are also creating studded jewellery with more gold content to make upselling easy,” notes Ramesh Kalyanaraman, executive director, Kalyan Jewellers.
Not all markets are clocking similar growth, say retailers. “In the post-pandemic scenario, metros are recovering faster than other markets,” says MP Ahammed, chairman, Malabar Group. Further, stores on high streets are seeing healthy footfall as opposed to those located in malls.
According to Kalyanaraman, time spent in the store has shot up. “Initially, people were spending less than an hour in our stores; now they are comfortable spending up to two hours shopping inside the store,” he says.
In 2020, organised jewellery retailers made a strong push for technology-enabled shopping solutions — people could book slots to visit stores, browse products online and complete a purchase offline; video calling via WhatsApp also came to the rescue of both shoppers and retailers.
Candere, the e-commerce division of Kalyan Jewellers, earned Rs 32 crore in revenue in Q2FY22. The typical ticket size on e-commerce has remained in the Rs 20,000-30,000 range, and digital platforms are still an avenue for gift purchases, rather than high-value purchases, say retailers.
Keeping these factors in mind, CaratLane has increased its focus on the less-than-Rs 20,000 category, and has a large collection of products for kids in this segment. Avnish Anand, COO and co-founder, CaratLane, says, “Searching for products online and purchasing them offline has emerged as a strong trend since the pandemic.” Almost 85-90% of the in-store sales originate online for the brand.
In FY21, jewellery retailers put offline expansion on pause. Now, adding showrooms would be critical to leveraging the revival in demand. Tanishq has about 370 stores across the country, while Kalyan Jewellers has 120, and Malabar Gold & Diamonds has 138 stores. Kalyan Jewellers plans to add about six stores this fiscal, while Malabar Gold & Diamonds plans to add 40 stores.