Mumbai: Gitanjali Gems Ltd, India’s biggest jewellery retailer that owns brands such as Asmi, Ddamas, Nakshatra and Gili, plans to double its reach in a year’s time to cover 2 million sq. ft of retail space as it rolls out new stores in smaller towns, railway stations and cinema theatres.
Saving costs: Gitanjali Gems chairman and managing director Mehul Choksi says the firm keeps its inventory low by procuring precious stones, gold coins and other items on customer orders.
The jewellery firm more than trebled in size in four years from Rs1,621 crore in sales in 2005-06 to Rs5,088 crore in 2008-09, and is slated to end this fiscal with a growth of at least 35% in net sales, even as it tweaks its product mix in favour of high-margin jewellery business from its earlier focus on diamonds.
“Fifteen years ago, I felt luxury will never arrive in India. It is time now and luxury (business) will explode,” said Mehul Choksi, chairman and managing director of Gitanjali Gems.
In 1994, after the government did away with the Gold Control Act that prohibited owning gold bars and coins, Choksi decided to move away from selling diamonds, which he now terms as a “commodity business”.
He branched out to branding jewellery, using innovative means such as issuing certificates to guarantee the genuineness of his products. He is now even considering an offer to buy back diamonds to woo customers.
India has the potential to be the largest luxury market, said Choksi. “The next LVMH is going to be from India or China.”
Gitanjali has 30 retail formats and is “multiplying”, he added. “Our major driver will continue to be jewellery, silverware, precious stones, etc., and lifestyle products ranging from Rs1,000 to Rs1 crore. We are redefining our business in many ways.”
His peers in India are also on an expansion spree. Tanishq, a part of Titan Industries Ltd, a company promoted by the Tata group, currently has 115 stores and two Zoya (the high-end format started last year) stores.
Reliance Retail Ltd has also entered organized jewellery retail. But they lack the scale and speed that Choksi’s firm has adopted.
“Gitanjali is in a different space than ours as their business model is focused on creating brands,” said Sandeep Kulhalli, vice-president, Tanishq.
Choksi bought two retail chains in the US for $45 million (around Rs200 crore). It took him three years to effect a turnaround. The money he spent was “symbolic”, he said, as it helped him learn how developed markets operate.
The organized sector accounts for 12-15% of overall jewellery retail trade in India, according to Kulhalli. Old jewellery stores are their main competitors. But jewellery sales is a high-risk business, where fashion trends change rapidly and often catch marketeers unawares.
What Choksi does differently is to run his luxury business as a fast-moving consumer goods business. For instance, he has pruned inventory to the minimum. “All our brands have a central team—that’s how we cut the costs,” Choksi said.
New stores have been leased under a revenue share agreement. Another move is to stock less and procure precious stones, gold coins and other items on customer orders.
“We borrow gold as finance costs are low,” he said. “Why carry inventory, as I don’t have the appetite for price fluctuations.”
Choksi also outsources work such as making some jewellery items and packaging to firms in China.
But he also gives customers the choice of designing their own jewellery. A price hike of 20-30%, the third increase this fiscal, went off smoothly, Choksi said, pointing out that customers are flocking back to buying conspicuous items.
The firm’s US business saw a growth of 30% in February. “We are completely integrated now. We downsized our (US) business by cutting costs,” he added.
Choksi’s firm has marketing tie-ups with four teams of the popular Indian Premier League (IPL) quick-format cricket tournament. Talking about an IPL party hosted a few days before the tournament kicked off on 12 March, he said: “What heartened me was the fact that many women at the party were wearing Christian Dior outfits and accessories.”
This, he meant, was a sign of how Indians were no longer apologetic about wearing designer jewellery and clothes.
Ironically, Choksi himself is “uncomfortable” wearing adornments such as rings and chains. “I am fully sold out,” he quipped. “Wearing a ring would mean a ring less for my customer.”