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Branded jewellers focus on smaller towns to spur growth

Consumers opt for organized jewellery chains due to trendy gold and diamond designs, quality assurance certificates
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First Published: Tue, Dec 25 2012. 07 07 PM IST
A file photo of the PC Jewellers store in Karol Bagh, New Delhi. Retailers such as PC Jewellers have opened stores in Dehradun, which has a population of 1.7 million, about one-tenth that of Delhi. Photo: Ramesh Pathania/Mint
A file photo of the PC Jewellers store in Karol Bagh, New Delhi. Retailers such as PC Jewellers have opened stores in Dehradun, which has a population of 1.7 million, about one-tenth that of Delhi. Photo: Ramesh Pathania/Mint
New Delhi: Kamala Nath, who lives in Dehradun, has just finished shopping for her daughter’s wedding next month. For some of the most critical items on the list, she didn’t have to travel to the Capital, as would have been the usual practice until a few years ago.
“I have travelled to Delhi a few times to buy wedding jewellery, but some big stores have opened up in the city so I can shop here now,” Nath said over the phone from the Uttarakhand capital.
Jewellery retailers such as Gitanjali, PC Jewellers and Tanishq have opened stores in Dehradun, which has a population of 1.7 million, about one-tenth that of Delhi. Nath is among customers outside India’s biggest cities with the aspirations and the money that are encouraging branded jewellery retailers to tap growing demand in towns and cities such as Dehradun.
Vikram Raizada, executive director and chief executive officer (retail) of Mumbai-based Tara Jewels Ltd, was in Jabalpur for the launch, while Mint interviewed him. He was in Madhya Pradesh to launch a product line immediately after introducing it in Delhi and Mumbai.
“The fact that we are launching a contemporary range here shows that these cities are becoming increasingly important,” he said.
Consumers in tier 1 cities (population base: 100,000-1 million) and tier 2 cities (50,000-100,000) are opting for organized jewellery chains for several reasons: trendy gold and diamond designs, quality assurance certificates and celebrity brand ambassadors who make the products aspirational.
“Although there is no trust deficit with the traditional jeweller in small towns, consumers are demanding quality,” Raizada said.
Tara has six stores in Mumbai and another 24 in 18 cities. According to Raizada, the move into smaller towns makes sense for branded retailers as the metros have a lot of competition, while the non-metros are “less organized from a retail point of view”.
Umesh Parekh, managing director of Shree Ganesh Jewellery House Ltd, said that for his company, tier 2 cities account for higher volume growth, while the metros generate more value growth.
The company sells its products through 46 stores in cities such as Mumbai (Maharashtra), Kolkata (West Bengal), Ludhiana (Punjab), Rajkot (Rajasthan) and Ghaziabad (Uttar Pradesh) under the retail brand Gaja.
“The last two years have seen a tectonic shift in consumer behaviour in tier 2 cities,” Parekh said. Consumers have moved from traditional or family “mom and pop stores to organized retailers,” he said.
Retailers like him are targeting cities such as Dehradun (Uttarakhand), Ajmer (Rajasthan), Bilaspur (Chhattisgarh), Indore (Madhya Pradesh), Solapur (Maharashtra) and Gwalior (Madhya Pradesh) among others. Places such as Satna (Madhya Pradesh), Begusarai (Bihar), Jharsuguda (Orissa), too, are on the radar of organized jewellery retailers.
Gitanjali Gems Ltd is seeing rapid growth in sales thanks to such towns.
“For us, tier 2-3 towns and cities are much more important than tier 1,” said Abhishek Gupta, president at Gitanjali. In the last two years, Gitajnali’s share of revenue from tier 2 cities has grown from 40% to 50%. “We expect it to touch 60% by the next financial year,” he said. The company has put in place a logistics system to service these towns.
Rachna Nath, executive director and leader of retail and consumer at PricewaterhouseCoopers, “We have worked with retailers who see a lot of demand coming in from tier 2 - 3 cities primarily because there is a lot of money, but no guarantee of the purity or quality of jewellery being sold”. Nath adds that “localization “in terms of design plus customer service will play a big role in selling to the small town consumer. The consumer in Kolkata is very different from that in Midnapore.
An October 2012 report by credit rating agency Credit Analysis and Research Ltd (CARE) said India is one of the markets that’s least served by organized jewellery retailers
The share of organized jewellery stands at 5-6% based on the sales of companies such as Gitanjali, Tanishq and Reliance Jewels that have a nation-wide presence. This rises to 16-18% if regional retailers such as TBZ, PC Jewellers, Malabar Gold and Kalyan Jewellers are included. To expand in small towns, several companies have raised or are raising money through initial public offerings.
The first half of 2012 saw a slow start however Q3 witnessed a slight surge in gold demand, according to a World Gold Council report dated 16 August.
India’s Q3 2012 gold demand value was Rs.65,373 crore, an increase of 27% in comparison with Q3 2011. Late revival of monsoon and restocking by traders and jewellers ahead of the festive and wedding season could be the key reasons for the upward trend in demand in Q3 2012. Indian consumers also seem to have adjusted to the rise in gold price levels. Jewellery demand witnessed an increase of 7% year-on-year to 136.1 tonnes from 126.8 tonnes in Q3 2011, owing to slowing economic growth. But retailers are keen on opening more stores. That’s despite record-high local gold prices, exchange-rate fluctuations and inflation.
“We are opening one store a month mostly through franchisees in tier 2 and tier 3 cities,” said Gupta of Gitanjali. This includes cities such as Yamunanagar in Haryana, Uddhampur in Jammu and Kashmir, Ajmer in Rajasthan, Rohtak in Haryana and Vapi in Gujarat.
As gold prices rise, small-town buyers continue to invest in the yellow metal, said T.S. Kalyanaraman, chairman and managing director of Thrissur, Kerala-based Kalyan Jewellers.
“Gold is now an investment for the common man,” he said. “With rising real estate costs, gold as commodity has a lower entry barrier.”
In August, the company announced investments worth Rs.1,000 crore to open 15 more showrooms in Kancheepuram (Tamil Nadu), Kakinada (Andhra Pradesh) and Thiruvalla (Kerala) among others. But for some shoppers such as Renu Dhawan, a resident of Ambala, Delhi is still the preferred market for wedding jewellery.
“There are lots of traditional family jewellers in Ambala, but we still go to Delhi since the shops there have better styles.”
Ish Kripa Gupta, who owns diamond store IG Jewels in Dehradun, agreed. “We get customers for light-weight buys, (but) people still go to Delhi to purchase wedding jewellery,” said Gupta, who sells brands such as Gitanjali, MMTC and Shubh, among others. His buyers range from the young to the middle-aged who buy diamonds for themselves or as gifts.
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First Published: Tue, Dec 25 2012. 07 07 PM IST
More Topics: Branded jewellers | growth | gold | diamond | wedding |