Jewellery | The new gold rush

Big corporates vie with each other for a pie of India's burgeoning jewellery market, offering consumers authentic products and creative designs

ISSUE DATE: Sep 30, 2024

West Delhi businessman Vinod Mitra, 68, and his family had for generations been loyal patrons of their jeweller on Bank Street in Karol Bagh. “You didn’t just inherit the house; you inherited the jeweller too,” he says. Next-gen, however, is thinking otherwise. Mitra’s daughter-in-law Prerna looks beyond traditional, old-fashioned jewellery, one that she does not have to wear only at weddings, but also at work or social events. And fulfilling her desires are the big retail jewellery stores like Tanishq, Kalyan Jewellers, Reliance Jewels. And a brand new kid on the block—Indriya—launched by Novel Jewels, part of India’s top business conglomerate Aditya Birla Group, this July.

Call it the new Gold Rush. India’s leading corporate houses are eyeing the burgeoning Rs 6.4 lakh crore jewellery market. ABG’s Indriya will be taking on Tata’s Tanishq and Reliance Retail’s Reliance Jewels, alongside jewellery retailers like Kalyan Jewellers, Malabar, Joyalukkas and Senco. “Entering the jewellery business is compelling due to the ongoing value migration from informal to formal sectors, the rising consumer preference for strong, trusted brands, and the ever-booming wedding market, all of which present substantial growth opportunities,” Kumar Mangalam Birla, chairman, Aditya Birla Group, said at the launch of Indriya in New Delhi. The group’s move is backed by a significant investment of Rs 5,000 crore.

Not to be left behind, Reliance Retail announced its entry into the ultra-luxury jewellery market this year, signalling plans for further investment in the sector. To build on their first-mover advantage, national players like Tanishq and Kalyan Jewellers are delving deeper into their existing markets, while regional brands like Joyalukkas and Senco are eyeing pan-India expansion. As the festive season approaches, these brands are stocking their shelves with festive-themed jewellery and luring customers with promotions and gifts.

According to a report by financial services firm Motilal Oswal, jewellery is now the most organised retail category in India after apparel and footwear, with 36-38 per cent market share of the overall jewellery market, up from 22 per cent in FY19. While the organised segment is growing at 18-19 per cent, the overall market has expanded by a compounded annual growth rate (CAGR) of over 8 per cent during FY19-24. This trend of formalisation is driven not only by consumer demand but also by factors such as demonetisation, the introduction of the Goods & Services Tax, regulations like the PAN card requirement for purchases above Rs 200,000, and the mandatory hallmarking of gold.

A favourable sentiment

India is the second-largest consumer of gold after China, with annual consumption ranging between 700 and 800 tonnes. Of this, 66 per cent is for jewellery, the rest for bars and coins. Most of this demand is met through imports. During FY24, imports increased by over 34 per cent to Rs 3.8 lakh crore from Rs 2.8 lakh in the previous year due to strong domestic jewellery demand, according to Centre for Monitoring Indian Economy (CMIE) data. With the favourable consumption sentiment, retail players have been significantly expanding over the past 4-5 years.

The Rs 18,548 crore Kalyan Jewellers has announced plans to open 130 stores this fiscal year, with 80 showrooms under its flagship brand Kalyan, and 50 under Candere, its lightweight omnichannel brand. “We have a clear vision of being a hyperlocal player, where we compete with regional and unorganised players, who hold the largest market share,” says Ramesh Kalyanaraman, executive director, Kalyan Jewellers. Kalyan is present in 23 states and Union territories. To scale rapidly, it introduced the FOCO (franchisee-owned, company-operated) model two years ago. “This model allows us to expand without capital constraints while retaining control over pricing, inventory, location, staff appointments, and more,” Kalyanaraman explains. Of the 130 stores, 80 are expected to be financed through the franchise route in FY25.

Titan, a leading player with an 8.5 per cent market share, has been well-established since launching Tanishq in 1994. Titan’s jewellery division is now growing at a CAGR of 15-20 per cent with a Rs 38,352-crore turnover (excluding Rs 3,940 crore bullion sale) and operates stores in various formats—company-owned, franchisee-operated (COFO) and franchise-owned, franchise-operated (FOFO) stores in addition to the company-owned stores.

Like Kalyan and Tanishq, most players start with their own stores, but they venture into various franchise models once their supply chains and best practices are established, reducing the high capital investment required for stores. For instance, Senco enters new states with company-owned stores and then expands its presence in nearby cities through franchise stores. With a focus on the northern and eastern regions, it operates 159 stores, comprising 93 company-owned and 66 franchise stores as of FY24.

Kerala-based Joyalukkas is an outlier here. It operates only through company-owned stores, investing Rs 80 crore on average to open each shop. The regional player is now aiming to become a pan-India brand with an investment of Rs 6,000 crore to open 75 stores. “While we have a presence in northern and western states like Punjab, Haryana, Delhi, Maharashtra, Gujarat, it remains nominal and we plan to increase it going forward,” says CEO Baby George. Similarly, Reliance Jewels operates 380+ stores in showrooms and shop-in shops across 200-plus cities.

With aggressive expansion, you may think the market is becoming crowded, but experts think otherwise. “The opportunity is huge, and organised players are growing by capturing the share of the unorganised sector,” says Anuj Sethi, senior director at CRISIL Ratings. A lot has changed too in the decades since the last big players entered the market—from consumer aspirations and buying preferences to retail experiences and technology backend, explains Sandeep Kohli, CEO, Novel Jewels. “These shifts present opportunities for us, as we don’t carry any legacy baggage and we will leverage our understanding of this new ecosystem to create brand differentiation.”

Established players are taking note of the increasing competition and changing market dynamics. “Two to three years ago, we started an extensive retail transformation exercise for our stores, where we evaluated each location to determine whether we needed to add new stores, expand or relocate existing ones, or include newer categories in wedding or high-end jewellery to better serve the new realities of that area,” says Ajoy Chawla, CEO of the jewellery division at Titan Company. For instance, some smaller 3,000 sq. ft stores were expanded, or a dedicated floor for bridal jewellery with a lounge to enable consumers to try jewellery with their wedding attire, or customer event spaces, were added. Over 150 Tanishq stores now have dedicated wedding floors. As a result, the brand saw a 16 per cent same-store sales growth.

A matter of design

Design has become a crucial factor in the buying decisions of today’s consumers. They want jewellery that reflects their personal style and aesthetics. New brides are taking their cues from Bollywood actresses—be it Anushka Sharma’s uncut diamond and pearl choker, or Alia Bhatt’s magnificent Sabyasachi Heritage Jewellery, adorned with a statement matha patti and uncut diamond necklace. “Plain gold jewellery is restrictive and can be worn only on weddings, but I can easily wear polki on several occasions, even pair its earrings with a black dress,” says 36-year-old Ridhima Kukreja, a Gurugram-based brand manager, for whom it was the jewellery of choice for her wedding last year. And the market is responding with innovative designs that cater to this evolving taste. “Through Indriya,” says Abhishek Rastogi, head, design, “I wanted to create a world where traditions and modernity thrive together; where our centuries-old heritage shapes the way we create and is reimagined for modern times in our craft.”

With a new crop of young Indians looking for contemporary designs, jewellery firms are launching several sub-brands. For instance, Titan serves 3.8 million customers annually through its 985 stores across its four brands—483 under its flagship Tanishq and the rest for luxury brand Zoya, which specialises in diamond jewellery, contemporary jewellery brand Mia by Tanishq, and omnichannel brand that provides modern jewellery CaratLane. Similarly, Reliance has Bella for workwear, Nitara for children, men’s collection and wedding collection, including their signature lines such as the Jewels of India and Vivaham.

That said, jewellery remains highly localised, with consumption patterns varying by region. Heavier traditional plain gold jewellery is preferred in the southern states, while lighter weight and studded jewellery are more popular in the northern and western regions. “As a hyperlocal player, we are a Punjabi in Punjab and a Gujarati in Gujarat,” says Kalyanaraman, noting that almost 30-40 per cent of their inventory is region-specific. Novel Jewels is working to contemporise traditional designs by bringing regional craftsmanship to the national stage. “Crafts like Nakkashi and Meenakari are traditional, but we are exploring how to modernise them in ways that appeal to consumers across the country,” says Kohli. The brand started with an initial assortment of 15,000 curated jewellery pieces with over 5,000 exclusive designs in each of its four stores and plans to add new collections every 45 days.

Fresh collections seem to have become the mainstay of retailers. Tanishq launches 20-25 new collections every year, says Chawla. While most of the designs are sourced from their inhouse designers, to up the design game, they have partnered with marquee designers like Tarun Tahiliani to launch a new wedding collection, RIVAAH, inspired by popular embroideries such as Chikankari, Kashida, Zardosi and studded, which were transformed into jewellery through karigari techniques like Rawa, Filigree, Chandak and enamel work.

Aura of authenticity

Over the last couple of years, gold prices have been rising rapidly due to the increased demand, geopolitical uncertainty and inflationary pressures. The average price of 10 grams was Rs 29,289 in FY18, which steadily rose every year before reaching Rs 60,608 in FY24. Gold jewellery, though, attracts a GST of 3 per cent.

With rising prices, the demand for gold tends to decrease as consumers wait for a price correction. “Consumers do not increase their budgets when gold prices rise,” says Joyalukkas’s George. “They either opt for light jewellery to meet immediate needs or defer their purchases.” However, with the reduction of import duties from 15 per cent to 6 per cent in this year’s budget, the demand has surged by at least 30 per cent, adds George.

And it is the organised players consumers are increasingly flocking to, given their USP of trust and brand loyalty. “Adulteration in gold is common, but I feel big brands wouldn’t risk their reputation by engaging in such practices,” says Prerna. Tanishq, for instance, introduced karatmeters in all its stores 25 years ago to address the issue of under-caratage. “Tanishq was the first major player in the market, but it struggled during its first four years as consumers continued to prefer their family jewellers,” says veteran adman Ambi Parameswaran. “The company identified the problem of gold adulteration and leveraged this strategy to turn things around, eventually making Tanishq the crown jewel of Titan.” Similarly, Kalyan’s My Kalyan initiative helps consumers make an informed purchase decision. Its 1,006 ‘My Kalyan’ centres contributed to 15 per cent of domestic revenue and got over 37 per cent of enrolments to its ‘Purchase Advance Scheme’ during FY24. Jewellery exchange schemes, certificates of authenticity and buyback offers are also helping organised players expand their influence. Omnichannel strategies, too, have become an integral part of the brand proposition. While online platforms are primarily used for discovery, most purchases still happen offline. “We have built a robust tech backbone so that we can even flip our business model if needed,” says Kohli. Similarly, Tanishq has four million monthly active users on its website and mobile app. Mia by Tanishq offers home visits with iPads, allowing customers to browse, order deliveries without stepping into a store. Currently, 9-10 per cent of their jewellery business comes from omnichannel.

The future certainly looks bright for the organised jewellery segment. Is it time then to bid goodbye to the neighbourhood goldsmith?