India as Litmus Paper

According to RAPAPORT news agency, research firm RNCOS called the diamond and jewelry markets across India one of the fastest growing in the world, and in that country as well. Government support and highly skilled yet low cost manpower have been major drivers for the sector.  Currently, the Indian market remains highly fragmented but is rapidly transforming into an organized sector, RNCOS concluded.

Various government incentives coupled with private sector initiatives are projected to drive the sales of India's gems and jewelry sector at a compound annual growth rate of 14 percent from year 2008 through 2011.

RNCO suggested that increasingly competitive global markets would drive positive change in India. They expect branded jewelry demand to grow faster than the generic counterpart, and that innovative designers and low cost manufacturing would make the country more attractive for production investment.

 

India’s retail jewelry sector was pushed down to rank fourth amongst India’s largest retail categories as organized retail jewelry slowed down, the 2009 edition of the India Retail Report said. The Jewelry sector totaled Rs 694 billion ($15 billion), putting it behind the out-of-home food services (catering) category which came in third place at Rs 713 billion ($15.4 billion).

Food and grocery was the dominant category followed by clothing and accessories.

 

The report, which was released on Thursday at the India Retail Forum, said that the retail boom in India is expected to continue over the next few years with the size of the Indian retail market expected to be in excess of Rs 18,100 billion ($389.65 billion) by 2010. Of this, organized retail is likely to grow to more than Rs 2,300 billion ($49.51 billion), accounting for nearly 13 percent of the total market in 2010.

In jewelry retail, overall market growth was higher in 2007 at 9.6 percent compared to 9.2 percent the previous year though organized retail grew at a lower pace of 31 percent in 2007 relative to 2006.

 

India remains to be a country where gold jewelry is still more popular than diamond jewelry.

Agence France-Presse in its report on the subject says India is the world's biggest gold consumer, importing 700 tons to 800 tons a year on average - around 30 percent of global demand.

And higher prices won't stop Indians buying, said Suresh Hundia, head of the Bombay Bullion Association.

Indian brides are traditionally bedecked in heavy gold jewelry - seen as a family heirloom and also security.

With around 10 million marriages a year in the country of 1.1 billion people, wedding-related demand is huge, especially during the nuptial season between October and January and April and May.

The gold given to a bride is known as "woman's wealth." This is why, jewelry merchants say, most of the time the customers don't even look at the design - they just look at the weight.

However, lifestyles are changing in urban areas.

The vast array of consumer goods and trendy accessory jewelry to be found in India’s cities has made gold a less sought-after item for many.

"For thousands of years women had very little personal wealth other than their jewelry - they didn't have bank accounts," said the head of retail consulting firm Technopak. "But now with the empowerment of women in urban areas, they want to spend their disposable income on cars, TVs, holidays, a new handbag."

And even though urban tastes are changing, India's overall gold consumption is unlikely to alter much in the foreseeable future, analysts say.

The majority of gold consumption is in rural areas, noted Suki Cooper, analyst at London's Barclays Capital. In the countryside, where the banking system is still poorly developed, gold rules as a medium of financial exchange and secure savings vehicle.

 

De Beers and Indian companies working in team with it pay great attention to shaping higher demand for diamonds. Thus, in particular the advertising campaign launched by Mumbai’s JWT is focused on the “diamond bride” image.

As a result of the campaign diamond jewelry worn at weddings jumped to 65 percent from 8 percent before the campaign while overall growth in the market for diamond jewelry at weddings rose to 30 percent compared with 20 percent growth in the market for diamond jewelry overall.  

The objective of the campaign was based on research conducted by the agency which indicated that a gold bride was perceived by many as being "too decked up, traditional, with a vernacular accent, fearful, obedient and surrounded by uncles, aunts, and squealing cousins, at a hustle-bustle-hotchpotch of a wedding party." 

In contrast, the "diamond bride" was imagined to be "elegant, at a select gathering, an extrovert who speaks her mind, and, above all, casual, cheerful and happy, not nervous at all, even though she is getting married." 

Preference for diamonds over gold for wedding jewelry grew rapidly, with 86 percent of future brides saying they would choose diamonds over gold according to a De Beers commissioned study.

It should be noted, however, that it is not clear what kind of audience was covered by this survey. It may be assumed that it dealt with residents of large cities. On the one hand, they are the minority of Indian residents; on the other hand, this is probably the most credit-worthy part of the country’ population.