Not really, going by the ever-growing domestic jewellery sector in the country. Changes in life styles or choice of purchase patterns may change due to external influences but thanks to Indian’s culture traditions, the country has always been an ever-growing enormous market for precious jewellery. Irrespective of the economic changes domestically or internationally or even fluctuating prices of gold or other precious metals or prices of diamonds or other precious stones, the jewellery sector has registered growth. None of these factors have had any drastic effect on the market or the consumption patterns of jewellery lovers pan India.
It is predicted that India will remain the most important market for precious jewellery and the potential will be consistent for a long time to come, if not forever. According to available official data, currently India is number one in diamond jewellery consumption, number two in pure gold jewellery consumption, and number four in platinum jewellery consumption, all by volume. And demand for precious jewellery is expected to be massive in the future as it is estimated that more than 90% of adults in India possess wealth valued below US$10,000, indicating a colossal potential waiting to be tapped.
At present, however, the consumption of precious jewellery in India is rather subdued and not as it was when it gained momentum earlier, when Indians took advantage of the gold price inflation. Stronger economic growth and lower inflation was also a boost with consumption reaching a pinnacle. When the situation slowly reversed, India’s consumption lost its momentum, and today with higher inflation and a weaker economic growth, Indian consumers are at crossroads at purchase decisions...gold jewellery or diamond jewellery or something less expensive? A disturbing prediction for the next few years is that, weakness in consumer spending will weaken further due to the existing poor macro-economic situation of the country, coupled with rising inflation and lower wage growth thus affecting jewellery sales. But, as mentioned earlier, jewellery consumption will remain constant and the future may not be as formidable as predicted.
Blame it on ‘inflation’, but the prices for goods in India are normally on the higher side, making jewellery less competitive. It is predicted that jewellery sales in India will experience slower growth for another couple of years than in the 2010-’12 period. The ongoing weakness in consumer spending due to various reasons like rising inflation and real wage growth diminishing , besides the poorer macro-economic environment will definitely slow down demand. However, the Indian industry’s efforts at modernisation of sales channels, supported by the gradual rise in the number of middle class consumers, may turn the table for the better in the coming years.
In the calendar year 2013, retail sales of gold jewellery decreased by almost 4 percent to US$ 31.732 billion. The first half of the year showed strongest demand for gold jewellery due to the sudden witnessing of lower gold prices. In year 2013, volume demand for gold jewellery too increased by 4.3% to 575.2 tonnes. In fact consumer demand for gold showed an increase fr om the last quarter of 2012, growing even stronger in the second quarter of 2013. Naturally, when the price of gold decreased to 2010 level, jewellery consumers saw this as a buying opportunity and were quick to make purchases. Indian buyers saw the dip in gold prices as an anomaly and predicted gold prices to quickly return to former level. However, it did not happen and as a result, volume demand in the second half of 2013 was comparatively low.
Retail sales of gold jewellery in India have always correlated with the increases in the price of gold because of the strong adornment as well as investment demand factor. Therefore, volumes sales too changed from year to year, again depending on consumer economic sentiment. In recent years however significant gold price inflation had put immense pressure on consumer demand. This also led to a drastic downward trending for lightweight jewellery pieces, until the gold prices dropped down significantly in April 2013.
Giving market space for pure gold jewellery, diamond studded jewellery, colour diamond studded jewellery, colour stone studded jewellery in India based on demand, Rajiv Popley, Director of Popley Group said, “In India gold is not just synonymous with jewellery but it is considered to be auspicious as it is a mythological metal. But in this contemporary period, the consumers are more inclined towards Diamonds as it is said to be forever. More people are now opting for diamonds rather than plain gold jewellery, because they offer a greater investment opportunity and are trendier. Diamond solitaires outperformed gold in the stock index by over 10 percentage points in the recent times, further lowering India’s profound love for gold.”
In calendar year 2013, retail sales of diamond jewellery increased by 11 percent to almost US$ 8.609 billion. In recent years, the demand for diamond jewellery grew at a rather slow pace. Current conditions in India reveals a rather slower impact on diamond jewellery sales than on gold jewellery sales, since Indian consumers are much more cautious as it is a discretionary demand, when it comes to diamonds. At least passing knowledge of the 4Cs of diamond jewellery - colour, clarity, cut and carat- is required and the Indian consumers are still not confident about it. Understandably, this has been a hurdle to the growth of diamond jewellery sales in India.
However, of late, organized retail chains in India have taken steps to educate the Indian consumers about diamond jewellery. In addition, certified diamonds have made diamond valuation more transparent and have also increased the trust factor. Democratizing diamonds and allowing people of most economic levels to purchase diamond jewellery has augured well for the sector. In addition, jewellery manufacturers are focusing on innovation and are producing fashionable diamond jewellery that is cheap by world market standards. This jewellery is offered to the markets in India with the middle class in mind, as demand for diamond-accented jewellery is strong and growing by the day.
Of late, there has been a paradigm shift in consumer preference in India. India has a 32 percent of its population living in the cities and metros and the rest is the rural population. Therefore, diamond jewellery sales are minimal in rural areas, wh ere gold jewellery is extremely popular and in high demand. In towns, Metros, the entry level, low-priced everyday-diamond jewellery has been in good demand. This jewellery are normally priced about 50 percent cheaper than the regular diamond jewellery studded with good made stones; and also cheaper than pure gold jewellery. So, this everyday jewellery, which cannot be expensive jewellery, has become popular, especially with the younger consumers. They come in trendy lightweight designs and with guaranteed buy-back schemes, affordable and transparent pricing with availability of quality certification, have boosted sales of these every-day diamond jewellery. As of now, cheap diamond jewellery is gaining much importance.
On the topic of demand for diamond jewellery panning out in the future; and whether gold jewellery will reign forever in India, KGK Chairman, Navrattan Kothari said, “Gold will always be gold; you cannot replace it with anything else. But yes, customers have become aware about diamonds and have basic knowledge about their quality also. With price standardization through Rapaport and certificating agencies like IGI & GIA, they have started being sure of their investment in diamonds.”
Colin Shah, MD of Kama Schachter Jewelry Pvt. Ltd, too, thought on the same lines and echoed the same sentiment: “Jewelers like us, also understand this and the jewellery offered today is more modernized and trendy. While India will always remain a gold loving country, the demand for diamond jewellery, precious and colour stone jewellery has seen a rise in the recent times and this trend will continue. India’s appetite for diamonds will never dry.
India is a huge market and preferences vary for different regions. Our customers in the North like to have their jewellery to have a big look. SI, I1, I2 & I3 are in more demand with North customers. Down south, customers like their diamonds and the demand for VVS, VS is high with that region. East and Western regions see a demand of V and SI diamonds. “
In the past few years, India has improved the quality of this category of jewellery a great deal, so much so that this jewellery category is expected to be offered in the overseas markets too very soon. Purchasing pattern too is seeing huge changes pan India. The traditional practice of preferring the trusted neighborhood jeweler is no more the norm. This is gradually changing due to the mushrooming of numerous regional retail chains as well as countrywide retail chains. The profile of business in India is typical of the country, which are low margins and high volumes. Owing to a steep rise in commodity prices and severe competition, margins continue to be under severe pressure. Analysts feel jewellery in India should be more aggressive, opting for large-scale adoption of branded jewellery, which might create space for more sustainable margins in the sector.
In India, the key consumption drivers being weddings and festivals, demand is very traditional with product preferences vary as per different regions. But, trade-ins, discounts and buy-back schemes are popular across the country because of the investment factor and seasonal consumption of jewellery. The Government of India has, over the years, has taken various steps to boost growth of the retail jewellery sector in India. Therefore, demand for jewellery is naturally structured to grow significantly in this country, which has a cultural tradition of precious jewellery consumption. The gigantic population coupled with economic growth and with improved standards of living, the jewellery sector in India may see a spurt in growth in the near future after all.
Aruna Gaitonde, Rough&Polished, India
