Despite a slowdown in the overall markets, therefore, organised players have increased at least 6-7 per cent of their share in the last one year in the overall Rs 2.7 trillion jewellery sector sales (both domestic and exports).
From around 22-23 per cent of market share till last year, the overall branded market share has surged to 29 per cent by the end of March 2018. The overall domestic jewellery market is expected to grow by a massive 31 per cent by 2023.
“India’s jewellery market has actually remained flat over FY14-18 as both volume and price have remained stable. However, 17 leading organised retailers such as Tanishq, Tribhovandas Bhimji Zaveri (TBZ), and Thangamayil across the country have grown at around CAGR of 11 per cent, implying a clear shift of business towards the organised trade on aggressive expansion of footprint. We expect this group of 17 jewellers to corner around 42 per cent of the domestic market by FY23 (from 29 per cent currently) underpinned by their aggressive expansion drive, design might and increasingly competitive pricing vis-à-vis family jewellers,” said Jay Gandhi of HDFC Securities.
The share of branded players in the entire jewellery markets was estimated at 22-23 per cent before the launch of GST in July 2017.
In fact, the battle for market share will be fought harder, as pricing premium based on depth of design, gold scheme offerings, repurchase/exchange commission across the leading jewellers have begun converging. Around three-fourths of the combined top line of key south jewellers comes from the 5 southern states, where customer purchasing behavior is largely homogenous in terms of designs.
Meanwhile, south-based jewellers face weaker artisan tie-ups in the rest of India. But, they are proactively plugging this gap and increasing their non-south ‘karigar’ pool. Hence, design arbitrage will dwindle in the medium term resulting in better craftsmanship offers from jewellers like Joyalukkas, Kalyan Jewellers and PCJ.
“We remain extremely bullish on the formalisation theme. Unorganised jewellers are already facing issues due to demonetisation, GST and mandatory hallmarking (which is likely to be implemented soon). This has led to customers switching allegiance to organised jewellers, who offer the advantages of contemporary design, lightweight jewellery, and most importantly, trust,” said Vishal Gutka, an analyst with PhillipCapital India Research in a report on Thangamayil Jewellery.
Moreover, unorganised players are facing problems of their own -- their money-lending businesses (significant contributor to profitability) have come under pressure, gold-on-lease is not available, and capital availability is limited, restricts their investments into their businesses for growth. Their next generations’ flagging interest in running the show and increasing family feuds are also major drawbacks for unorganised sector players.
Organised sector players, however, feel the threshold of Rs 200,000 for PAN (permanent account number) requirement is very low and therefore, should be increased to Rs 500,000.
“Tax compliance has increased over the past two years, taking away focus from business development. The government must ease compliance issues to enable us to focus on the growth of our businesses,” said Vinod Hayagriv, Managing Director, C Krishna Chetty & Sons, one of the largest jewellery retailers in southern India.