India’s tryst with Jewellery

Introduction

While we are amidst a whole host of festivities, weddings and celebrations, we thought it would be a good idea to cover one of the most sought-after items during these festivities – jewellery! 

Overview of the Indian Jewellery Industry

The Indian Jewellery industry has come a long way when it comes to formalization, as organized market share has inched up from ~22% in FY19 to ~36% in FY24. The total jewellery market reported ~8% revenue CAGR during FY19-24, reaching a market value of $70 billion and is expected to reach $145 billion by FY28. The organized market clocked ~18-19% revenue CAGR during the same period. 

But why has this shift taken place from unorganized to organized? Two primary reasons – 

1. Quality Assurance – With less information asymmetry, today’s buyer is much more informed and aware as compared to a buyer ten years ago. Therefore, while buying jewellery, quality assurance with respect to the metal (gold or diamond) has become paramount. Therefore, the new and evolved consumer seeks quality assurance which she is going to get from an organized store.

2. Better Experience – Tied to the first point, is the overall consumer experience between an unorganized store and an organized one. Starting from first sale to after-sales service (in the form of repairs, polishing, and so on) an organized store would offer much better services than its unorganized counterpart. 

That was as far as qualitative factors are concerned. Over the years, a lot of quantitative changes have also taken place in the form of compulsory hallmarking, proper quality standard norms, identity proof, and the likes. All these measures have also led to a natural transition of consumer behavior towards branded retail who have better infrastructure to comply with the said norms. 

The numbers corroborate with this shifting trend. As of FY24, the top 10 organized jewelry retailers command over 30% of the total jewelry demand in the country. As per Motilal Oswal, their estimates suggest that this number was close to 20% in FY19. This increase in market share gives us a good indication of the changing trends.

How is Jewelry consumed in India?

For the purpose of this section, we will take the proxy of Gold to gauge the consumption pattern. Given the popularity of the yellow metal in our country, it should give us a good sense of the consumption pattern. 

India is one of the largest consumers of Gold in the world, importing close to 900 tonnes of Gold. Not to mention, not all of it is used for consumption, but a sizable portion is. Take a look at the table below. 

So how is the market positioned currently? Bridal Jewelry forms the bulk of the market with close to 55% share, followed by daily wear with 35% market share, and finally for fashion with 10% market share. 

Source: AMSEC Research 

Weddings are the biggest driver of gold demand, making up 55% of total gold consumption and is expected to grow at an annual rate of 16.5% from FY23 to FY28E. During weddings, not only do the bride’s and groom’s families buy gold jewelry, but extended family members, relatives, friends, and gift-givers also contribute to demand. The peak seasons for wedding jewelry sales are in popular wedding months like May-June, October-November, December, and January-February. Wedding-related jewelry purchases are influenced by extra disposable income, price dips in gold, and special schemes from jewelers. Some families even buy gold bars or coins regularly and later turn them into bridal jewelry when needed. And this wedding demand is expected to pull further market share.

And as it happens for almost all industries, given the diversity India has to offer each region has a distinct consumption pattern. Before we get to seasonality, we need to address regionality. If you come to think of it, just like food the jewelry preferences in let’s say North India and South India are quite different. What works in Delhi would not work in Kolkata or Bengaluru and vice versa. A table is attached below which summarizes this point succinctly. 

As one would expect, jewelry demand in India is seasonal in nature. It is usually at its peak around Q3 where festivals like Diwali and Dhanteras fall which is followed by the wedding season till Jan which in turn is followed by Akshaya Trithiya around April-May. So there are demand spurts on certain months while others are on the benign side. Indians are sensitive to religious beliefs and hence during un-auspicious occasions like Adhik-Mass the demand completely dries up. 

What are companies in this industry doing?

First, let’s take a look at the market share of various players in this segment. In the listed space, Titan stands to be the largest player. 

Now, let’s talk about few trends that companies in this industry have been exhibiting – 

1. Aggressive focus on store additions – While this has been a trend for almost all retailers (across industries) but nonetheless organized jewellers have been on a continuous store addition spree. This is primarily to address the under-penetration, especially within the tier 2 & 3 towns. Moreover, store additions help retailers propel their topline, more specifically during a lacklustre demand environment. 

2.  Increased focus on branding & promotion – In a tight market like jewelry, market players need to fight for visibility. Given, this space deals in high ticket items, brand positioning and trust is extremely important to garner market share. As a result, players across the board have been spending handsomely on branding and promotion to gain both digital and physical real estate. The flipside to that strategy is margin pressure. Over the past three years, jewellers have witnessed heavy pressure on margins.

3. Asset Light is the way to go – Jewelry companies have adopted franchising to expand quickly into metro cities and smaller towns. This approach allows for faster store openings with less capital, as franchise partners cover most of the costs. Franchisees also bring local market knowledge, helping companies build a strong presence. By sharing costs and inventory risks, these companies reduce their fixed expenses and need for working capital. Leading brands like Titan, Kalyan, and Senco have grown their market share, improved return ratios, and strengthened their balance sheets through franchising. Each operates slightly differently: Kalyan uses a FOCO model (Franchise Owned, Company Operated), Senco uses a FOFO model (Franchise Owned, Franchise Operated), and Titan has two franchise models, one where it invests in the inventory and another where the franchise partner does. In both Titan models, franchisees manage daily operations.
   
4. Studded Share is all to fight for – Studded jewellery offers a much better margin profile as compared to plain jewellery and most of the players are fighting to increase their studded share. For the uninitiated, studded jewellery refers to the type that features gemstones or diamonds embedded into the design, adding sparkle and texture while plain jewellery is made of the base metal only. Currently, studded jewellery accounts for ~13% of the market. Studded jewellery has registered 13% CAGR over FY18-23 outpacing the growth of the fine jewellery segment which posted a CAGR of 6.6%. Going ahead, Studded jewellery is projected to grow ahead of the industry at a CAGR of ~19% over FY23-28E compared to a 14.9% CAGR in fine jewellery over the same period.

5. Staying ahead of the curve – Most of the branded retailers have been riding the innovation curve with the aim to stay ahead of the rest. Players like Titan and Kalyan have dedicated e-commerce brands (Caratlane and Candere respectively) which have been dominating the e-commerce market. And there is untapped potential at this stage. E-commerce penetration in the jewellery segment is expected to reach 10% by FY28, up from the current level of ~6%. The new buzz word of the town is Lab Grown Diamonds. Reports suggest that lab grown diamonds, depending on the size, can be 60-70% cheaper than natural diamonds. That definitely calls for consumer attention, which explains the pace at which they have been growing. Brands, across the spectrum, have been experimenting with lab grown diamonds to get a market pulse and make a standing for themselves.   

How do companies make money?

Before I talk about this bit, please realize that this exhibit is a broad simplification of the actual business model. There are two primary ways a jeweler can make money – a) premium on gold prices b) making charges. 

Making charges depend on the materials used, such as gold, platinum, diamonds, or other precious stones, and typically range from 10% to 25%, sometimes reaching as high as 35%. The intricacy of the jewellery design and the gold’s karat level also affect these charges. Since much of India’s jewellery is handmade and crafted by skilled artisans (karigars), retail jewellers usually pay these artisans 5% to 8% in making charges for gold jewellery. Hence, the additional spread is the jeweller’s margin.

A representation is attached below for better understanding. 

_{Source: AMSEC Research}

Growth Drivers

A lot of factors are at play here which would contribute to the growth of the industry. Let’s have a look at the infographic below. 

We have already discussed a handful of them while the rest are self explanatory. The good thing is that all of these mentioned growth drivers look intact which is good news for the industry.

One of the most recent growth drivers for the industry was the reduction in import duties for gold and silver. The reduction of custom duty on gold and silver from 15% to 6% bolstered demand as the landed price of gold and silver came down materially, almost overnight. Such favorable government policies definitely makes the business environment conducive for growth. 

Closing Thoughts

India’s retail jewellery market has seen major changes over the past decade, moving from a sector mostly run by individual or family-owned shops to one where corporate chain stores have become key players. Some large jewellery chains now operate across the country, while others have established strong regional networks. Many single-store businesses have also adopted improved practices, allowing them to compete effectively in this evolving market. The industry’s fragmented nature compels players to be always on their toes as the competition could eat into their market share. And it has been a secular trend, as we have seen almost all the players keep trying new things to keep themselves relevant with changing dynamics.

In simple words, if you need to crack this industry, you need a well-positioned brand, hyperlocal brand strategy, superior customer experience, transparency, digital initiatives, and conscientious innovation. It’s tough and high pressure, but as you know, pressure is what turns coal into diamond. 

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