The share of the organised sector in the Indian domestic jewellery industry, currently estimated to be about Rs 2.7 trillion in size, has grown strongly over the past few years and is now pegged at nearly ~30%, up from ~23% a few years ago, according to a report released recently by researchers at HDFC Securities.
In fact, the organised sector, and especially the 17 largest retail chains, have clocked a CAGR of ~11% and outstripped the growth rate of the industry as a whole, which had a CAGR of ~6.5% for the period 2011-18.
The trend will continue, according to the authors of the report, Jay Gandhi and Rohit Harlikar, who project that while the industry as a whole will grow at a similar rate of ~6% over FY18-23, the large chains will grow ~12% and their market share will rise at to ~42% in the same period.
Changes in the regulatory environment between 2014-18 such as demonetisation, introduction of GST and a few other sector-specific changes have speeded up the growth of the organised sector, Gandhi and Harlikar note.
However, it is the shift to hallmarked jewellery and aggressive diamond activation programmes, both of which are being pursued by the larger players, that have spurred growth, the report states. The rise of nuclear families coupled with migration to tier 1 cities has also been a catalyst is helping the large chains selling branded jewellery gain share from more traditional family jewellers.
According to the authors, studded jewellery sales are expected to grow at 11% CAGR over FY18-23E due to this.
They also report that consumers are increasingly insisting on hallmarked jewellery, even though it is not yet mandatory, and this has increased the cost of procurement for jewellers. As a result, the ~25-30% pricing arbitrage between jewellery chains and standalone jewellers is shrinking, impacting the smaller
Interestingly, the study points out that of the -21,778 BIS-listed stores in India that stock hallmarked jewellery, chain stores comprise only about 25%. Today stores licenced by BIS are spread over ~553 districts out of the 700+ districts in India
Looking forward, the authors state that the market in North and West India is characterized by greater impulse purchases as against the more planned jewellery/gold accumulation approach down South. This also translates into greater growth for studded jewellery in the former two regions, while in the South, despite an increase in demand for diamonds, gold jewellery continues to be strong.
The report concludes that since most of the larger jewellers are inching towards parity in terms of gold pricing, monthly scheme offerings and repurchase/exchange commissions, the breadth and depth of designs that each has on offer will eventually be a key differentiating factor facilitating their further growth and expansion.
News Source: gjepc.org