Jewellers lose shine as buyers prefer branded products.

BANGALORE: Branded jewellery is making greater inroads into the Indian market, with companies such as Titan and Kalyan Jewellers seeing customers shifting towards them and away from traditional retailers.

This migration, on top of the import restrictions on gold and the overall economic slump, has put the squeeze on small jewellery stores. Branded jewellery has close to a fifth of the market and maybe about twice that in the big cities. The trend is growing, said CK Venkataraman, chief executive of Titan's jewellery division, in an interview to ET.

"Industry has started transforming. New regional and national players will benefit at the cost of other smaller players," Venkataraman said. Titan sells jewellery under the leading Tanishq brand and gets almost 79% of its revenue of more than Rs 10,000 crore from the sale of gold and diamonds.

Organised gold retailers, including Delhi-based PC Jewellers, Bangalore-based Titan and Kerala-based Kalyan Jewellers, currently have a 16% share of the $40 billion jewellery market, according to analysts at Mumbai-based Crisil Research.

The transformation that's under way is akin to what happened in the garment business in India — neighbourhood tailors giving way to branded readymade clothes. "Similar to what happened in the garment industry, with organised players like Madura Garments, Arvind in the apparel business, a similar trend will be seen here as more operators become national, become corporate," Venkataraman said.

Small retailers are facing difficulties as the majority of bullion dealers have been "crushed" by government regulations, thereby leading to a "huge supply crunch", Venkataraman said. These "measures to curb demand by macroeconomic developments have actually aided. organisation of the industry".

The import restrictions were put in place last year because India's current account deficit (CAD) ballooned to a record in the FY 2013. The government raised customs duty to 10% besides banning imports of gold coins and medallions. The steps also included a ban in August on Titan's traditional "gold-on-lease" model. The various curbs, along with other measures, have since succeeded in sharply narrowing CAD.

The push however led to an increase in gold smuggling. According to a World Gold Council estimate, up to 200 tonnes of gold was brought into India illegally in 2013, compared with 112 tonnes in 2012. Much of this gold ended up at small shops, which were then able to offer jewellery at relatively lower prices. Still, that's unlikely to change the overall trend, Venkataraman said.

"Just because someone sells for a little cheaper does not mean that this secular, unstoppable wave, that is branding, can be stopped in the medium term," he said. Titan, which claims a 5% share of the jewellery market, said customers also prefer branded ornaments because of purity concerns and the rising demand for better designs. A senior executive at PC Jewellers who didn't want to be named also said that purity was one of the reasons people seek out branded jewellery.

"People who buy from these small players are not really coming to us anyway," the executive said. "But as people become more brand conscious and aware of purity, we will see this group also moving to branded stores." Kalyan Jewellers, which has 52 stores and says it's the biggest gold retailer in the country after Tanishq, contends that in large cities gold and diamond consumption through organized stores already accounts for up to 40% of total jewellery demand.

Source : economictimes.indiatimes.com