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Opportunity is Huge in India in Jewellery Retailing

 

C K Venkatraman, CEO, Tanishq, discusses various aspects about jewellery retailing, manufacturing, export competency and so on. He believes that India is a huge opportunity for jewellery category, but has cautioned that manufacturing activities, particularly in gold jewellery manufacturing, need significant overhaul. Lack of technology upgradation is the single largest obstacle for export of jewellery, in his view. He also opines that there is need for more women in the policy making in government. Women have a better understanding of the jewellery category and they can address issues related to trade better than only men. Excerpts…

Good day to you sir! Let me start with a fundamental question on jewellery demand. Tanishq is the largest jewellery retailer in India having presence in 150 cities. What is your estimate of proportion of jewellery demand that emerges from rural India?

It is very difficult to answer this question. The salemay come from feeder cities and towns while some of that sale may actually be rural demand.  Let me give an example. Let’s say annual jewellery sale in Kanpur is Rs. 5000 crores. Of this how much is the demand from Kanpur and other nearby towns (all urban) and how much demand is arising from villages around Kanpur is very difficult to estimate. All I can say is rural demand for jewellery is substantial and much higher than rural demand for many other goods like automobiles and electronics.

Is gold jewellery a saving or a luxury item? Most of the policy decisions are taken based on this fundamental question.

People are buying jewellery for wearing and enjoying them as ornaments.But, historically jewellery has also been a significant store of value and has therefore become an important route for saving. Because of this, even middle class families spend a few lakhs on jewellery. But spending 3 lakhs on a necklace is not at all like buying a 3-lakh TV or fridge. Some people in the government have typically looked at these price pointsand defined jewellery as a luxury category. I think if there were more women in the policy making, then the view would be different.

Is the customer behaviour same in both rural and urban India?

Rural customers are quite traditional. Their primarypurchase occasion is weddings, the jewellery is ethnic and the motivation is savings. They typically come in a large group to buy. Women sit in the front row of the counter to choose jewellery while men sit behind to help them on the budgets and payments. In urban areas, the motivation is adornment, the purchases are more spread across events and the jewellery is more cosmopolitan and national. Purchase is often by couples and sometimes even by women shopping alone.

Do you think the market fails to connect the new generation? Will jewellery be sold as a piece of adornment than anything else? How do you make jewellery attractive for millennials?

The most critical role of jewellery for the Millennial is that of adornment, of accessorizing well with the rest of what she is wearing. So the most important thing the jewellery industry needs to do is to create jewellery that is designed to her current tastes, is light and comfortable and is affordable as well. And marketed and sold in new ways that are relevant to her. While some players in the industry have taken these efforts, the substantial majority of the industry is not focusing on this.

You have outsourced your jewellery manufacturing activity to outside vendors. How do you maintain the quality, responsible sourcing of gold etc?

Manufacturing is in in our DNA. We have kept very stringent policiesand processes in place so that we can maintain the quality of every piece of jewellery. Our quality control managers are stationed inall the premises where our jewellery is getting manufactured. We use destructive testing of sample by picking randomly from every lot to ensure that the gold and diamonds are as per the specification. We have kept our offices in major manufacturing locations to supervise the manufacturing activities on a regular basis.

On sourcing of gold bullion, we buy gold from LBMA approved refineries, other than when we buy gold from customers. We also ensure that there is no child labour involved wherever our outsourced jewellery is manufactured.

Can you tell us about your ‘karigar’ development programme?

We undertake a lot of programmes for the karigars who work with our vendors. One of the most important programmes is the Mr Perfect programme, which seeks to substantially improve the working conditions for the karigars, covering basic infrastructure, tools and fixtures, comfort and safety. We also include all the karigars in the supply chain processes that the company has developed for its own plants. Using the programmes of NSDC and Sector Skill Council, we also enable karigars to get the RPL certification (Recognition of Prior Learning) which reinforces their skill. We also conduct Karigar days across the country to give all of them a day of relaxation and recognition.

What kind of changes are you anticipating in the policy making which will work in the interest of the sector?

There is change in government’s thinking that needs to be happen in the first place. Thinking of gold as a financial asset needs to change. A section of society, essentially upper class, is involved in converting ‘unaccounted money’ into gold or jewellery, which pushed government to think that way and in the bargain has led to take a negative view on the sector. Introduction of PAN Card from a certain threshold or the PMLA limit that came in last year is the reflection of that. Majority of purchases take place in the range of Rs, 50,000 to Rs, 150,000 which makes the industry sell some 300,000 crore. May be 10% of this jewellery is purchased for converting unaccounted money. So virtually the whole market is created by genuine buyers buying jewellery with hard-eared money. Somehow this aspect is not seen by the government, and the luxury and black money tag get attached. Which is why I am convinced that women are needed in the government policy making in this sector. Jewellery for women is meant for adornment. Whether the lady is a rich person owning a 10-lakh necklace or a middle class lady having a Rs.30,000 chain, when they both stand in front of mirror, their feeling is same. That is why I believe government should change its perception from the point of view of financial asset or a place to park black money, and rather view it from the real benefit. Where is the difference between buying a jewellery, for which gold is being imported, and buying an expensive mobile phone, which is also imported? Each product has its own benefit. Jewellery should be treated like any other life style product. Why should we restrict the imports of gold and let expensive mobile phones flow freely in?

We need to revamp our manufacturing sector to push export especially in plain gold jewellery segment. First of all, manufacturing is totally unorganized, using primitive system and processes to make thejewellery. There is very little infusion of technology to make other kinds of modern jewellery. They are simply making handmade jewellery. But even in handmade, the kind of environment in which it is done is extremely primitive. There are thousands of small entrepreneurs who are engaged in making this kind of jewellery.

There is one jewellery park coming in Kolkata. It is certainly the way to provide much better infrastructure to the manufacturers. It is also the fact that manufacturers are fragmented and they are not connected to the global world of technology. So, the absorption of CNC technology, better casting technology, tubing etc are simply not there. Therefore, we are unable to participate in the global market.  For a country with such a strong domestic market, it is very unfortunate that our export performance is poor.

Do you think there is need for a technology upgradation fund? Is GJEPC’s plan to set up multiple jewellery parks a move in the right direction?

Certainly. Technology upgradation is the need of the hour. Setting up of jewellery park will facilitate the infrastructure. What is important is the upgradation of technology, improving working condition, safety etc. This cannot be done by government alone. Industry has to take the initiative. Why am I saying that?There are thousands of small entrepreneurs as opposed to 25-30 companies like Titan. These small entrepreneurs need to travel to major jewellery exhibitions and manufacturers outside India. Otherwise they cannot understand the kind of technology used in jewellery making and their relevance to us.

Tanishqhas set a target of 2.5x of FY 18 for FY 23. Can you give us little detail of your plan?

Wedding is the largest segment. We have wedding collection of every region of the country. Along with that, India is very much cosmopolitan as well. City women are looking for jewellery which is very “Indian” in nature, but crafted for today.

Diamond jewellery penetration is low and presents another large opportunity. An aspiring society like our nation in its current state will migrate more and more towards products like diamonds much faster.

We have the aspiration to open one store in each small townin the country, which means many hundredstores. We are going about it in a systematic way, assessing the potential of each town, signing up with the right partner and setting up the store to succeed in the first year itself.

Our market share is low in some cities. We are working on it in a comprehensive manner. From products to price points to store expansion to marketing communications, we can improve many things to grow in these cities much faster.

The opportunity for growing the business from golden harvest is also very large.

The government is appearing to be coming out with a new regulation on deposits. Will it affect the golden harvest scheme?

Companies like Titan have already come under this regulation in 2014, when the scope of the relevant Companies Act was expanded to define these schemes under Public Deposits.

What we are hearing is about creation of new regulations to include all jewelers many of whom are partnership or proprietary firms.

Why is Tanishq not focusing outside India when many jewellers have done so. Is there any specific reason behind this?

India is a huge opportunity. The return on investment in India is very attractive and our market share is not even 5%. We can keep growing at 25% every year for the next many years. So while we may end up going outside India by and by, the pre-dominant play will by far be in India.

 

Disclaimer: Views are personal and not the views of the publisher.