RETAIL JEWELRY INDUSTRY 2020: INDIAN OUTLOOK
The Gems and Jewelry industry is going through dynamic changes as we move towards the end of the decade. The revival of the luxury industry post the global recession has brought about several changes in the consumer behaviour as the focus moves from product to design and customer experience.
Business NOT as Usual
Ask any jeweller or a diamantaire about the industry and he/she will say business is not as it used to be. It is fast changing. Dynamism in the order of the day. Where earlier jewelry brands would launch a new line just once or twice a year, the new era has seen new product ranges being launched every quarter and in some occasions even monthly.
The advent of online jewelry has also been revolutionary due to real life rendering look via CAD software enhancing the customer experience and reducing working capital needs. With augmented reality and virtual reality climbing small steps of the ladder, technological disruption is just around the corner for the online jewelry space.
A Multifaceted future
A McKinsey report back in 2014 “A multi faceted future: The Jewelry Industry in 2020” had indicated that the trends that shaped the luxury apparel industry is also evident in the jewelry industry. That too at a faster rate. The report states that annual global sales will grow at 5 to 6 percent every year to reach €250 Billion (INR 18 lac crore) by 2020. We are finally seeing those dynamic changes, specially in India as the report had stated.
The report emphasises on the following changing landscape:
· Consolidation
· Growth of branded products
· Market segmentation (Online and Retail)
· Retail distribution channels
The above have been discussed below in detail from an India perspective.
Consolidation and Internationalisation
The gems and jewelry industry is moving towards a structured pattern of growth. Organised companies are expected to grow at a better rate whereas smaller jewellers and diamantaires need to adapt to the changing dynamics and customer focus. For example, several family based jewellers have failed to have any digital presence at a time when such presence is boosting retail footfalls for organised players.
This has also encouraged consolidation within the industry with Tanishq (A Tata enterprise) buying majority stake in Caratlane.com. Opting for further growth in the ecommerce segment, Kalyan Jewellers have also taken over Candere for about INR 35 to 40 Crores.
International brands have also been taking keen interest in the rising Indian markets. Iconic global brand Bvlgari has opened up its flagship store in Delhi and looking to expand its market in Mumbai as well. Canada’s Fura Gems is actively looking for opportunities in the diamond and gems market and is keen to invest in India.
Growth of Branded Products
Globally, the share of branded jewelry is about 20 percent of the total sales as per the Mckinsey report. However, in India, the organised jewellers have a share of only about 10 to 15 percent of the total market. However, this is rapidly increasing.
The recent financial results of Titan for the second quarter of 2017 just proved the significance of the trend towards organised retail. Titan, primarily a watch brand, has almost 80 percent of its revenues from its jewelry segment, Tanishq. The jewelry segment reported a Q2 revenue of INR 2,710 Crores, an increase of 37 percent over the last year.
The Indian consumers are moving away from occasion based consumption and treating jewelry as a fashion wear. This is driving retailers to launch distinct collections such as wedding wear, work wear, regular/daily wear and fashion wear.
Further, the advent of social media has given consumers direct access to the world’s events. This in turn has got the customers to demand more: better designs, innovation, multiple uses and quality craftsmanship. With rising disposal income and this new awareness, the dynamics are changing quickly. India, being an emerging market is looking for an upgraded lifestyle, leading to the change in consumer mindset. The traditional jewellers have not yet adapted this change and could not invest in relevant training and development for upskilling themselves and their teams. This is where the organised retailers found themselves to be more equipped and in a position to take advantage of the same.
However, one must note that the share of unorganised market is still 80 to 85 percent. There is a lot of room for the traditional jewellers to take advantage of the new changing markets by adapting to latest updates, skills and technology to be at par with their organised peers. In short, they need to become a part of the organised sector. Several family based jewellers such as Kalyan, Joy Alukkas, TBZ have successfully transitioned to the organised segment.
Market Segmentation
Traditional jewellers, including organised retailers were not prepared for the next onslaught in the online space – Sale of luxury products online. This is where new startups such as Bluestone.com, Caratlane.com, Velvetcase.com, etc. made their way into online jewelry space. Scaling up due to excessive demand was comparatively easier due to the lack of established players in online jewelry.
The likes of Tanishq (acquiring Caratlane), Kalyan Jewellers (Candere acquisition), and several others have now realised that the online space cannot be ignored. Even though the market share of online sales is less than 1 percent, it cannot be ignored as it provides brand awareness to the new market of millennials and increases retail footfalls.
The above is important to understand. Though online sales is insignificant, it has significant attributes to enhance the customer experience. To take an example from the Mckinsey report, luxury clothing brand Zara does not break up the sales between online and retail. They consider online services as a facility to enhance customer experience. It facilitates customers to get in touch with Zara for products and return services. Customers tend to engage in online research for product information and advise before they visit the retailer for purchase.
Hence online presence needs to be considered as complementary to the brand’s retail presence. The future will belong to Omni Channel (Online + Offline). This can be seen in Caratlane’s decision to open a chain of retail showrooms.
Retail Distribution Channels
As was discussed above, the branding mindset is gaining centre stage this space. Due to this, jewelry players might consider focussing on mono-brand retail presence. This gives them more control, keeping them in direct contact with customers and higher margin potential.
Another promising channel is multibrand boutique chains that provide carefully curated assortment of brands as well as unique shopping experience. A good example of such store is Shopper’s Stop showcasing a variety of branded jewelry.
The wholesale distribution for retail is one of the space where brands like Kisna (Hari Krishna Group) are thriving and is also one of the options with no direct retail presence. However, this channel is used mostly by existing established players and is difficult for newer brands to take this route.
Conclusion
The gems and jewelry industry has a glittering future for all those adapting to the changing times. By the year 2020, the organised share of jewelry sales will would be very significant and rising at an incremental rate. Fine Jewellers must consider introducing new product lines at affordable prices to entice the younger consumers, providing them an entry point to the brand. Alternatively, depending on their area of operation, may choose to play exclusively in the high end markets. Both the high and low end of the market are growing whereas the middle market stagnates.
Focus of traditional jewellers should be in branding exercises and customer experiences. Now, you are not only selling jewelry but also an experience in the process of selling the jewelry. Digital presence is a necessity.
Jewellers will have to react to trends quickly and reduce their product development cycles. Further, a streamlined process for collaboration with designers, suppliers and logistics provider should be in place to be able to serve the customers based on their changing demands.